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I've read that the answer to this question is why a large part of our military-industrial complex exists - the US government gave Lockheed and others 50+ year l

I've read that the answer to this question is why a large part of our military-industrial complex exists - the US government gave Lockheed and others 50+ year long non-cancellable contracts to build equipment for the government back in WW2 because they couldn't justify the business risk (similar to why Fannie Mae and FMAC were created) and it was deemed in the government's "best interest" to keep these companies afloat in some capacity. Aircraft carriers we don't need, guns that are long obsolete, tanks that the Pentagon doesn't want anymore - the list goes on with the excess manufacturing spending the government seems to be roped into buying because of... "reasons." I've never read through those contracts myself but I would hope that they're public record if they're so old and important.

Kadin 10y ago
That sounds a bit hard to believe in the specifics, but in general I don't think it's particularly controversial that the US government has something of a vested interest in keeping the defense industry from contracting too much during peacetime, and structures contracts and purchasing in such a way that companies are kept around who might otherwise go out of business or get acquired. E.g. I think it's pretty much accepted that the Pentagon has gone out of its way to keep the market for military aircraft from collapsing too much. That's an industry that would be difficult to rebuild once the expertise and tooling is gone. (Personally I was surprised when they let McD-D merge in the late 90s.) Interestingly, there's case studies in the private sector for doing exactly this sort of thing in cyclical industries. Toyota is famous (within the rarefied air of supply-chain textbooks, anyway) for supposedly buying up its suppliers parts and stockpiling them, or even just paying the suppliers to be idle, so that they don't go out of business (or start retooling for other clients) during lean times and are ready to go when demand returns. If you view the military-industrial complex as basically a "supplier" to the US Government, and view the demand for military equipment somewhat cynically as a cyclical demand curve, the government's behavior makes sense. You don't let your suppliers go out of business if you think you might need them again...

Kadin 10y ago

That sounds a bit hard to believe in the specifics, but in general I don't think it's particularly controversial that the US government has something of a vested interest in keeping the defense industry from contracting too much during peacetime, and structures contracts and purchasing in such a way that companies are kept around who might otherwise go out of business or get acquired. E.g. I think it's pretty much accepted that the Pentagon has gone out of its way to keep the market for military aircraft from collapsing too much. That's an industry that would be difficult to rebuild once the expertise and tooling is gone. (Personally I was surprised when they let McD-D merge in the late 90s.) Interestingly, there's case studies in the private sector for doing exactly this sort of thing in cyclical industries. Toyota is famous (within the rarefied air of supply-chain textbooks, anyway) for supposedly buying up its suppliers parts and stockpiling them, or even just paying the suppliers to be idle, so that they don't go out of business (or start retooling for other clients) during lean times and are ready to go when demand returns. If you view the military-industrial complex as basically a "supplier" to the US Government, and view the demand for military equipment somewhat cynically as a cyclical demand curve, the government's behavior makes sense. You don't let your suppliers go out of business if you think you might need them again...