America likes to call itself the land of free markets, where companies succeed or fail on their own. But when it comes to defence firms, that story has always been more complicated.
Under President Donald Trump, the government’s role became even clearer. Subsidies, tax breaks, and even talk of taking equity stakes showed how closely the state was working with big defence companies. The line between public policy and private business has become harder to see than ever.
For investors, that’s not necessarily bad news. “It shows the government is pro-business and wants American companies to succeed,” investment strategist Josh Koren told ET Now. “But of course, no one wants the state stepping too far into boardrooms.”
The US has seen this before. During World War II, Washington took direct control of industries. The Cold War kept defence spending high for decades. What feels different now, Koren pointed out, is that America is not at war—yet government involvement is still growing.
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Still, he argues this is not un-American. “The goal is simple: keep the US ahead in any future conflict—whether that’s new fighter jets or artificial intelligence. Falling behind isn’t an option.”In practice, whether support comes through subsidies, loans, or direct stakes, the result is the same: billions of dollars flow into companies like Lockheed Martin, Raytheon, and Northrop Grumman. For investors, that means stability. For critics, it raises red flags. They worry that too much government money makes the market less competitive and less honest as a measure of business success.This points to a bigger question: how “free” is the free market? America’s defence sector has always been closely tied to Washington, but Trump’s policies are pushing the relationship even further.Koren sees it differently. “Whether it’s subsidies or direct capital, the money is being spent on technology that keeps the US ahead. From that view, it’s a good thing.”
But not everyone agrees. If the government guarantees profits for defence giants, some fear it could make them less efficient and discourage new players from entering the industry. At what point does private enterprise start to look more like a government arm?
For investors, though, the picture is simple: defence stocks look safer than ever. With Washington’s backing, earnings are predictable and risks are lower. From pension funds to small investors, many see these firms as solid bets in an uncertain world.
But for believers in free-market capitalism, the picture is more troubling. If Lockheed Martin is now seen as part of the government, it suggests the American economy itself is changing. And not just in defence—this could be the start of a new playbook where government and business are tied more tightly than before.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)