B-24 bombers under production during World War II. (Photo by Library of Congress/Interim Archives/Getty Images)
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Today, the United States faces a defense industrial base inflection point. Since the fall of the Berlin Wall, defense contractors producing America’s defense arsenal have been motivated to seek efficiencies versus what it takes to deliver combat effectiveness at scale. Now, with threats facing America greater than ever before, U.S. officials are seeking to reverse this dynamic: they want weapon system production fast, in high volume, and at lower price points. Many firms are struggling to adjust, which has set off a major debate over the need to radically reset the defense industrial base. Do the prime U.S. defense contractors have a major role in this reset, or does the future increasingly lie with new entrants?
Congressional legislation in the form of the FORGED and SPEED Acts speak to many of these concerns. If confusion remains on the issue, Secretary of the Army Daniel Driscoll clarified it recently by explaining: “I will measure it as success if in the next two years, one of the primes is no longer in business, and the rest of them have all gotten stronger.”
The reality is that America’s future security should not involve an either-or choice between established defense firms and new entrants into the business. Success demands an encompassing approach for all industrial base actors, new and proven. Of equal importance, a successful reset requires the government to provide appropriate funding, acquisition program stability, and policies that encourage desired results.
America takes tremendous pride in its heritage as the “arsenal of democracy.” Whether in World War I, World War II, or the Cold War, a key part of our nation’s identity was surging war production to secure victory. Time and again, we have been caught by surprise by incredibly dangerous adversaries. Yet, industrial and tactical innovation, backed by mass production, powered our forces to victory.
When Hitler first invaded Czechoslovakia in 1938, the U.S. possessed just 13 operational B-17 bombers. Those famed aircraft would go on to become the backbone of air operations that ultimately crushed the German Luftwaffe. Seven years later, when World War II ended, the U.S. air arsenal numbered over 200,000 combat aircraft. A similar story can be told for ships, artillery, tanks, munitions, and countless other weapons.
It took time. The U.S. and its allies fought just to stay alive in 1942 and 1943 while waiting for mass production and mobilization to catch up. By 1944 and 1945, production was so vigorous that the U.S. was equipping its own forces and those of allies in two theaters.
Established manufacturers were joined by non-traditional new entrants, and it took both to win World War II. While established shipyards churned out battleships, destroyers, and aircraft carriers, new entrant Henry Kaiser figured out how to mass produce cargo vessels at record speed and scale. American industry built its way to victory with unmatched industrial might. It took an “all hands on deck” industrial base effort to make this happen.
Following the end of World War II, the U.S. industrial base reset for the Cold War. The military industrial complex defined the state of the art in numerous technologies, from jet propulsion and advanced aerodynamics to computer technology, communications, and advanced materials. America’s defense industrial base did not just protect us, it revolutionized our economy and way of life.
Once again, established companies and new entrants both delivered results. General Electric drove jet propulsion and Raytheon and Hughes carved out new niches in weapon system computer processing. Established defense firms provided experience and scale, while newer businesses offered innovation and agility.
As the Cold War ended, however, and America sought a “peace dividend,” the world’s best defense suppliers faced a new age. The Pentagon encouraged consolidation and the industry scaled down to match the nation’s declining defense appetite. Many firms cut their defense portfolios as weapons programs were cancelled or cut short. B-2 production dropped from a planned 120 to just 21 aircraft. The expected F-22 fighter inventory objective plunged from 750 to 187. Munitions buys were gutted. While dozens of companies produced military aircraft in the 1960s, just three primes remain. The same trend followed in every other mission area, including nuclear deterrence, with space standing as the only exception as a burgeoning commercial industry developed, largely on its own.
Now, as China flexes its muscle in the Pacific, as Russia presses its fight on Ukraine, and as Iran and North Korea develop long-range nuclear strike capabilities, the U.S. homeland is under threat like never before. Defense leaders and Congress are asking industry to kick it into high gear to rearm America and its allies.
Three decades after those post-Cold War cuts, however, that’s easier said than done. American defense industrial capacity and capability have been reduced by years of “efficiency measures” and derided as guilty of “gold plating” their remaining programs. Absent large production contracts, firms scaled their business to the customer’s needs and today lack the capacity to rapidly scale up.
Reversing those trends will be challenging, yet not impossible. America’s strategic advantage remains its robust innovation and industrial acumen. Established industrial might complemented by new, venture-funded startups can turn this situation around—together. They cannot do it alone.
Defense is a business like any other, and industry responds to its operating climate. Success demands that the U.S. government fosters a business environment that fuels a dual-track industrial base. First and foremost, defense budgets must grow. America will buy fewer Air Force combat aircraft in fiscal 2026 than it has in a decade accelerating its shrinkage, munitions accounts are failing to keep pace with combatant command needs, the Space Force took cuts in key areas, air and missile defense for forward military bases remains an unfunded mandate. Industrial capacity won’t materialize without orders, and orders require increased spending.
Second, requirements are still too unstable. Aircraft buys fluctuate too much from one year to the next, sending inconsistent demand signals to industry. Business likes stability, and unpredictable orders drive costs up, not down. It is hard for firms of any size to make smart decisions in about their workforce, production infrastructure, long-lead materials, or research and development without some level of predictability.
Congress wants to speed up weapons development and cut the cost of acquisition. But will legislation like the FORGED and SPEED Acts help or hurt? Do they favor new entrants at the cost of established firms? The devil is in the details.
One clear problem is that the government is an unreliable partner. Requirements are in constant flux. Volumes are unpredictable. Layer upon layer of oversight means it’s hard to know who the ultimate decision maker is—and when a decision is final. Shutdowns happen—indeed, we’re in the midst of one right now—and cash flows are disrupted. It is hard to scale production and accelerate innovation if bills are not being paid.
President Roosevelt’s arsenal of democracy came about because the government took on much of the risk; President Reagan’s decisive military buildup won the Cold War through steadfast commitment to acquisition of new systems along with commensurate funding—originating the idea of peace through strength.
America’s ability to rise to the challenge, whether for World War II, the Cold War, or today, hinges on the health and prosperity of our defense industrial base. We cannot take that for granted.
Innovating and building the world’s most effective weapon systems is a complex business, and the capability and capacity to execute is a fragile ecosystem. We must steward it with care.
Regenerating capability and capacity is a decades-long proposition. We need to protect what we have and grow new entrants at the same time. We can no more choose one than the other. We need both.
