For years now, Silicon Valley defense firms like Palantir Technologies and Anduril Industries have marketed themselves as insurgents poised to disrupt the bloated military-industrial order dominated by legacy contractors like Lockheed Martin, Northrop Grumman, and RTX Corporation. Unlike the traditional defense giants, “primes,” we are told, are the new firms—agile, software-driven, innovative, and unburdened by the bureaucratic sclerosis that has come to define the modern Pentagon procurement system.
This narrative has become increasingly fashionable among defense reformers in Washington. The old military-industrial complex, they argue, is inefficient and incapable of adapting to twenty-first century geopolitical competition. What is needed is not less militarization, but smarter militarization: a more technologically-sophisticated and entrepreneurial warfare state.
Yet there is little reason to believe the “neo-primes” will ultimately behave differently from their predecessors. If anything, history strongly suggests they will evolve into precisely the kinds of politically-connected defense conglomerates they currently criticize.
In fact, looking back, one finds the current circumstance to be not unique at all. Throughout the Cold War and after, Washington repeatedly promised that procurement reform would finally solve the Pentagon’s endemic inefficiency. From Robert McNamara’s systems-analysis revolution in the 1960s to the Packard Commission reforms of the 1980s and the “acquisition transformation” initiatives of the post-9/11 era, each generation of reformers claimed that better management techniques, smarter contracting, or more advanced technology would rationalize military procurement and reduce waste.
They were wrong. Instead, the system only grew more centralized, more expensive, and more politically entrenched.
Defense analyst J. Ronald Fox documented this recurring cycle in his studies of defense acquisition reform. Again and again, reformers identified genuine inefficiencies within Pentagon procurement. Again and again, proposed solutions focused on process improvements, managerial restructuring, or technological modernization. And again and again, the underlying political economy of the warfare state remained fundamentally untouched.
This is because the core problem is not managerial incompetence. It is the absence of genuine market discipline within a state-driven system of permanent militarization. In normal markets, firms that misallocate capital, fail to satisfy customers, or consistently overrun budgets, face losses, declining market share, and ultimately failure. In the defense sector, however, the state itself creates the market. Demand is political rather than consumer-driven. Profitability depends less on satisfying voluntary customers than on securing access to appropriations, cultivating political relationships, and aligning corporate interests with national security narratives.
The result is a form of corporate state capitalism—not a free market, but a system in which nominally private firms operate within an environment fundamentally structured by state power and guaranteed public expenditure.
The rise of the neo-primes does not alter these incentives. It merely changes the aesthetic presentation of the firms operating within them.
Indeed, many of today’s defense startups already display the classic characteristics of mature military contractors. They aggressively lobby for expanded military spending, cultivate close relationships with intelligence and defense officials, and frame geopolitical tensions as justification for accelerated procurement and industrial mobilization. Their rhetoric may emphasize “innovation” and “disruption,” but the underlying business model remains deeply dependent upon government demand and political access.
Nor is this surprising. As Robert Higgs observed, crises consistently serve to expand state power while simultaneously creating new opportunities for politically-connected private interests. War and perceived national emergency generate enormous flows of public expenditure, weaken resistance to centralized authority, and encourage forms of industrial concentration that would be difficult to sustain under normal market conditions. Once established, these arrangements rarely disappear entirely. Instead, they become institutionalized.
The military-industrial complex is not simply a collection of corrupt firms. It is the predictable outcome of a political system characterized by permanent global intervention, continual inflation, and effectively unlimited deficit financing for military priorities.
Under such conditions, even genuinely innovative firms are unlikely to remain “disruptive” for long. Once companies become dependent upon large government contracts, investor expectations, and long-term Pentagon procurement pipelines, they face overwhelming incentives to preserve and expand the system from which their revenues derive. Political entrepreneurship gradually supersedes market entrepreneurship.
In this sense, today’s neo-primes resemble earlier generations of defense firms more than many observers care to admit. The legacy contractors themselves were once viewed as innovative challengers. Companies like Lockheed, Boeing, and General Dynamics were not born as stagnant bureaucracies. They became so through decades of integration into a procurement system that rewarded political access, guaranteed demand, and risk socialization over genuine market competition.
There is little reason to believe Palantir or Anduril will somehow escape the same institutional logic.
Indeed, some of the newest procurement initiatives already point in the opposite direction. Defense firms increasingly advocate “commercial-like” contracting arrangements under which the government absorbs greater production risk in order to encourage industrial scaling and long-term investment. Such models are often presented as pragmatic responses to geopolitical competition with China. In reality, they further weaken what little market discipline remains by insulating firms from downside risk while preserving private profit.
The result is not a freer market in defense. It is a more technologically sophisticated form of corporatism.
This is the central illusion underlying many contemporary defense reform proposals. They assume the military-industrial complex is primarily a managerial problem when it is, in fact, a structural one. The issue is not that the Pentagon has failed to find the right contractors or the right procurement mechanisms. The issue is that a permanently interventionist empire, financed through debt and organized around continuous military mobilization, will inevitably produce politically-privileged firms whose fortunes rise alongside the expansion of state power itself.
The neo-primes are not likely to undermine or fundamentally alter the military-industrial complex. They are far more likely to become its next generation of primes.
