Neocon Cries Poverty For Defense Companies

Bear with me for a second, ok? Today, James Joyner mentioned a post by Thomas Barnett citing a subscriber-only article in a recent issue of The Economist which notes that “the war in Iraq is surprisingly bad news for America’s defence firms.” Barnett wrote: Surprising to the Economist perhaps, but I made this argument with some force in the first chapter of Blueprint for Action. The Pentagon lives to dream up fabled future opponents and then program against that desired foe. In concert, the defense firms live to build those massive and expensive platforms and weapons and communications systems for that desired scenario. You have some nasty and real like Afghanistan and Iraq intrude on that dreamy future, and guess what? Stuff doesn’t get bought. Not surprising whatsoever. Asymmetrical, fourth-generation warfare doesn’t favor the few and the absurdly expensive, but the many and the cheap. James then built upon that post to say that "facts seldom change preconceptions" and "people will go right on believing that we go to war at the behest of defense contractors". Now... I noticed Barnett didn't provide a link or any quote from the article. Here it is. The first paragraph only talks about the cancellation of the C-17 transport. So I decided to see what others were saying about the various defense firms. After all - with multi-billion dollar destroyers, subs, stealthfighters etc. and a budget that now is roughly equivalent to the whole of the rest of the world, not to mention all those lucrative new deals in Pakistan, India, Saudia and others that the war on terror has made possible - how can Barnett explain away the public perception of record profits and share prices for every major defense firm? Well, he can't. Between 2001 and 2005, the profits for the 34 largest defense companies have climbed 189 percent. Profits for U.S. corporations as a whole rose 76 percent. Or are those just pesky facts again? Like the doubling of defense firm average CEO pay while they are supposedly "hurting" this much? Before 9/11, the gap between CEOs of publicly traded companies and army privates was already a galling 190 to 1. Today, it is 308 to 1. The average army private makes $25,000 a year. The average defense CEO makes $7.7 million. It gets worse. Jan 26, 2006 Lockheed Martin quarterly profits up 53% Profits topped Wall Street estimates as sales rose 2.6 percent to $10.2 billion. Net income was up $568 million, compared with the fourth quarter of 2004 when earnings were $372 million. The company is raising its earnings forecast for this year from $4 a share to $4.25 and has declared a quarterly stock dividend of 30 cents a share." April 26, 2006 Boeing 1Q earnings up 29 percent to $692M Net income was $692 million, or 88 cents per share, up from $535 million, or 66 cents per share, a year earlier. Revenue climbed to $14.3 billion from $12.7 billion, up 12 percent although below the $14.5 billion expected by analysts. The defense unit's operating earnings declined 4 percent and revenues were down 6 percent, leaving it just ahead of the commercial airplane division at $7.2 billion. The company said operating margins for the Integrated Defense Systems division increased by 11 percent, driven by gains in military aircraft programs such as the C-17, F/A-18 and Rotorcraft. Those are the big two and both are reporting making big bucks from big-ticket military items. Northrop Grumman showed an increase 3.6% in profits from 2004 to 2005, Raytheon a 5.8% increase, United Technologies 10% and General Dynamics 7.22%. (All data from Fortune magazine) Accross the pond, BAe are also showing increasing profits. BAE said net profit for the 12 months ended Dec. 31 was 553 million pounds ($969 million), up from 2 million pounds in the previous year. Revenue rose to 11.02 billion pounds ($19 billion) from 8.82 billion pounds. Finance Director George Rose said earnings at the company's programs unit were driven higher by the Eurofighter military jet program as deliveries ramped up to European nations. Last year, 37 Eurofighters were delivered to air forces in Britain, Italy, Spain and Germany. BAE is making the planes along with partners European Aeronautic Defence & Space Co. and Finmeccanica SpA. Overall sales were boosted by BAE's acquisition of its Arlington, Virginia-based rival United Defense Industries Inc., the maker of the Bradley Fighting Vehicle. The purchase, completed in the middle of last year, made BAE the world's second-biggest producer of tanks and armored vehicles behind General Dynamics Corp. and the Pentagon's seventh-largest supplier. The company said that defense spending in the United States, the world's biggest market, continues to be robust for the near term. Either the Economist is full of it or we can file Barnett with Timmerman and Taheri under "neocons and the lies they tell".