With the termination of combat operations in Iraq and Afghanistan, defense spending seems likely to trend downward. How will your business feel the impact?
I grew up in Southern California in the late 1960s, amid the Cold War and the space race. Probably three-quarters of the kids on my block had fathers who worked for companies like Northrop or Rockwell or McDonnell-Douglas or Lockheed. Yes, we did “duck and cover” drills under our desks monthly. Most of us brought in a note from our parents when our teachers assigned a report about what our fathers did for a living. And when a major project got canceled, it sent ripples up and down the street. First, the anxious whispers started, then the layoffs began. Suddenly, Sandy's dad, who used to carpool with Ricky's, was out cutting the grass in the mornings. Then a few weeks or months later he'd start working with Diana’s dad or my dad, at least until the next program shift. Our world was bounded by the military and aerospace budget.
There’s a theory that the world never recovered from the Great Depression; it just dove into World War II. That war didn't so much end as roll into the Cold War. For decades, fueled by conflicts around the world, defense spending represented a significant part of the world economy. And even though military expenditures dropped with the fall of the Iron Curtain, they bounced right back up with the various Gulf Wars and 9/11.
The situation is changing now, however. Countries like China, India, and Pakistan may be increasing defense spending, but elsewhere, ongoing economic fallout from the recession is pushing legislators into slash and burn mode. Last year, the United States ended combat operations in Iraq. More recently, the NATO countries announced drawdowns in Afghanistan. Granted, NATO has also initiated an intervention in Libya, but not to the same scale. Meanwhile, for many European countries, defense budgets have remained flat or seen only modest boosts. The European Union has its hands full (its wallets, less so) bailing out struggling members like Ireland and Greece.
In the United States, spending cuts are just one of the bargaining chips in the political game of chicken being played over raising the debt ceiling. Cuts in some weapons programs have already been proposed. Given the concerns about the deficit, it’s hard to believe that more will not follow.
I'm all for nostalgia, but this is evoking childhood memories I can do without. What are you seeing out there in Radioland? Do you think the Afghanistan drawdown will affect your business? How, and how soon — or is it happening already? What are you doing to compensate? And how do you think the mil/aero sector will fare going forward?
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