Earlier this month, the Pentagon released its annual Industrial Capabilities report to Congress, outlining what the Department of Defense views as the biggest risks to and vulnerabilities of America’s defense industrial base. The report, not exactly a major news event even in normal times, received very little coverage in the tense lead-up to President Biden’s inauguration. But, it is worth paying attention to because in addition to major developments like Covid-19 and long-standing security threats like cyber attacks, it also highlights two other major threats to America’s defense capabilities that have so far remained under-acknowledged: industry consolidation and the pursuit of short-term shareholder profits.

The report, which follows a 2017 Executive Order by the Trump administration, aims to assess how the decline of American manufacturing has affected the resiliency of the country’s defense industrial base and its supply chains. Its findings are rather bleak. The report cites dozens of examples in which the vitality and resiliency of the US industrial base—“once the wonder of the free world”—had been “acutely affected” by trends like deindustrialization, noting extreme consolidation of supply chains in areas like aircrafts, ground vehicles, machine tools, missiles, and printed circuit boards, and the risk of dependence on sole source vendors in many others.

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In a 2019 piece, Matt Stoller and Lucas Kunce criticized the corrosive effect that the offshoring of critical industrial capabilities, together with a financial industry that created strong incentives for consolidation, have had on America’s national security, leading the military to rely on fragile, monopolized supply chains largely controlled by China. The Pentagon report echoes these concerns, quoting a recent report by the American Society of Mechanical Engineers (ASME) that criticizes corporate strategies that focus on short-term cost savings through offshoring:

“In such cases, corporate strategies often diverge from national interest, where better information on the effect of such decisions on the supply chain may lead to more mutually beneficial proactive decisions. It is also prudent to develop an ability to rapidly standup manufacturing capability in sectors that have been downsized in the US or to develop new flexible manufacturing capabilities so that rapid reconfigurations can be realized.”