A Good Business

By Conn Hallinan
published by portside
January 10, 2003

War, the expression goes, is a bad business. It's certainly not a good idea if you're a soldier or civilian caught in the middle of one, and it tends to raise havoc with things like domestic spending. But if you are Lockheed Martin, Northrop Grumman or former Joint Chiefs of Staff chair, Admiral (ret.) William Crowe Jr., these are salad days.

For those who make its instruments, war is very good business indeed, and, while the rest of the economy may be tanking, things that go "bang" and kill people are on a roll.

Boeing, for instance, recently doubled its production of JDAM kits ($25,000 a pop), which make dumb bombs smart. Raytheon added a shift to produce its Paveway laser guided bombs ($55,600 apiece), while Alliant Techsystems is churning out 265 million rounds of small arms ammunition ( $92 million).

This is the era of high tech war, which is good news for General Atomics Aeronauticals Systems and its unmanned surveillance and attack craft, the Predator. The going rate is $25 million for four. So, too, for Northrop Grumman, with its $20 million Global Hawk, the Cadillac of robot aircraft. Northrop, which recently swallowed TRW for $7.8 billion, is projected to earn $26 billion in revenues this year.

To keep all these machines talking to their operators, Boeing is pitching its Wideband Gap satellite ($1.3 billion per unit) and Lockheed Martin, Hughes and TRW are pushing their EHF Advanced Wideband satellites for $2.7 billion a shot.

And if you're Admiral Crowe Jr., you are cashing in on a real smart investment. Back in 1998 the state of Michigan sold the vaccine company, Bioport, to a group of private investors. At the time, the company was under fire from the Federal Drug Administration for poor quality control of its smallpox vaccine. Crowe Jr. and company brought the place for a song and, shortly thereafter, landed a $60 million contract from the Department of Defense.

You don't have to kill people to make money. Take Kellogg Brown & Root, owned by Vice-President Dick Cheney's old company, Halliburton. The construction company has been building bases since World War II and had a virtual lock on military construction during the Vietnam War. It made $2.5 billion from the DOD during the '90s and is presently building bases in Afghanistan (the costs are classified).

Other bases are being constructed in Yemen, Pakistan, Turkey, Georgia, Uzbekistan, Kyregyszstan, India and the Philippines. No need to go to uncomfortable places to make money from all this, however. The Homeland Security budget is $37.7 billion, and the military industrial types are already thundering toward the trough.

Boeing wants to fit commercial airplanes with its missile-tracking device, the same one that keeps missing its targets in the Administration's billion- dollar missile defense boondoggle.

Lockheed Martin wants to sell its military simulators to train emergency fire and medical teams.

General Dynamics is pushing armored vehicles to local police (a bargain at $200,000 plus) and also wants the military to use its Gulfstream Executive jets as early warning radar systems. Smart move. With the economy a disaster, and the Iraq War likely to worsen things, Executive jets are a slow sell these days. Northrop Grumman, builder of the $2 billion B-2 Stealth Bomber, and co-contractor with Lockheed Martin on the $400 billion F-35 Joint Strike Fighter, is pushing its telecommunication systems as a way to fight bioterrorism.

All of this, of course, is done in the spirit of patriotism. "The attacks on Sept. 11 are a very personal things for us," says Boeing Vice-President John Stammreich. He did not, on the other hand, offer any of his company's whiz-bangs at cost.

If one adds up all the supplementary costs of war beyond the $355.5 billion military budget--Homeland Security, $30 billion in supplementary funds, $25.5 billion for foreign military assistance, $16 billion for nuclear weapons, etc--the U.S. spends in excess of $465 billion each year, or $1.2 billion a day.

A month of military spending would wipe out California's catastrophic budget deficit. Instead, Californians are going to cough up $10.1 billion in income taxes just to pay for the upcoming $100 billion plus Gulf War. U.S. military spending not only dwarfs the combined military budgets of the "Evil Axis" ($11.4 billion), all potential enemies ($116.4 billion), but every single nation in the world, from Russia to Luxembourg ($423 billion). War is a bad business? Not for everyone.