While weapons technology may be what Northrop Grumman is best known for (perhaps you’ve heard of the B-2 Stealth Bomber?), it turns out that the work the company is proudest of doesn’t have anything to do with the defense industry—at least as we usually think of it.
At a recent lecture presented by the Wharton Public Policy Initiative, Wes Bush, president and CEO of Northrop Grumman, spoke to a packed room about the business behind defense and how public policy shapes the nature of his market.
From a telescope that could allow NASA scientists to see the Big Bang, to unmanned aircraft that have been deployed to quickly map the landscape following a natural disaster, Bush sees his industry’s products as being at the forefront of technology innovation rather than destruction.
“Believe me, if peace broke out tomorrow, I’d be thrilled!” he said—a point he reiterated several times throughout the lecture.
Bush also noted several major public policy issues that his industry is tackling–including the struggle to strengthen cybersecurity in government networks and revisions to laws regarding the sale of defense technology outside the U.S.– but in the era of sequestration, perhaps the policy question on everyone’s mind is: How much should we invest in defense?
According to Bush, during the 1960s and the height of the Cold War, about 2 percent of gross domestic product was spent on defense. In the 1980s, that number dropped to about 0.75 percent. And today, roughly 0.5 percent of America’s GDP is spent on defense. This decline has led many in the defense industry to push harder for the U.S. government to ease restrictions on the export of their products, such as non-combative drones, which are already being produced by U.S. allies.
When asked what his company is doing now that the budget of their largest client has been cut because of sequestration, Bush replied simply:
According to Bush, the defense market has always been cyclical; investments made today will allow Northrop Grumman to be ahead of competitors down the road. In reality, Northrop Grumman sees itself more like a tech company, whose growth drivers are advancements in science rather than global unrest.
Still, without the right kinds of regulations in place, companies like Northrop Grumman can flounder during economic dry spells.
“We really are an industry that depends on the right kind of public policy,” said Bush.