Adam Watson (00:00.47)
Welcome back to “Simplifying the State,” the podcast where we break down politics so you don’t have to figure out why World War III is trending again on Google. As always, I’m Adam Watson.

Nicholas Perrin (00:10.40)
And I’m Nicholas Perrin.

Adam Watson (00:12.47)
Okay, so Nicholas, what do Raytheon, Texas Instruments and Boeing all have in common?

Nicholas Perrin (00:17.45)
Are they all big parts of the military-industrial complex?

Adam Watson (00:20.84)
They are indeed. They’re all big companies that provide military equipment to the United States. The same people who make your calculator also make missile systems. That’s what our episode is about this week. We’re talking about the history of price gouging within the U.S. military and the military-industrial complex. Toward the end, we’ll have a little debate—so stick around.
Nicholas, do you want to give us a quick rundown on what the military-industrial complex is and how it’s evolved over time?

Nicholas Perrin (01:07.77)
Yeah. The military-industrial complex in the United States really began when the U.S. joined World War II. Before then, it was mostly civilian industry. The U.S. had its own shipyards and weapons factories used during World War I and other conflicts.
During World War II, under pressure from FDR, more civilian industries were converted to military production. For example, before World War II, weapons manufacturing was about 1% of GDP, but it jumped to 40% during the war. That’s due to the emergence of the military-industrial complex and the amount the U.S. manufactured.
After World War II, the complex remained profitable because many thought World War III was imminent. The term “military-industrial complex” was coined by President Eisenhower in his farewell address, warning the country to be cautious.
In the 1990s, especially from 1992 to 1997, the government encouraged many defense companies to merge, theoretically to cut costs.

Nicholas Perrin (03:34.85)
That backfired. Equipment that used to be cheap now costs exponentially more—thousands of percent increases in some cases—far beyond normal inflation. And that’s where we are today.

Adam Watson (04:00.72)
Right. The U.S. has had a massive defense budget in recent years—somewhere between $700 and $800 billion. A large portion of our GDP and federal budget goes toward defense.
In 2026, the White House has proposed a $1.01 trillion defense budget, the highest since the Cold War. One reason it’s so high is that in 2023, almost half of the budget went to defense contractors.
This includes equipment, parts, and software. Take the F-35 Joint Strike Fighter program. The U.S. and allies like NATO, Israel, Indonesia, and Australia went to Lockheed Martin to develop this fighter jet, designed for a range of combat roles.
While the U.S. may own the plane, it doesn’t own the ability to update the software, replace parts, or train pilots—Lockheed Martin does. That’s in the contract.

Adam Watson (06:26.02)
Without Lockheed Martin, it’s basically a shell. They can charge whatever they want because they’re the only ones who can make the software or parts.
Another example of price gouging: In 1991, a single shoulder-fired Stinger missile cost $25,000. Since the consolidation of defense contractors—from about 50 companies down to five major ones—that same missile now costs $400,000. Raytheon is the sole supplier. That’s not just inflation.

Adam Watson (07:57.88)
If you adjust for inflation, $25,000 in 1991 would be about $55,000 today. So the cost increase is far beyond inflation—Raytheon is charging whatever they want.
That’s part of why we’ve had to raise the defense budget: we need these weapons. We need replacement missiles for the Patriot system and others. And with little competition left, prices just go up.
Nicholas, hearing that massive price jump, what do you think?

Nicholas Perrin (09:13.18)
Obviously, it’s bad for the federal government and the U.S. defense overall. It also affects American taxpayers. The government has two options: raise taxes—making people angry—or spend the same amount but get less, meaning fewer resources for soldiers. Either way, it’s bad and needs to be fixed.

Adam Watson (10:11.46)
Right. There’s a third option: pull funding from things like Social Security or Medicaid, which people rely on. We need a military for defense, sure, but if this price gouging continues, those are the options.
One example: An Apache helicopter needed a replacement part. The Pentagon asked the company for permission to make it themselves since the helicopter was in an active combat zone. The company said no—they had to buy it from them.
So the helicopter didn’t move until they paid. This wasn’t a grounded aircraft in Kansas. It was in combat. Nicholas, what do you think the impact of that could be on a battlefield?

Nicholas Perrin (12:36.67)
It would make combat operations more difficult. But I think at some point, soldiers on the ground would just do what they need to do. They carry spare parts and often don’t use them during peacetime to avoid legal issues.
In wartime, there’d be more flexibility. In a formal war, I don’t think it would matter as much. But in modern proxy wars, it would be a big problem.

Adam Watson (13:41.65)
Right. I could see Congress or the president issuing an order to suspend exclusive rights to parts during wartime.
But in peacetime operations—like those in Syria or Somalia—if troops need a part and can’t legally fix it, they’re stuck. That puts lives at risk.
Inspectors general have found cases of defense contractors overcharging the military: $71 for a pin that should cost a nickel, $80 for a drainpipe worth $1.41.
Nicholas, what do you make of those markups?

Nicholas Perrin (15:07.56)
That’s what happens in a monopoly. The government is contractually obligated to buy from these companies—even when they have spare parts already. The government shot itself in the foot in the ’90s by encouraging defense mergers.

Adam Watson (15:39.45)
Yeah. In a capitalist society like ours, when essential military supplies are in the hands of monopolies, you get Lockheed Martin and Boeing making 40% profits on missiles.
There are oversight offices in the Pentagon that try to stop this. One found that renegotiating a contract saved taxpayers $550 million.
But here are more examples: $4,361 for a half-inch metal pin, 9,400% profit. The Army paid $1,678 for a helicopter part it already had in stock for $7.71.
TransDigm priced parts 4,000% over cost. That’s the reality when monopolies go unregulated due to lobbying.

Adam Watson (18:05.15)
Now we’ll move into our debate: Should the U.S. nationalize its defense industry?
I’ll argue for nationalization. Nicholas will argue against it. Nicholas, want to go first?

Nicholas Perrin (18:16.41)
Sure. One benefit of the current system—besides the monopoly issue—is that competition drives innovation. Historically, private companies under their own management outperform government-run operations in developing new technologies and pushing progress.

Adam Watson (19:19.12)
I agree that competition breeds innovation. I think we should keep research and design privatized. But when it comes to producing the equipment—making spare parts, rifles, missiles—the government should take over.
That way, production meets demand fairly and reliably.
For example, the U.S. Navy has around 490 ships—active or under construction. But at the current pace, we’ll lose more ships to retirement than we build.
This is partly because there are so few private shipbuilders left in the U.S.

Adam Watson (21:45.45)
We’re not building fast enough. Many ships are Cold War-era and nearing retirement. Aircraft carriers from the ’70s and ’80s are aging out.
China now outnumbers us in ship count. While we still have an edge in tonnage, in a naval war, that may not matter if they can outnumber us 3 to 1.

Nicholas Perrin (22:50.17)
Instead of nationalizing, the government could offer more incentives to private shipbuilders. If the money’s there, construction companies will build the dockyards. That’s how supply and demand works.

Adam Watson (23:40.88)
I see your point, but corporations are less motivated to build expensive dockyards. The government has more of a vested interest in doing so—especially if it sees war on the horizon.
It doesn’t need profit to justify building a dockyard. That’s why nationalizing production makes sense.

Nicholas Perrin (24:31.58)
Construction companies build dockyards, and we have plenty of them. If there’s money to be made, they’ll do it. That would attract more workers to the industry.
Government inefficiency and bureaucracy could slow things down.

Adam Watson (25:20.09)
I get that. But with monopolies in place, we’re held hostage to what corporations want. If the government ran production, it could act faster and cheaper—without negotiating every contract or overpaying for parts.

Adam Watson (26:35.99)
We’re being held hostage by the military-industrial complex. They can charge whatever they want. And they know we have no other options.
Five corporations now control the parts and ammo supply for our entire military. Without those, our military grinds to a halt.
This is a serious issue—especially if we face a long war with China, which has nationalized production and rapidly expanded its military.

Adam Watson (27:21.97)
Their system works for production. I’m not saying we should be like China overall—but we should rethink our model.
Keep design private, but shift production to the government. The World War II model won’t work for the next war—today’s tech is too complex.
We can’t afford delays caused by contracts or lack of funds. That’s my point.

Nicholas Perrin (28:00.00)
That problem could also be solved by breaking up monopolies—trust-busting.

Adam Watson (28:07.05)
Right. That could work too. But the bottom line is that our current system isn’t working. As tensions rise and we need more advanced weapons, we need a solution.
Mine is nationalization. Yours is trust-busting and keeping it private.

Nicholas Perrin (28:21.95)
Yeah. Well, yeah.

Adam Watson (28:22.00)
All right. Thank you for listening to “Simplifying the State.” We’ll be back next week. Rate the podcast if you enjoy it. Follow us on Spotify, Apple Podcasts, YouTube—wherever you’re listening. We’ll see you next time.