The benefits of defense industry privatization: Markets, technology and U.S. military supremacy since World War II

Abstract Recently, China and Russia have taken unnoticed steps to partially privatize their defense industries to make them more innovative. If successful, these reforms could seriously alter the international balance of power at the expense of the United States. However, previous academic writings have usually been skeptical of the benefits of privatization in the defense industry. I argue that private markets constitute the best way to instill innovativeness in the defense industry. To demonstrate it, I compare the technological performance of the defense industry of two extreme and opposite cases, namely the United States and the USSR during the Cold War.