California Defense Contracting: How the Military-Industrial Complex Shaped the State

Defense spending built modern California. Though military dollars have declined, the industry still shapes the state. Here’s how.

PUBLISHED MAR 23, 2022 12:00 A.M.
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The Reaper drone is manufactured by a major California defense contracting firm.

The Reaper drone is manufactured by a major California defense contracting firm.   Paul Ridgeway / Wikimedia Commons   Public Domain

President John F. Kennedy opened the 1960s by declaring a new era of optimism in the United States—the “New Frontier,” he christened it. But just three days before Kennedy’s inauguration on Jan. 20, 1961, the outgoing president delivered a speech with a darkly ominous message.

Dwight D. Eisenhower, who before becoming president had been the Supreme Commander of the Allied forces that won World War II,  gave what became perhaps the most memorable farewell speech of any president ever. Eisenhower warned of a newly emerging menace known as “the military-industrial complex.” This entity, Eisenhower explained, had arisen in the previous decade as the United States developed “a permanent armaments industry of vast proportions.”

No such industry existed in the U.S. before World War II. Military weapons and equipment were manufactured only as needed, by the same manufacturing companies that produced automobiles, commercial ships, and other heavy machinery. After the war the U.S. put the brakes on military manufacturing, and largely downsized its capacity to build armaments.

When the U.S. got involved in the Korean War at the start of the 1950s, just five years after the end of World War II, the military was caught flat-footed. For the first several months of the three-year war, American forces had to make do with outdated equipment left over from the previous war.

The country wouldn’t make that mistake again.

California: Capital of the Military-Industrial Complex

Hostilities wound down on the Korean Peninsula in 1953, but U.S. domestic military production, research and development accelerated, stronger than ever thanks to the ongoing Cold War. Private companies, which after previous wars quickly reverted to civilian production, instead stepped up production of weapons and other military systems, paid for through massive government contracts.

There was no region of the country where the impact of the emergent defense industry was felt more directly than in California, where military spending drove the state’s economic growth, bringing in new industries, and with them suburban housing developments, highways, office buildings, shopping centers and all of the other features that transformed the California landscape in the late 1950s. All of these developments were largely paid for by government dollars—via the salaries of a large military workforce, and revenues from military hardware and software purchased from California businesses.

Today, the magnitude of defense spending in California has receded somewhat, but the military-industrial complex still plays an important part in the state’s economy, and even now California is among the top recipients of defense contracting dollars.

For the 2019-2020 fiscal year, according to a U.S. Defense Department Office of Local Defense Community Cooperation (OLDCC) report, California ranked third in total defense spending at $61 billion, behind Texas ($83 billion) and Virginia ($64.3 billion). Even so, California ranks well ahead of the next state on the list, Maryland, which pulled in less than half as much, at $30.4 billion in defense dollars.

The $61 billion spent in California was somewhat down from the previous fiscal year, when $66.2 billion flowed into California through defense spending, according to an earlier OLDCC report.

The total amount of defense spending includes both defense contracts and spending on defense personnel in the state. In contracts alone, California pulled in $44 billion in Fiscal Year 2020, down from $50.2 billion in 2019.

Who Gets All That Defense Money?

The top recipient of defense money, according to the OLDCC report, was the Northrop Grumman Corporation. Despite moving its corporate headquarters from Los Angeles to the Washington, D.C., area in 2011, Northrop Grumman retains seven California locations—six in the Los Angeles area, plus one Silicon Valley facility in the Santa Clara County city of Sunnyvale.

Among Northrop Grumman’s numerous defense products, the company makes the B2 Stealth Bomber aircraft, a variety of “autonomous systems,” aka drones, and “directed energy” weapons—high-powered laser beams used to defend against incoming drones, rockets and even cruise missiles.

In 2020 the company nabbed the contract to develop the Air Force’s Ground Based Strategic Deterrent (GBSD), which is the next-generation nuclear missile system replacing the 50-year-old Minuteman III, the linchpin of the land-based portion of the land/sea/air “nuclear triad.” The GBSD contract was worth $13.3 billion for an eight-year development period, and $63 billion over 20 years. The first missiles are scheduled for test-launch in 2023 from Vandenberg Space Force (formerly Air Force) Base in Santa Barbara County.

Also in 2020, the San Diego-based General Atomics—a privately held company founded in 1955 as a division of another defense contracting giant, General Dynamics, and purchased in 1986 by billionaire businessman and aviator Linden Blue with his brother Neal (also a billionaire)—picked up a $7.4 billion contract for what the Air Force calls the Agile Reaper Enterprise Solution. General Atomics produces the MQ-9 Reaper drone (pictured above).

Drones and Secret Spy Planes

Under the new five-year contract, the firm can turn out up to 36 new Reaper drones per year. The Reaper is one of the primary drones that has been used for strikes against targets in Afghanistan, Pakistan and elsewhere. The remotely piloted plane is primarily used for surveillance and intelligence-gathering, however.

General Atomic Technologies Inc., the largest private defense contractor in the U.S., ranked 27th in total defense contracts for FY 2020. The largest defense contractor overall is the publicly held Lockheed Martin, which operates a super-secret aerospace facility in Palmdale known as “Skunk Works,” where the first stealth fighters were produced. The Lockheed Skunk Works was also the home of the SR-71 “Blackbird”—a spy plane that could fly at an altitude of 90,000 feet in excess of 2,000 miles per hour. The SR-71 was flown in top-secret intelligence operations from 1964 to 1999.

How Defense Dollars Built Silicon Valley

Though its legendary Skunk Works still sits in Southern California, Lockheed in 1956 moved its Missile Systems Division from Burbank 340 miles north to Sunnyvale, an agricultural town in Santa Clara County. Though there wasn’t much going on in what would two decades later become Silicon Valley, Naval Air Station Moffett Field was located adjacent to the farmland purchased by Lockheed, and Stanford University was already making the region a hot spot for technology engineers.

Building such high-level military armaments as the Polaris, the first nuclear missile capable of being launched from a submarine, Lockheed grew to become the second-largest defense contractor in the United States. After just nine years in Sunnyvale, the Missile Systems Division swelled to 28,000 employees. In 1995, it merged with Martin Marietta Corporation, the third-largest, to become the top recipient of military contracts in the country.

The Defense Department by the 1960s relied on Silicon Valley (which didn’t get its now-iconic nickname until 1971) to produce the computer processors that guided the guided missiles, military satellites and rockets. Fairchild Semiconductor, the company that manufactured the first microchips and essentially created what we now know as the technology industry, received 80 percent of its revenue from the Pentagon in the ’60s.

The most revolutionary technological innovation arguably of all time, the internet, was also created with defense money in Silicon Valley. Researchers at Stanford, funded by the Advanced Research Projects Agency—an arm of the Pentagon later renamed the Defense Advanced Research Projects Agency, or DARPA—built the earliest version of the internet, ARPANET, as part of a project to allow cutting-edge computer communications to operate at the front lines of a war zone.

The Silicon Valley/Pentagon ‘Divide’ (Or Not)

Over the years, many of the executives and entrepreneurs who made Silicon Valley the technological Mecca that it quickly became have at least publicly projected a disdain for defense contracting. A “divide” reportedly opened between the military, whose lumbering procurement process could take years, and the Valley, which prided itself on a nimble and fast-moving culture of innovation.

The reality is, there is no such divide, and never has been. An extensive survey of defense contracts by the nonprofit tech industry watchdog group Tech Inquiry found that of all the major Silicon Valley firms, only Facebook, Apple and Twitter have shied away from defense contract work.

“Narratives decrying a massive divide between Silicon Valley and the military are anecdotal and qualitatively false,” the report concludes. The “divide” is largely an illusion created by the seeming contradiction between the rigid, cumbersome defense contracting process and the Valley's freewheeling entrepreneurship.

“We are always tempted to refer to Silicon Valley as a monolithic entity in terms of politics or in terms of its business model,” tech industry historian Margaet O’Mara told the military news site Breaking Defense. But Silicon Valley is far from “monolithic” in its reluctance to take on military work. The opposite, in fact, is true.

“Silicon Valley is there because of defense, aerospace contractors,” O’Mara said.

The Rise, Fall and Rise of Defense Contracting

As with Silicon Valley, the whole state benefited from defense contracts—but the spending patterns are subject to many variables. When the big postwar push began, its effects were striking. It took California until 1950—the first 100 years of its existence—for the state budget to reach $1 billion.

By 1959, defense spending had hit $5.2 billion in California—almost one of every four defense dollars spent in the whole country, according to the 1962 article “Defense Spending: Key to California's Growth” by historian James L. Clayton.

California had surpassed New York and moved into first place among U.S. states for “prime” defense contracts back in the final year of the Korean War, 1953. In the ensuing decade, defense contracts awarded to California firms were more than double the total granted to any other state—about $50 billion (approximately $472 billion in 2022 dollars).

During that period of explosive growth in California, defense expenditures in other states dropped steadily, according to Clayton’s research. California became the capital of the military-industrial complex largely due to the aerospace industry. California already led the country in aircraft manufacturing heading into the 1950s—one third of all workers in the industry were employed in California as early as 1947.

In fact, as early as 1928 more than 20 aircraft makers were already open for business in California. The Los Angeles area alone sported 53 airfields including Mines Field, which was renamed Los Angeles International Airport shortly after World War II and today is the fourth-busiest airport in the U.S.

After the Korean War, the bulk of new defense contracts, 63 percent, went to aeronautical development—aircraft, missiles, and their associated electronic and guidance systems. With the infrastructure already in place, it seemed inevitable that California would dominate this new world of never-ending military manufacturing. And that’s exactly what happened.

Then came the early 1990s. The Soviet Union collapsed—and the federal defense budget shrank. In 1987, one of every four aerospace industry workers was employed in California. By 1997, according to a Rand Corporation report, one-third of those workers were gone from the job rolls. In Los Angeles County, where industry firms were particularly concentrated, the aerospace worker-base plunged by half.

California aerospace has made at least a partial comeback as the country settled into the post–Cold War reality, thanks largely to the “space” portion of “aerospace.” Between 2004 and 2016, according to data from the Los Angeles County Economic Development Corporation, employment in jobs producing guided missiles and other spacecraft and parts rose 62 percent. The Los Angeles area employs about 25 percent of all workers in the space and missile manufacturing fields.

As of 2016, 90,100 aerospace industry jobs were located in Southern California, 14 percent of all U.S. jobs in the industry.

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