The Strategy Sessions is a limited-run podcast hosted by Emma Ashford, a senior fellow with the Reimagining US Grand Strategy Program at the Stimson Center. Today, Emma talks with Julia Gledhill, a research analyst with the National Security Reform Program also at the Stimson Center. Emma and Julia discuss the state of the U.S. defense industry, current proposals for Pentagon acquisition reforms, and how partial nationalization of U.S. defense companies could help remove constraints on strategic decision-making. Emma and Julia’s discussion is part of the New Visions for Grand Strategy Project, a collection of essays, videos, and podcasts in which out-of-the box thinkers discuss the future of U.S. foreign policy. *The Strategy Sessions Podcast is hosted by the Stimson Center and produced by University FM.
The Strategy Sessions is a limited-run podcast hosted by Emma Ashford, a senior fellow with the Reimagining US Grand Strategy Program at the Stimson Center. Today, Emma talks with Julia Gledhill, a research analyst with the National Security Reform Program also at the Stimson Center. Emma and Julia discuss the state of the U.S. defense industry, current proposals for Pentagon acquisition reforms, and how partial nationalization of U.S. defense companies could help remove constraints on strategic decision-making.
Emma and Julia’s discussion is part of the New Visions for Grand Strategy Project, a collection of essays, videos, and podcasts in which out-of-the box thinkers discuss the future of U.S. foreign policy.
*The Strategy Sessions Podcast is hosted by the Stimson Center and produced by University FM.
(Transcripts may contain a few typographical errors due to audio quality during the podcast recording.)
[00:00:07] Emma Ashford: The 2020s are likely to be a pivotal decade in determining the future of America's role in the world. Global dynamics are changing. The era of unchallenged U.S. global dominance is ending. And China and other states are rising. At home, the United States is also going through a period of transition and change in foreign policy, from bipartisan consensus to debate and division. The only thing certain is that change in U.S. foreign policy is inevitable.
In these discussions, our guests engage with some of the most challenging questions facing U.S. policymakers, bring distinct perspectives to bear on these questions, and offer their own vision for the future of U.S. grand strategy. These are The Strategy Sessions.
Hello, I'm Emma Ashford, a senior fellow in the Reimagining US Grand Strategy program at the Stimson Center. Welcome to The Strategy Sessions, a series of discussions with out-of-the-box, forward-looking thinkers on the future of U.S. grand strategy.
Joining me today is my Stimson colleague, Julia Gledhill. Julia is a research analyst in Stimson's National Security Reform program and has written us a wonderful essay on the future of America's defense industrial base and, in particular, how the government relates to defense rights. So, welcome!
[00:01:28] Julia Gledhill: Thanks for having me, Emma.
[00:01:30] Emma Ashford: So, before we dig down into the specifics, I do want to ask you a couple of general grand strategy questions, and these are ones that I think you spend a lot of time on, the defense budget, defense contracting. So, maybe these aren't the things that you focus on on a daily basis, but they're really important, right? And so, my biggest question and what I'm asking everybody is how you see the emerging world when you look around at what is happening in the world right now? We're leaving the unipolar moment. What is it that you think we should be paying attention to?
[00:02:00] Julia Gledhill: Sure, that's the million-dollar question. I think that the optimistic take here is that, whatever comes next, whether you call it multipolarity or not, we are entering an era of new possibilities. As you said, the unipolar moment is on its way out, and the United States now has an opportunity to rethink the way that it approaches the world and how it fits in the global stage writ large.
And so, you have the American public questioning things like military aid to some of our closest partners. You have members of Congress rethinking alliances. You have parts of civil society in the Washington national security establishment rethinking the way that we work with those allies, and for what purposes.
And so, I think that, whatever comes next, the deliberation and discourse is likely to be a lot richer, as we start to actually ask the critical foundational questions of what we want out of the world and how we get it. And so, for me, I mean, I optimistically try to look for opportunities where the United States can use a more dynamic geopolitical environment to really get back to the basics and ask questions like, how do we advance the collective good? Is the United States the best arbiter for advancing the collective good? And if so, what does that look like? Particularly, in regard to our multilateral institutions, which is not something that I focus on in my work, necessarily, but I think is a really big piece of the coming order.
[00:03:40] Emma Ashford: So, for you, the U.S. role in the world is, to some extent, about serving the world?
[00:03:47] Julia Gledhill: I think that our interests, which national interests are, you know, debatable, we all have different ideas of what they look like, but in a security environment like this one, where you do have middle powers and other great powers making their way in the world, we are, in a security sense, subject to a lot of the same existential threats, the two basic ones being climate change and nuclear war. And I think that that itself really warrants greater collective action and greater collective thinking about what will mutually benefit us all. And in my view, that is collaboration, and that is collaboration on a more equal footing.
[00:04:27] Emma Ashford: So, if you were to, sort of, give your top priorities for U.S. foreign policy, I'm assuming collaboration or, you know, collective security would probably be one of them, but I mean, what would your other core principles be for U.S. foreign policy?
[00:04:40] Julia Gledhill: Yeah. I think my couple top principles for U.S. foreign policy, you know, the first one, really, is solidarity. And I think that that applies on a national and an international level. Like I said, we're, kind of, in a moment where people are reckoning with the havoc that the United States has wreaked worldwide through the proxy wars of the Cold War, to the humanitarian interventions of the '90s, to the global war on terror. And so, how do we think about practicing solidarity with our people in the United States who have lost blood and treasure throughout these, you know, militaristic interventionist, foreign policy misadventures? But also, how do we reckon with that, effectively, pillaging of the world and, you know, take some accountability for it on a worldwide stage? I think that that's a really important piece of moving on from the neoliberal international order.
[00:05:39] Emma Ashford: Great. Well, let's shift into your piece, because I think moving away from the neoliberal order and your piece go pretty well together as ideas. So, I mean, you lay out in the piece a case for, let's say, reforming the way we do defense acquisition, the way we think about our defense industrial base. And one of the core components of your argument has to do with the fact that the way the U.S. builds its defense equipment that we, sort of, think it's the system of private enterprise, but it's really not. Could you talk a little bit about that?
[00:06:15] Julia Gledhill: Sure. Yeah. There's a lot of rich history here that has been fascinating to delve into. But the prime military contractors, which include Lockheed Martin or Northrop Grumman, they really wouldn't exist as they exist today without the government, without government contracts.
And the history of some of these subfields is also quite intertwined with the government and the state itself. A good example is, you know, aerospace, in the interwar years, really didn't take off until the mobilization effort, right? For World War II, there was no commercial interest in aerospace. And you could say the same, to some extent, to Silicon Valley, DARPA, the Defense Advanced Research Project Agency, as well as the parallel program at the Department of Energy were really critical to providing basic research funding for some Silicon Valley firms to develop the core technologies for commercial products that we see today, those technologies being GPS or touchscreens. You know, these have applications in a military sense as well.
And so, I really think that this sort of mythology that private enterprise is so critical to changing the fundamentals of warfare to saving blood and treasure on the battlefield, kind of, ignore some of this history. And so, it's important to remember the role that the state has played in shaping the development of technology and the development of the arms industry itself in order to think about how best to change it, right?
There's all this hullabaloo around our ability to mobilize or our ability to produce. The reality is that, historically, the government has always intervened in order to make big things happen. And that is the case, whether we were to convert to a peacetime economy to achieve a real peace dividend. This was a big conversation in the '90s for a short period of a few years. And it was the case with World War II as well. I mean, we didn't nationalize the industry, per se, but there was a significant government intervention in order to convert domestic industrial production for military purposes.
[00:08:25] Emma Ashford: Yeah. I mean, I think one of the things that's very interesting about this history is just that there have been periods, I think, where the U.S. has done very well at mobilizing its industrial capacity for defense purposes and not necessarily all in wartime, right? I think there's periods during the Cold War where you see that fusion of government and technology companies working pretty well. But, you know, you talk in the piece a little bit about, today, that is not really working.
[00:08:52] Julia Gledhill: Yeah. I mean, we experienced just a wave of financialization in the '70s. This was during the rise of venture capital. And I think, as a result, we have just seen an absolute ballooning of the shareholder interest in extracting value from the federal government without providing, necessarily, the capabilities that the government is after, right?
And by that I mean, we've seen, for decades, contractors really fail to hit basic performance marks, much less budget marks. You know, this is, sort of, the notorious issue in the defense industrial base, is that contractors are constantly late. They're constantly over-budget. And at the end of the day, there is an incentive for contractors to do that because they're really only accountable to their shareholders. Executives are accountable to their shareholders, regardless of what they say to the public, regardless of how they posture to the government. They are not ultimately evaluated on their performance in delivering on government contracts, much less within budget. Their job is to make money.
[00:10:05] Emma Ashford: Yeah. And again, I mean, America's history of private enterprise is a very worthwhile thing. But, you know, thinking about whether these companies truly are private entities maybe suggests the profit motive is somewhat problematic here.
[00:10:20] Julia Gledhill: Right. Because, as I say in the piece, some of our biggest prime military contractors really would not be able to continue their work without government support. I mean, I think the argument you typically hear against cutting Pentagon budgets, for example, is that contractors would then backfill, essentially, bolster their bottom line with arms sales. And so, there are just multiple facets of the way in which private profit motive, kind of, corrupts our decision-making process itself. And at the end of the day, companies like Lockheed, you know, they make 70-plus percent of their net sales from government contracts. And so, the idea that they are privatizing the financial rewards from socialized risk taking, and by that I mean, the government, you know, subsidizing R&D, as well as things like capital investment.
[00:11:14] Emma Ashford: I mean, it's certainly an interesting problem. So, for a minute, let's stop and talk about it, because there is supposed to be a mechanism for holding companies accountable for making sure that we don't see, you know, the Pentagon getting too cozy with companies. And that mechanism is meant to be congressional oversight, you know, maybe executive action, but primarily congressional oversight. Can we talk about why that's not working?
[00:11:35] Julia Gledhill: Absolutely. There's so many reasons why that's not working. Congress, unfortunately, is broken. And a big reason for that is that they're up against one of the biggest special interest lobbies in the United States. The arms industry, these weapons manufacturers, they spend an incredible amount of money lobbying members of Congress in support of weapons manufacturing, in support of, you know, militaristic foreign policy. They make political contributions to members of Congress who are then dependent on those funders to protect their incumbencies.
And so, you know, you can do campaign finance reform, you can propose an advance legislative reforms to make this process more transparent, but at the end of the day, a lot of those revolving door laws, whether they be lobbying disclosures or recusal requirements for individuals who are entering government after working in private industry, for example, they are primarily transparency statutes. There isn't really a lot of enforcement authority for the government to really prevent folks from muddling their private or professional financial interests with work that they might do in cahoots with the government. And so, that, I think, is the really primary issue here, is that, because of the financialization of the military industry, in particular, after the Cold War, UN consolidation, these contractors have simply amassed an incredible amount of political and economic power in order to shape the national security policymaking process.
[00:13:18] Emma Ashford: So, a lot of times, what we hear, and I hear what you're saying about Congress, but a lot of times, I think what we hear is that the main problem with defense contracting is red tape, right? It's that contractors have to meet so many requirements, that there's, you know, extensive bid processes they have to go through, they have to jump through so many hoops, and there's so many people in the Pentagon managing it, that that's what just slows this down and makes it impossible to produce in a timely manner. We heard a lot of this around the war in Ukraine. You know, production lines weren't capable of keeping up. But the problem was insufficient contracts, insufficient lead time, that kind of thing. That plays a role, right, the Pentagon bureaucracy.
[00:13:59] Julia Gledhill: It absolutely plays a role. I can 100% recognize that, in particular, the requirements issue. This, sort of, gets to, I think, an institutional constraint, which is the way that the DOD is organized, and you have rivalry between military services, there's going to be budget competition, there's going to be a convoluted requirements process, in part, due to that interservice rivalry. And, you know, that's a big discussion in and of itself, that partial nationalization frankly would not address. You know, it's not a perfect solution.
But the, sort of, bureaucratic argument is one that industry pushes and that I see a lot of lawmakers adopt because it’s a convenient explanation when, in fact, a lot of the red tape that they're talking about is simply providing, for example, the DOD with pretty basic cost and pricing information so that the government can ensure that it's paying reasonable prices. I mean, you would not reroof your house without shopping around a little bit. You wouldn't hire a contractor without looking into what they're paying for shingles, right? Imagine if you have one contractor to reroof your entire house and you have no capacity to investigate what they're spending on materials. That's the situation that the DOD is in. And lawmakers, for decades, have frankly conceded to industry on that point by limiting state capacity to even make sure that it's paying fair prices, for example.
Now, that's a detailed contracting issue that I don't expect people to follow, necessarily. But some of this red tape, there's not a lot of evidence in that case, for example, that contractors providing that kind of information to the DOD slows them down. They know what they're paying their suppliers. That information is on hand. And I haven't seen evidence to suggest that it slows down the contracting process. What I have seen is contractors sabotage that process in such a way that they can then blame bureaucracy when there's not a lot of evidence to support that claim.
[00:16:04] Emma Ashford: You, in the paper, argue for what, you know, first struck me as an extremely aggressive approach to this, which is nationalizing some of these defense companies. And, you know, I recoiled pretty instinctively at that. But part of the reason why I wanted to talk about some of these issues first is because it really, I think, is the case, that there's not actually a competitive private marketplace operating here. Nationalization would be less a process of nationalizing and more a process of taking control directly of something the government should already be controlling, but mostly, sort of, directs.
[00:16:41] Julia Gledhill: Yes. Yes. And this is the reaction I expect to get across the board. So, I appreciate the platform to explore an idea that isn't new, by the way, this is something that folks have talked about for decades, perhaps, not in the main stage of the national security establishment think tanks. But as you say, the defense industry is so far from a free market. It is a fantasy to pretend that these are truly private enterprises. The characteristics of a private enterprise are competition and privately owned capital. As we established before, the government is paying for R&D and capital investments for these contractors to do their work on these large military defense acquisition programs.
And so, I see this proposal as simply one that is recognizing the reality of the situation rather than trying to make it into something that it's not, which is a competitive industry, right? The Clinton administration very purposefully and explicitly facilitated the consolidation of the industry after the Cold War, but they did so in such a way that they protected profits, even as military contractors downsized from over 50 to 5. And they protected those profits, in part, by deregulation, by deregulating the way we buy weapons, by, again, doing what I have called "legalized price gouging." And that is when you cut red tape in order to increase efficiency. But in fact, you're simply allowing companies that wouldn't exist without government contracts to pay whatever they want.
And so, to some, this might seem like a radical idea, but after being in this space for several years now, I've seen legislative proposals peter out in the NDAA process and the defense policy bill because it is very difficult for lawmakers to defy funders, to defy people who are potentially capable of helping them win their next election. That's not to say that there are no members of Congress that don't talk about these issues. There are. And it's not to say that everything is reduced down to how people are going to fundraise for the next election. But the relationship between private profit-seeking behavior and our obsession with military dominance in a general sense and also our myopic focus on weapons production, and how do we do it more, how do we do it faster, how do we give more money to defense contractors, I think that we see a lot of ground. And at the end of the day, the government is the one who is responsible for national defense. And so, I think, of any industry, it's probably the one most viable to make partially nationalized, in some sense.
[00:19:41] Emma Ashford: So, I mean, one thing we could also talk about that I think is really interesting is how other countries do it, because the American Defense Industrial System is actually fairly unique. And that's often been portrayed, particularly in historical context, as a strength.
[00:19:55] Julia Gledhill: Mm-hmm.
[00:19:56] Emma Ashford: But other countries do this, lower costs sometimes.
[00:19:58] Julia Gledhill: Right.
[00:19:59] Emma Ashford: Do you have any examples you particularly think are interesting?
[00:20:02] Julia Gledhill: Yeah. So, I wrote in the piece that I think the French model is probably the one most viable for the United States, just because it is a mixed approach. They did not seize the means of production, necessarily. These are not wholly government-owned defense contractors. But I think that it's a helpful reference point because of the mix between the French government owning majority stakes in some partially state-owned enterprises. And so, there are fewer cooks in the kitchen at the end of the day, right? You don't have a bunch of shareholders that are looking to extract value from this company, often, through things like mergers and acquisitions or what have you, the kind of dressing up of the books that happens, especially in the arms industry, when, in fact, they are not necessarily producing more value, they're not producing more weapons.
And so, I think that it's a helpful reference point for the United States. And at the end of the day, this is a policy consideration that should be taken seriously but I think that we have shied away from because of the mythology of private enterprise in the U.S. defense industry. And so, you know, we can spend decades more fighting waste, fraud, and abuse and pushing for good governance reforms of which I am wholly supportive of. But I don't think that that means that we should deny ourselves other options because other countries like France and, to an extent, South Korea as well have employed partially nationalized models quite efficiently.
And I think this is an aside, but, like, especially, in sectors like shipbuilding, which have really, really struggled in the United States, you know, it requires a lot of investment, right, to build large ships in a reasonable timeframe. And the government is probably the best investor in that scenario.
[00:21:58] Emma Ashford: Yeah. And again, all these great historical examples of private enterprises, but, you know, Lockheed Martin Skunk Works that was so instrumental in producing all these technologies that, again, not entirely private enterprise, right? There's strong government funding and involvement.
[00:22:13] Julia Gledhill: Right. And another point that I would add is, I think, in the acquisition space, there's a lot of talk about focusing more on research and development, at least those of us skeptical of permanent expansion of the weapons production industry of our industrial capacity. And I think that a partially nationalized system could really engender more effective and better-designed acquisition programs because the government, ultimately, is better able to shoulder the risks that come with more research and development before you go about buying weapons en masse. And that's another way that, sort of, contractors are able to dig their heels into the Pentagon and get a lot of government contracts because, say, you make poorly designed weapons, in part, because of maybe arduous and extensive requirements that are, perhaps, more motivated by service interest than they are by the capability gaps that need filling in the military.
And so, like, if the government is responsible for funding that research and development across the board, you're doing competitive prototype testing of, essentially, finished products before you go about buying a weapon or producing it at full-rate production, then you can save money long term, even if it's more expensive upfront. At the end of the day, private companies are not going to want to take that risk. They want to build the exquisite and expensive weapons because that's how they make more money. And there's not a lot of money in building the inexpensive but important stuff like ammunition, or in doing competitive prototype testing of multiple finished products, for example.
[00:24:00] Emma Ashford: So, I want to pull this back up to the strategic level before we wrap up here, because I think, I mean, a lot of people who talk about the defense budget or defense procurement, they treat it as a proxy for strategy, right? If you want to spend less, you want to do less. If you want to spend more, you want to do more. I mean, I think something that comes out of your piece for me is that, you know, these things maybe aren't as linked as you may expect, right? It's not necessarily that having a better defense industrial base is because you think it would be helpful for maintaining U.S. primacy. But I'm curious how you think strategy is linked to these issues.
[00:24:37] Julia Gledhill: Yeah, it's a good question. I think that it really can shape and corrupt the decision-making process because of the incentives at play for policymakers in the Pentagon and on the Hill. But more broadly, I think that having an industry with far less private motive for weapons production and, potentially, intervention, though they're not always linked, as you say, but there is, you know, a relationship there, it can, sort of, engender more critical thinking about what it is we actually need and why. Bureaucrats, lawmakers, civil society, we are subject to certain political constraints.
And so, to imagine what it would be like to ask basic questions about our strategic needs, the capability gaps in our military and how best to fill them in a way that serves the public interest, in a way that achieves national security at the lowest possible cost, that's not necessarily a political opportunity that everyone is willing to make. And so, I see this as a proposal worth consideration because it broadens that political umbrella of what is even possible to consider publicly. And so, that, I think, can have a significant impact on our ability to do strategic decision making, on our ability to assess our ends and means.
[00:26:04] Emma Ashford: It removes a constraint or a distortion on strategic thinking. I like that way to think about it. Okay. So, before we wrap up, there is one final question that I'm asking everybody. And you are here at Stimson already. You know the Reimagining US Grand Strategy team. You know that we love our assumptions about U.S. foreign policy.
[00:26:23] Julia Gledhill: Uh-huh.
[00:26:24] Emma Ashford: And telling people why they're often wrong.
[00:26:25] Julia Gledhill: Mm-hmm.
[00:26:26] Emma Ashford: So, what is your top assumption you think we should question about U.S. foreign policy?
[00:26:30] Julia Gledhill: Oh, my goodness. That is a big question. I guess that the United States actually has to have a vision for the entire world. I think it's okay for us to have a vision for ourselves. And that, obviously, like I said earlier, involves rethinking our alliances and how best we advance the collective good, fight climate change, fight economic insecurities. But we don't have to have a fully baked vision for how the world order works and how we all interact. I think that other countries have agency and people have agency and that they are entitled to creating their own futures as well.
[00:27:14] Emma Ashford: That's a great one. I think that's something we can all question. So, that's all we have time for today, but I really appreciate you joining me.
[00:27:21] Julia Gledhill: Thank you for the opportunity, Emma.
[00:27:26] Emma Ashford: That's all for this episode of The Strategy Sessions. You can find the full set of episodes, along with the accompanying essays at stimson.org, or by searching for us on your favorite podcast app.
A big thanks to Stimson's communications team for their assistance with the taping, and to University FM for providing audio editing services. I'm Emma Ashford. Thanks for listening!