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From Draft NOtices, September-October 2000



- Molly Morgan

A decade after the official end of the Cold War, the Pentagon budget is still astonishingly bloated and Congress routinely gives it more than they ask for. Military spending takes up over half of the discretionary federal budget — $305 billion in 2001. The next largest category, education, is only $42 billion. The U.S. military not only has the most advanced weaponry with the biggest stockpiles, but outspends every other country by an enormous amount. The combined military spending of Russia, China, and the seven "states of concern" is still much less than half that of the United States. While global military spending continues to decline, the U.S.’s share continues to increase; in 1998 it was up to 36%.

The powerful influence of the corporate war system has everything to do with why the U.S. still spends so much on the military. The arms race during the Cold War was very profitable, highlighted by astonishing stories of $600 toilet seats and $400 hammers. Contractors paid no penalties for cost overruns or lengthy delays or technology that didn’t work — they just kept billing the government, which kept paying. People who shuttle between jobs in the Pentagon, Congress, and weapons corporations facilitate the complex procurement process. They pass the laws, negotiate the deals, and make sure that everyone inside the system makes money. Some examples: Warren Christopher was a director of Lockheed before he was made Secretary of State; William Perry promptly joined Boeing’s board of directors after he resigned as Secretary of Defense and is also on the board of United Technologies; Idaho’s Governor Dirk Kempthorne was vice president for governmental affairs at FMC Corporation (now part of United Defense) and then a Senator who sponsored the bill that created the Defense Export Loan Guarantee program (see below).

With the end of the Cold War and decreased U.S. military spending, the weapons industry looked to overseas weapons sales to bolster production lines and profit margins. This hasn’t worked very well because runaway costs priced most military technology out of the world market just as global demand declined. Undeterred, arms manufacturers heavily lobbied the nation’s decision-makers, spending, for example, $49.5 million in 1997. As a result, U.S. taxpayers underwrite a growing share of the cost of military exports.

This corporate welfare to the war industry exceeds $8 billion a year. Some of the creative programs these corporations and the U.S. government have implemented include:

  • The Defense Export Loan Guarantee program which provides $15 billion for sales to fiscally unsound nations.

  • Cash payments of over $2 billion have been provided to foreign governments to repay debts incurred to buy U.S. weapons.

  • Forgiven bad debts of $1 billion have been written off from U.S. government-guaranteed loans to foreign importers of U.S. arms.

  • The Export-Import Bank, a federal agency, offers below-market-rate loans to countries purchasing U.S. goods. Before 1990, it could only fund civilian products, but its expansion into the military realm has not-so-coincidentally paralleled Boeing’s arms export growth. Today Boeing is the second-largest arms contractor and the largest arms exporter in the U.S.

  • The Overseas Private Investment Corporation, a low-cost federal insurance policy, protects U.S. corporations doing business overseas against fluctuations in local currencies, protests, insurrections, "interference" from local government environmental restrictions, and nationalization. OPIC insures loans in 140 countries at rates that are virtually impossible to obtain from private lenders.

  • The Excess Defense Articles program gives to other countries "obsolete" weapons, components, spare parts, or anything else that the Pentagon decides it no longer wants. The EDA is one way to provide nations with poor cash flow $750 million worth of arms a year to get them accustomed to the U.S. as a supplier.

  • 6,500 diplomats and full-time employees of the State, Commerce, and Defense Departments promote and finance overseas military sales under the pretense that arms sales overseas are essential for preserving U.S. industrial jobs. (According to the Pentagon, 795,000 "defense" workers were laid off between 1992 and 1997.) From 1993 to 1997, the U.S. government sold, approved, or gave away $190 billion in weapons to virtually every nation on earth.

  • Offsets are incentives provided to foreign countries in exchange for the purchase of military goods and services. The programs often include agreements to manufacture some or all of the products in the purchasing country, creating jobs there but not in the U.S.

  • Export sales subsidies of about $500 million are created by not charging foreign purchasers for the cost of government research and development.

  • No-cost leases of about $63 million are provided when the U.S. government sends free equipment to foreign trade shows.

  • Merger and acquisition support is provided by the government to ensure the economic health of the weapons industry.

The last program helped consolidate corporate wealth and power into fewer hands. For example, when Lockheed acquired Martin Marietta it pocketed about $1 billion in taxpayer money for costs related to employee relocations, plant closures, and associated expenses. About 30,000 workers lost their jobs after the federally bankrolled merger, but executives received bonuses of approximately $31 million. Lockheed Martin is now the largest arms manufacturer in the world. Another example: in 1996 Northrop Grumman paid about $3.6 billion to purchase Westinghouse Electric’s defense and electronics business, but some $600 million of that was provided by the government in the form of pensions and medical obligations; an additional $600 million (over 15 years) was saved by purchasing tax-deductible assets from Westinghouse rather than actual stock of the subsidiaries sold. This means that the government saved North Grumman about $1 billion of the total cost of acquiring the Westinghouse division — and that was before the reimbursable restructuring costs.

In addition to all of these programs, the U.S. government ended the ban on arms exports to Latin America, expanded NATO, and defeated bills that would have conditioned arms exports on buyers’ human-rights records. The weapons industry doesn’t have to pay for all of these expenses, risks, and opportunities because one of every two dollars in arms export revenues now comes from U.S. taxpayers.

Another component of the system is various advisory groups, whose ostensible purpose is to make sure the country’s "defense" needs are adequately addressed. These groups are heavily populated with executives of arms manufacturers. Some examples:

  • The U.S. Committee to Expand NATO (later renamed the U.S. Committee on NATO) is headed by Bruce Johnson, director of strategic planning for Lockheed Martin. Because the three new NATO members are former Warsaw Pact countries, they will have to spend billions to upgrade their weapons systems to NATO standards.

  • The Defense Advisory Trade Group, a semiofficial body appointed by the State Department to advise on arms exports, has 40 current members representing the most powerful arms exporters and industry trade groups in the U.S.

  • The Defense Policy Advisory Committee on Trade, an organization comprised mostly of executives for major arms exporters, meets quarterly with top Pentagon officials to discuss issues important to key firms involved in U.S. military modernization. In 1998 they lobbied to give the arms industry $340 million in tax breaks over five years.

  • The Defense Science Board is a federal advisory committee formed to provide "independent" advice to the Secretary of Defense. Its vice chair, Philip Odeen, runs the Washington operations for TRW Inc., the Pentagon’s ninth-largest contractor. Odeen heads a panel that the Pentagon asked to review the health of its key suppliers, many of whose stock prices and profits are sagging. Not surprisingly, the Board recommends that the Pentagon find ways to strengthen incentives for contractors to make weapons more cheaply while simultaneously enhancing the profitability of the successful companies.

The rapid growth of transnational corporations is quickly making a mockery of militarized national defense even for those who believe in it. A three-way merger in Europe has created the third largest weapons producer in the world. And as in other industries, U.S. military corporations are discussing acquisitions of foreign firms. For these transnationals, the customer who can pay is their priority — "national defense" is just one more marketing buzzword to ensure that laws and subsidies keep their production lines open and profits pouring in. They have no problem with arming both sides of a conflict, as is increasingly happening, or selling to countries with bad human rights records. With the dramatic growth in arms exporting, it shouldn’t surprise anyone that U.S. troops encountered weapons of U.S. origin the last five times they engaged in combat.

Of course, as more countries around the world acquire current U.S. technology, the weapons corporations build a perfect rationale for the Pentagon to order the next generation of technology, like the not-so-stealthy, high-maintenance B-2 bomber at $2.2 billion per plane. Or the $34 billion the U.S. spends every year on nuclear weapons. Or the National Missile Defense that allegedly "protects" against an almost non-existent threat, was demonstrated again not to work this July 7, and which could restart the nuclear arms race. The arms merchants have their sights set on the militarization of space as an enormous growth industry.

The corporate war system develops technology that has no other purpose than to kill, maim, torture, and destroy, and these giant corporations are in competition with each other to see who can be more deadly — all in the name of profit. This isn’t national defense. This is a highly effective system of transferring wealth into the hands of a few at the expense of everyone.

Information sources: Nonviolent Activist, March-April 2000; Reuters, January 21 and May 22, 2000; Global Network Against Weapons & Nuclear Power in Space (; "Corporate Welfare and Foreign Policy," World Policy Institute (www.foreignpolicy; Center for Defense Information (; "Arms Makers’ Cozy Relationship with the Government," Mojo Wire ( /arms/lobbying/html); "100 Companies Receiving the Largest Dollar Volume of Prime Contract Awards," (DoD); "Nuclear Missile Deception," (World Policy Institute), "The Pentagon’s Bomb," Mother Jones, January/February 2000.

This article is from Draft NOtices, the newsletter of the Committee Opposed to Militarism and the Draft (


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