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1. Today, the head of the Air Force's acquisition said consolidation in defense contractors is so extreme it's a national security concern. There is just no longer much competition. reuters.com/article/us-usa…
2. Meanwhile, the WSJ reported that national security officials under the Obama administration accidentally allowed chipmaker AMD to move 'crown jewel' technology to the increasingly totalitarian Chinese government. wsj.com/articles/u-s-t…
3. What is happening now is the result of a breakdown of public control of our defense industrial base, and more broadly, our manufacturing base. I interviewed a several small manufacturers to find out what happened. It's not pretty. theamericanconservative.com/articles/ameri…
4. How did America lose every single one of its telecom equipment makers? We invented the telephone business. Those businesses existed for a hundred plus years. What happened? How is China now in the lead via Huawei?
5. Why do we spend more than every other country combined on the military and yet increasingly are finding that strategic competitors like China and Russia are catching up quickly, or even surpassing us? Trump is raising military budgets. But the problem is not a lack of money.
6. Here's the story, in a chart. It's the monopolization, stupid. From 100+ prime contractors in the 1990s to less than 6 today.
7. In 1993, Clinton DOD official Bill Perry, a former defense M&A specialist and engineer, told defense contractors at a dinner, known as "The Last Supper," to merge. "Consolidate or evaporate," he said. They did. theamericanconservative.com/articles/ameri…
8. The Clinton administration, aside from encouraging a wave of consolidation, also restructured contractor rules to allow defense contractors in monopolized markets for specialized parts to avoid telling the Pentagon what things cost. theamericanconservative.com/articles/ameri…
9. In the 1990s and 2000s, new business models, based on corporate raiding and rebranded as "private equity," invaded the defense industrial base. Transdigm, the Martin Shkreli of defense contracting, began pillaging the taxpayer. huffpost.com/entry/defense-…
10. L3 sought to become the "Home Depot of the defense industry," mimicking the trend towards financialized predatory chain stores in the rest of the economy. One of the L's stood for Lehman Brothers, which was a cofounder. theamericanconservative.com/articles/ameri…
11. Wall Street started monopolizing mid-sized industries and then selling them to China. Rare earths was the well-known one. But it goes far beyond that. theamericanconservative.com/articles/ameri…
12. We've lost much of our fasteners and casting industries, which are key inputs to virtually every industrial product, we've lost much of our capacity to make grain oriented flat-rolled electrical steel, a specialized metal required for highly efficient electrical motors.
13. One manufacturer told me we can no longer replace our submarine fleet, because we don't have the capacity to do high quality steel castings necessary for high-pressure hulls. Most of that's in China now. theamericanconservative.com/articles/ameri…
14. Our middle class was a key national security asset. “The middle-class Americans who did the manufacturing work, all that capability, machine tools, knowledge, it just became worthless, driven by the stock price,” said one manufacturer.
15. The thing is, we've been here before. The Nazis tried to do the same thing to the U.S., establishing control over U.S. industrial commons through our domestic oligarchs like Standard Oil. theamericanconservative.com/articles/ameri…
16. Much of the New Deal in the late 1930s and early 1940s was about breaking the control domestic oligarchs had on U.S. industrial capacity. Here's Harry Truman, as a Senator.
17. And we are refocusing on domestic manufacturing and national security, and on a bipartisan basis. As bad as he is, Trump is pushing for insourcing. @ewarren, @RoKhanna, and @JackieSpeier have begun reversing contracting policies that helped Transdigm. theintercept.com/2019/05/28/ro-…
18. And though he doesn't talk about it (and should!), one of the most ardent opponents of the defense consolidation in the 1990s was.... @BernieSanders. latimes.com/archives/la-xp…
19. The lesson is simple. If we allow private equity and China to control our markets, we allow them to control our security. Concentrated power - whether in the supply chain or elsewhere - is a security threat. So let's take back our markets and provide for the common defense.
20. If you liked this thread, I'm covering more of these kinds of power dynamics with my newsletter, Big. You can sign up here. mattstoller.substack.com/welcome
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