The Uncertain Future of the Military-Industrial Complex

The U.S. defense industry, flush since September 2001, may once again be facing a period of decline

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President George W. Bush speaks to employees of United Defense Industries in California in May 2003. In the background is a Bradley fighting vehicle, made by the company and widely deployed during the initial U.S.-led invasion of Iraq two months earlier / Reuters

This post is part of a 12-part series exploring how the U.S.-Russia relationship has shaped the world since the December 1991 end of the Soviet Union. Read the full series here.

The 1990s might not have been a decade of peace, but they were for big, U.S. defense firms. After decades of working for a Defense Department oriented toward the defeat of the Soviet Union, they struggled to adjust. During the 1980s the Pentagon had spent billions of dollars on developing and improving expensive hardware -- tanks, submarines, fighter jets -- but, in the post-Soviet '90s, their appetite shrank.

In 1995, U.S. Defense Department procurement spending dropped below $50 billion for the first time since 1982.

This changed with the attacks of September 11, 2001, which began an historic period of prosperity for the U.S. defense industry. Now, much like the period that followed the collapse of the Soviet Union, the industry faces a decade, or more, of adversity and softening political support for weapons spending. The defense industry is back at another crossroads, and the stakes for them are just as high.

Defense cuts during the early 1990s had a profound impact on not just the defense industry, but on America itself. Tens of thousands of well-paying jobs were lost when defense firms shut down entire lines of business. The spiritual home of the American aerospace industry, southern California, faced a debilitating economic downturn, crashing real estate prices and scattering aerospace workers throughout the country. More than 100,000 jobs were lost in the Los Angeles area between 1988 and 1994, according to one estimate.

Some companies decided they didn't need the defense business anymore and simply got out of the market, selling off their defense divisions. Texas Instruments sold its defense business to Raytheon in 1997 for $2.95 billion. At the time, Raytheon executives said the Texas Instruments deal would bring their annual sales up to $15 billion. By, 2010, Raytheon reported annual revenue of more than $25 billion.

The largest contractors today eclipse Raytheon. These so-called "super primes", Lockheed Martin, Northrop Grumman, and Boeing, dominate the global defense market. Their size is a direct result of the corporate consolidation of the 1990s. Martin Marietta Chief Executive Norman Augustine once remarked that the Pentagon held a "last supper" in 1993, when it gathered more than a dozen of the industry's top executives to inform them that the defense landscape was changing in ways nobody would have expected a few years earlier. Augustine later oversaw a merger between Martin Marietta and Lockheed Corp.

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August Cole is a writer focusing on national security issues and an Adjunct Fellow at the American Security Project.

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