When it comes to defense industrial policy, the Trump administration contains multitudes.

On the one hand, Secretary of War Pete Hegseth has embarked upon a crusade to remake the defense acquisition system (now rechristened the warfighting acquisition system) on more market-friendly lines. The Pentagon’s arcane requirements process is to be scrapped; defense firms will get bigger contracts, with more flexible terms; broader capability portfolios will replace individual programs as the basis for acquisition management; and government buyers will learn to better leverage existing commercial technologies, rather than commissioning bespoke systems as a matter of course. In a speech kicking off the effort last month, Hegseth characterized these changes as “an unrelenting onslaught to change the way we do business,” a fundamental shift that would “encourage risk taking, cut red tape, promote efficiency, and enhance competition.” Shock therapy, in other words—a swift, revivifying infusion of free enterprise into what has become a bureaucratized cartel.

But at the same time, the state’s role in defense production is massively expanding. Since May, Uncle Sam has become the proud owner of a golden share of U.S. Steel, 15 percent of mining firm MP Materials, 10 percent of chipmaker Intel, and stakes or options in five other strategically important suppliers. Price floors and purchasing arrangements have been established for rare earths, unprecedented “export taxes” have been agreed upon for chip sales overseas, and steel mill closures have been stopped by government fiat. The secretary of commerce has even teased the idea of taking over the nation’s largest defense contractors. 

So what is going on? 

One way to interpret the administration’s Janus-faced posture is as simple incoherence, the result of different principals pursuing different policies with different aims.

A deeper read, however, suggests an essential compatibility between these two tendencies. Consciously or not, the White House is executing an ambitious double movement, simultaneously blasting open an arena for market competition while anchoring strategically critical production against the vicissitudes of fortune.

The defense industry has always been a strange hybrid of public and private. In early modern Europe—where lie the origins of today’s sprawling military–industrial complexes—the lines between commercial and state activity were, to understate the matter, blurred. Some manufacturing concerns were directly administered by governments: the great Venetian Arsenale, the royal dockyards of Sweden, the gunpowder factories of Philip II’s Spain. In general, though, production and supply were handled by what we would call the private sector, under the leadership of “military enterprisers”—men who, from their own resources, raised, supplied, and often commanded forces on behalf of their rulers. (The Thirty Years War represented the peak of this model, with Imperial commander Albrecht von Wallenstein as the enterpriser par excellence)

But with the age of absolutism came, in the memorable phrase of one historian, “an inexorable drift toward military gigantism.” During the late 17th and early 18th centuries, the size and complexity of fighting forces grew enormously, requiring governments to take more regular and direct roles in their resourcing and organization. By the outbreak of the Seven Years’ War, Europe’s leading powers had become “fiscal-military states,” deploying new financial instruments (most importantly, national debt) and expanded bureaucracies to manage their warmaking.

In more recent times, the ability to effectively build and wield industrial power has been the single most important determinant of military success. The three great struggles of the 20th century turned on nothing so much as mass production and technological innovation.

It was the first of these struggles—the First World War—that occasioned the genesis of America’s own defense industrial base. For the first century and a half of our national existence, we had avoided the creation of a permanent defense establishment (industrial or otherwise). There were, it is true, a few public shipyards and arsenals, but these barely sufficed to meet the needs of the country’s paltry peacetime military. When war loomed, the government had recourse to private contractors, who swarmed into the defense sector to meet the needs of the moment and exited swiftly once the guns fell silent.

But given the immensity and intensity of the Great War, something more seemed necessary. So when we took the plunge in 1917, the U.S. government dramatically expanded its involvement in the economy. Dozens of public munitions plants were created, thickets of new regulations were imposed upon private industry, and—most significantly of all—the nation’s railroad, telephone, and telegraph lines were nationalized. But although it served to channel the republic’s raw industrial might into battlefield power, this effort was far from an unqualified success. State intrusion into the market was executed clumsily, alienating many of the country’s most important businessmen; on the other side of the ledger, profiteering was rampant enough that well into the 1930s, majorities of Americans believed private companies should be banned from defense work altogether.

The sequel, when it came, was more impressive. Much of this can be explained by the intelligence and energy of the Roosevelt administration’s industrial policy apparatus: although private industry naturally supplied the motive power, a sprawling, energetic wartime state moved swiftly to direct investment, coordinate production, and police the inevitable abuses. As the historian Mark Wilson relates in his brilliant book on the subject,

Successful conversion of the U.S. economy [during World War II] owed as much to socialism as it did to capitalism. To be sure, the American war economy relied on private-sector capacities, allowed for profits, and involved some competition among private firms. But it was also full of state enterprise and ramped-up regulation. The government paid for, and owned, thousands of acres of new industrial plant; it managed complex supply chains; it collected huge amounts of information about its contractors’ costs and business operations, which helped to strictly control prices and profits. It even seized the facilities of several dozen companies, including those led by executives who flouted federal labor law.

This industrial base began to be deconstructed after the end of the war, but our burgeoning rivalry with the Soviets first halted and then reversed this heretofore routine process—and for the first time in American history, the country maintained the capability to manufacture vast amounts of weapons during peacetime. 

The Truman and Eisenhower administrations presided over an incredibly dynamic period for both innovation and capacity. Defense research led to massive advancements, particularly in computing, microelectronics, and aerospace (indeed, several of the airframes that first flew in the 1950s—the B-52, the C-130, the U-2—are still in service today.) And for the defense sector as a whole, productive output quintupled, registering the steepest increase of any period outside of the world wars.

What enabled this success was consideration of the defense industrial base, not as an end in itself, but as a means. Ditching alike the orthodoxies of the free marketeers and the pieties of the New Deal’s left flank, the men who steered our ship of state during the early Cold War hewed to a steely pragmatism that accommodated extensive state involvement in defense production (the Defense Production Act was passed in this period, as were unprecedented hikes in federal research and development spending) as well as the flourishing of private firms under the salutary pressures of genuine market competition (including all of today’s legacy primes).

But by the end of the Eisenhower years, this arrangement was coming undone. America failed to heed Ike’s parting warning to “guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.” Corporate power captured government decision-making; misled by promises of efficiency and economy, successive administrations looked overwhelmingly to the private sector to supply them with war-making materiel, even as they did ever less to oversee a singular, inherently distorted market (after all, defense suppliers were, and are, irreducibly creatures of government). The next three decades saw the divestment of most public shipyards and munitions plants, even as the gangrenous spread of neoliberalism began to erode the broader American manufacturing base. 

Nevertheless, we did manage to consign Bolshevism to the ash heap of history—and with it, the military–industrial complex’s raison d’être.

The story of the Last Supper and the resultant consolidation of the defense industry is too well-known to need retelling here. Suffice it to say that productive capacity withered, costs and delays ballooned, and the United States eventually found itself in a new era of great-power competition with an industrial base unfit for purpose. 

During the same period, the Chinese government deftly and patiently implemented a far-reaching industrial strategy that allowed it to resource a massive military build-up and achieve dominance across several key strategic sectors—most importantly, the processing of rare earths and other critical minerals.

Of course, President Donald Trump is not the first to attempt a fix. From the Carlucci Initiatives of the Reagan years to Rumsfeld’s Revolution in Military Affairs to the Biden administration’s National Defense Industrial Strategy, our recent history is littered with disappointing reform efforts. But it has been a long time indeed since we have had a Pentagon that evinces such freedom from ideological orthodoxy, such tolerance for risk, and such sheer, vaulting ambition.

Even so, it will not be easy. Government power must be wielded energetically but judiciously, shoring up critical subsectors—even picking winners when necessary—without veering into cronyism or driving innovative firms from the business altogether. And while the stakes will be clear for some areas (rare earths, for example), the situation will be more ambiguous and controversial for others.

Intel is a case in point. For one of the facets of its business—chip design—there are numerous thriving U.S. competitors. This creates an understandable hesitancy to intervene. But for the other—chip fabrication—Intel is essentially the only game in town. And given the incredibly high barriers to entry for the industry, if we think it is important to have an American-owned fab capable of large-scale, leading-edge chip manufacturing, there is no other option. Hence the equity stake, which communicates to both customers and investors that Intel will not be allowed to fail (and already, this has led to new deals and a positively trending share price).

Beyond extending support for, and influence over, vital private sector actors, the administration may also look to expand the publicly owned portion of the defense industrial base. The role of this “organic industrial base” is chiefly to produce critical munitions at scale, especially artillery and small-caliber ammunition, and to maintain and repair the military’s weapons systems. Given the failures we have seen in these areas (munitions production has failed to keep pace with demand, and major weapons systems—submarines, for example—continue to miss maintenance targets), bolstering this component of the arsenal would be wise.

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Finally, it is necessary to restore innovation, competition, and responsiveness to America’s privately owned armsmakers. This is the object of Hegseth’s acquisition reform efforts; and it probably means breaking (or at least, seriously weakening) the hegemonic position of the legacy primes. The challenge is to do this without shrinking existing productive capacity or jeopardizing critical programs. 

Luckily, Trump’s Pentagon has something previous reformers did not. The new ecosystem of “neoprimes,” those offspring of venture-capital funding and the Silicon Valley ethos, offers, for the first time since the end of the Cold War, plausible alternative sources for major defense capabilities. And though there are still important questions about the ability of companies like Anduril, SpaceX, and Shield AI to deliver on their extravagant promises, they are building systems that are at least able to compete directly with the products of the Lockheeds and Boeings of the world—and often for a fraction of the price.

Revitalizing the defense industrial base remains a titanic undertaking, but so far, we are off to a promising start. By simultaneously tapping into the animal spirits of the marketplace and buttressing defense production with state power, the second Trump administration is mirroring the approach taken at America’s midcentury peak. Whether it can replicate the success of its forebears remains to be seen.