The latest forecast for the war: profits
Yesterday, the Biden White House asked Congress to fund a massive infusion of cash and weapons in Ukraine’s name. The headline number of the package — $33 billion — was clearly intended to grab attention, and it did. The core of the request is $20.4 billion in “security and military assistance,” most of which will be handled by the Pentagon. If approved (as looks likely), it would balloon total U.S. spending on the Russo-Ukraine War to $46.6 billion — equivalent to two-thirds of Russia’s entire annual military budget, according to the New York Times.
The request comes at a desperate moment for Ukrainian forces, who are trying to repel a renewed offensive in the east of the country. It also comes at a great time for the weapons industry. The end of the U.S. war in Afghanistan and a general leveling off of weapons sales to the Middle East have both reduced profits. Investors initially cheered when Russia breached Ukraine’s borders — the stock prices of Raytheon, General Dynamics, Lockheed Martin and Northop Grumman all soared during the invasion’s first days — but enthusiasm quickly waned, as sanctions on Russia eliminated another weapons market and cut further into the contractors’ bottom lines.
On Thursday, Defense Secretary Lloyd Austin (himself a former Raytheon board member) said that Biden’s new request would re-open the feed bag, providing $6 billion to buy new weapons for the Ukrainians, $5 billion to transfer and compensate for the loss of existing U.S. inventory, and another $5 billion to bolster the military forces of NATO allies in Eastern Europe, ). Another $4 billion would go to a State Department program that provides financing and training for allies who buy from U.S. weapons-makers.
As often happens, the arms manufacturers are upfront about all this with their investors. Lockheed CEO Jim Taiclet told investors earlier this month that, thanks to the Russian invasion, “the value of strong deterrents to war as an instrument of nation’s geopolitical strategy has not been as great since the middle of the 20th century. So, here at Lockheed Martin, we’re aggressively, and have been aggressively, positioning our company as a deterrence company.”
Raytheon CEO Greg Hayes similarly told an earnings call on Tuesday that he was optimistic about his bottom line. “We were seeing an increase in defense spending before any of this nonsense in Ukraine with the Russians. So I think, again, the trajectory is better than what we had expected.”
Both calls took place before Bidens’s big ask, but it’s likely both CEOs knew something like it was coming. They, along with executives from Boeing, L3Harris, BAE, Huntington Ingalls, General Dynamics, and Northrop Grumman had been invited to a classified briefing about plans surrounding Ukraine at the Pentagon in mid-April.
So that’s all well and good — there’s a war, wars are fought with weapons, weapons makers are eager to sell weapons. But what, if anything, does it tell us about this particular war?
Some right-wing commentators, such as Jack Posobiec, have used the ratcheting spending spree to imply that the arms dealers, and their allies like Lloyd Austin, are responsible for the war. (Posobiec, it should be noted, has been a profligate amplifier of Russian state propaganda for years.) That’s getting things backward. The only person ultimately responsible for Russia’s invasion of Ukraine is Vladimir Putin, who has his own goals and logics that have nothing to do with a Raytheon balance sheet — and, as anyone who lost money in the post-sanctions sell-offs attest, can be at cross purposes with one.
It also doesn’t mean that suddenly cutting off all weapons deliveries to the Ukrainians from the U.S. and other European allies would necessarily lead to a better outcome, for either Ukrainians or the wider world. My fellow newsletterer John Ganz put it succinctly:
But it does mean that anyone whose goals include building democracy and ending this conflict should approach proposals like the one Congress is now considering with a lot more scrutiny. How, specifically, will each spending item help hasten an end to the war? Are there other things that we can spend money on besides weapons that will be of more help to civilians, Ukrainian and otherwise, in the long run? Are there choices being made right now that will lead to further escalation, or to feeding new arms races that will make future conflicts more likely?
None of these are new questions. In the aftermath of World War I, Americans were scandalized by the excessive profiteering of U.S. arms manufacturers. They called for investigations into whether arms manufacturers either caused the U.S. entry or influenced the conduct of the war. The result was a 1930s Senate committee chaired by Sen. Gerald Nye, a Progressive Republican from North Dakota. Over the course of ninety-three hearings, the senators interrogated representatives of DuPont, Colt, Pratt & Whitney, and other military contractors, as well as representatives of J.P. Morgan & Co.
The Nye Committee’s conclusions did not endorse the most conspiratorial theories of the war, including some favored by the committee chairman himself. But the senators did find that “some of the munitions companies have occasionally had opportunities to intensify the fears of people … and have used them to their own profit,” and that technological progress had been “used by the munitions makers to scare nations into a continued frantic expenditure for the latest improvements in devices of warfare” — in order words, intentionally provoking arms races.
At the end of the 1936 report, the senators concluded:
“While the evidence before this committee does not show that wars have been started solely because of the activities of munitions makers and their agents, it is also true that wars rarely have one single cause, and the committee finds it to be against the peace of the world for selfishly interested organizations to be left free to goad and frighten nations into military activity.”
In our own day, the goading and self-interest has reached incredible heights. Over the last twenty years, the arms industry has spent more than $2.6 billion lobbying politicians and $300 million making contributions to their campaigns, OpenSecrets reported. That translates into taxpayers footing hundreds of billions in annual contracts — not to mention as much as 70 percent of Lockheed CEO Taiclet’s $23 million annual salary as Eli Clifton calculated it. (Asked by Clifton about this state of affairs at a recent event of the Atlantic Council, a think tank that receives hundreds of thousands of dollars a year from Lockheed, Tacilet demurred: “It’s up to the U.S. government” — as if Lockheed hadn’t spent $14 million last year alone on wheedling the government for more money.)
Did U.S. arms manufacturers need a war in Ukraine? No more than they needed a war anywhere else. Will they wring every dollar out of it that they can, no matter the consequences, if we let them? Absolutely.
Edited by Sam Thielman
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