This is the script for my video posted on August 14, 2026. Watch it on TikTok.
The US spends about a trillion dollars per year on defense, and more than half of that goes to contracting companies. The five biggest, like Raytheon, General Dynamics, and Lockheed Martin, take a third of all contract dollars on their own. But why does the US rely so much on the military-industrial complex, and what impact does this have on geopolitics?
The story starts after WWI, when rapid demobilization led to a decrease in defense spending from about 20% of the US’s GDP to only around 1.25%. By 1939, the active duty army had only about 190k troops, ranking 17th in the world in size, just behind Romania.
In the 1930s, a Senate Special Committee was actually formed to investigate the munitions industry for an alleged conspiracy among arms makers to profit from promoting the conditions necessary for war.
There was little hard evidence of this, but the investigation did document bribery, influence peddling, hostility to disarmament, and enormous profits from war. The heavily publicized hearings helped drive the Neutrality Acts of 1935-1937, which aimed to keep the US out of foreign wars.
But by the attacks on Pearl Harbor in December 1941, the army had grown to around 1.6m troops, and it peaked at about 8.3m. All told, more than 16m Americans served in uniform during the war.
For most of its history, the US leaned heavily on government arsenals and navy yards to produce its own weaponry, alongside private contractors. But from 1940 to 1944, the US government placed 175b dollars in prime defense contracts, roughly 3t dollars today. Two-thirds of that money went to just 100 companies, and 20% went to just five.
Then after the war, the US did not return to its former baseline. Defense fell steeply from its peak of 41% of GDP, but never back to interwar levels. In 1950, a classified paper called NSC-68 argued for near-quadrupling defense spending, from about 13b dollars to as much as 50b, to build a base capable of rapid full mobilization. President Truman thought it was too expensive, until the Korean War kicked off. Within three years, spending had passed 50b.
Dwight Eisenhower’s farewell address in 1961 is maybe the best depiction of what things were like. He said that the conjunction of an immense military establishment and a large arms industry was new in the American experience, with economic, political, and even spiritual impacts felt in every city, every statehouse, and every office of the federal government. He stated that it was necessary but had grave implications, because it could create unwarranted influence by the military-industrial complex on the government, and in his words, endanger liberties and democratic processes.
Basically, they had to balance between security and liberty. Defense contractors, congressional committees like Armed Services and Appropriations, and the military all have a mutually reinforcing relationship, in what’s called the iron triangle. And because of how the American system is built, with first past the post voting and single-member districts, members of Congress are incentivized to protect defense companies operating in their districts, both to stay in office and to maintain jobs for their constituents.
The Cold War and the Vietnam war obviously provoked sustained spending. But in 1993, after the Soviet Union had collapsed and operations in Iraq had concluded, senior defense officials hosted about two dozen defense executives at a Pentagon dinner to tell that budget cuts would deepen sharply and the industry had to consolidate much further and faster.
This dinner, now known as the "Last Supper", accelerated a wave of mergers that was already underway, for example combining Martin Marietta with Lockheed to create Lockheed Martin. The number of prime contractors fell from 51 to only 5. The Pentagon's own 2022 review found this left it dependent on a handful of suppliers, with 90% of missiles for example now coming from just three sources.
This structure directly shapes geopolitics today. The clearest demonstration is the US’s Foreign Military Sales, or FMS, run by the Pentagon's Defense Security Cooperation Agency under State Department policy oversight. FMS is one of several channels that US weapons move through. The other big one is Direct Commercial Sales, where a foreign government contracts with a US firm directly. In Fiscal Year 2024, FMS hit nearly 118b dollars, the highest annual total ever, and DSCA was managing a standing portfolio of over 16k open cases worth more than 845b. As countries across Eastern Europe, the Middle East, and East Asia prepare for potential conflict, these companies wield enormous power.
The F-35 program is a great example of how countries and the US defense industry interact. Lockheed Martin originally developed the F-35 with eight partner countries, including Turkey, which planned on buying 100 of them.
But in 2019, Turkey accepted delivery of the Russian S-400 air defense system, which US and NATO officials feared could gather intelligence on the platform’s stealth capabilities. Turkey was kicked out of the program, but this caused a serious problem because Turkish subcontractors produced 937 parts, about 400 of them sole-sourced, worth more than 9b dollars in projected work over the program's life. The Pentagon estimated that retooling the supply chain would cost 500 to 600m dollars.
It gets complicated domestically too, because the military and the defense industry are so intertwined that giant conflicts of interest are basically inevitable. A 2021 Government Accountability Office report identified over 1700 former Pentagon acquisition officials, generals, and admirals working for just 14 contractors. Of the 32 four-star officers who retired between 2018 and 2023, 26 went on to work for the industry as executives, board members, consultants, or lobbyists.
Lobbying and campaign finance are similarly problematic. The defense industry spent over 159m dollars on lobbying in 2024. Over about 20 years, members of the House Armed Services Committee attracted more than 54m dollars in defense-related campaign money. From 2019 to 2023, the top 100 defense companies gave at least 35m dollars to the top 50 think tanks in the US, and that's only the disclosed money. It’s contested whether this directly shapes policy discourse, but many argue it skews debate in favor of higher defense spending.
It is worth noting through all of this though that research suggests policy is shaped more by the shared ideology of the military-industrial complex than by crude lobbying. Across the military, industry, and government, people see threats through the lens of their own interests, and they are not necessarily doing it consciously.
Not to mention, defense spending is around 3% of GDP today, versus about 13% at the Korean War peak and 6% under Reagan, and projections indicate the share will fall further. Prime contractors have also fights they’ve lobbied hard for. For example, the FTC killed Lockheed Martin's 4.4b dollar bid for Aerojet Rocketdyne in 2022. And empirical favoritism from government officials is hard to prove.
Nonetheless, global defense spending is rising, hitting 2.9t dollars in 2025. Europe is rearming amid threats from Russia, and it's buying from the US, with Poland ordering F-35s, Abrams, HIMARS, and Patriots. But the EU is pushing the other way too, with instruments capping non-EU spending at 35% to keep the money at home.
Non-traditional firms like Anduril, Palantir, SpaceX, and Shield AI are changing the landscape too, because they often operate like tech companies rather than traditional contractors, though they are also hiring former officials and ramping up their own lobbying, so it's an open question whether they're breaking the model or just joining it.
The fact of the matter is, corporations in general are hugely relevant to geopolitics. Whether you agree with their involvement or not, failing to consider them creates an enormous blind spot when it comes to actually understanding what’s going on.
Keep reading
- Who actually fights America’s wars?
- How and why would the US invade Cuba?
- Why is Guam critical to the US?
I’m writing a book called Groundwork about the buried history beneath geopolitics. Join the waitlist to hear when it has a publisher, a cover, and a release date.