When the arsenal runs low, ask who built it — and why

The BBC reports that American operations against Iran have consumed thousands of hard-to-replace missiles, prompting serious questions about whether the United States, for all its vast expenditure, has left itself perilously short of the very instruments on which its strategic posture depends. I am not a military engineer and will not pretend otherwise. But the institutional and economic question beneath the tactical one is very much my business: how does a nation organize the production of its own defense, and what happens when it organizes that production badly?

Defense is the first and most unambiguous of the public goods I identified in my own work. I wrote that the first duty of the sovereign is to protect society from invasion — and that this duty requires a revenue, organized by the public, because no private merchant will bear the cost of a fortress on behalf of strangers who cannot be made to pay for it. A standing army, properly maintained, is not a luxury of empire; it is the institutional precondition of everything else, including the free commerce that prosperity requires. A merchant who cannot enforce his contract is not free; a nation that cannot defend its borders has no sovereignty to speak of.

But here is where the matter grows interesting. The BBC's account, taken at face value, suggests that a country spending more on its military than the next several combined has nonetheless managed to exhaust critical stocks in a relatively brief campaign. This is a familiar pathology, and it has a familiar cause. When the production of arms is concentrated in a small number of large contractors — each protected from competition by the complexity of the procurement process, by patents, by security classifications, and by the capture of the very officials who are meant to discipline them — the result is precisely what you would expect from any sheltered monopoly: high prices, slow replenishment, and a product calibrated more to the buyer's budget cycle than to the nation's strategic need. I wrote at length about the East India Company, a private firm that had turned a public function — the management of trade and, eventually, territory — into a private toll. The defence contractor who lobbies Congress for a production line that cannot be surged in wartime is the same figure in a different coat.

The division of labor, I argued, is the great engine of productivity — but it requires competition to keep it honest, and it requires a sovereign able to discipline it when it goes wrong. The pin factory works because each worker is specialized, the market is open, and no single manufacturer can dictate the price of pins to the public. The missile factory works very differently: one or two firms, a single buyer who cannot easily walk away, and a procurement process so baroque that entry by newcomers is nearly impossible. That is not a market. That is a guild, and guilds produce exactly this: scarcity at the moment of greatest need.

I would not pretend to know the specific numbers behind the BBC's claim, or precisely which systems are in short supply — those are technical matters I am not positioned to assess. But the inference I am willing to draw, from the institutional logic alone, is this: any nation that entrusts the production of irreplaceable public goods to a narrow set of uncontested private suppliers, without the discipline of competition or the transparency of public audit, should not be surprised to find its shelves bare when the demand arrives suddenly. The remedy is not to nationalize the arsenals — state monopoly is no better than private monopoly, and often worse. The remedy is to design a procurement system that actually admits competition, that maintains surge capacity as a public investment, and that treats the defence industrial base as what it is: a public good clothed in private production.

The moral foundation of all of this is the same principle that underlies honest commerce: the exchange between the sovereign and the arms-maker must be transparent, governed by law, and open enough that neither party can exploit the other indefinitely. When it is not — when the manufacturer captures the regulator and the budget process substitutes for the marketplace — the consumer of last resort is the soldier in the field, and the cost is paid not in money but in blood. That is the oldest and gravest argument against mercantile capture of a public function, and it applies with full force to the arsenal of a republic.