This time it’s different.
To remain strong as the defense bubble deflates, the sector’s companies must take some uncomfortable steps. One of the most important is to recognize that their primary customer, the Pentagon, is a terrible role model when it comes to efficiency and accountability – the very qualities that will be needed most during the next decade. The industry needs to be its own best role model.
Perhaps the toughest measure will be to back off from the costly lobbying and political influence in Washington that’s now a hallmark of the industry. This has become a liability beyond the Beltway, making the industry’s companies look like they can’t compete on the merits of their work. Another crucial step is rebalancing shareholder interests against those of government customers. That will upset some big investors, but this is an era where utility-like performance in the aerospace sector is going to be increasingly attractive. After all, taxpayers increasingly eye each dollar of contractor corporate profit, wondering how much of that money was once theirs. This is an era of zero-sum game political and economic outcomes in Washington. The defense industry is now no different.
August Cole is a fellow at the American Security Project, where he focuses on defense industry issues. The former Wall Street Journal defense reporter is based in the Boston area.