The defense industry as we know it today may not be a permanent fixture on the national landscape. It emerged in response to an urgent and protracted threat posed by the Soviet Union in the 1950s, which produced a 40-year boom in demand for weapons that we now call the Cold War. However, the demand signal for military hardware began to weaken after the USSR collapsed, and now all five of the major drivers of defense demand are pointed downward for the first time in the sector’s history. Threats are receding, political alignments have shifted against industry interests, federal funding is harder to come by, the economy is not what it used to be, and public opinion is opposed to using U.S. forces overseas. Defense contractors therefore need to get a lot more aggressive about diversifying while they still have the resources to do so. I have written a commentary for Forbes here.
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