Leveraging U.S. Capital Markets to Support the Future Industrial Network

Editor’s Note: Written by General Joseph L. Votel, USA (Ret.), Francis A. Finelli, and Samuel Cole on behalf of Business Executives for National Security. Published by War on the Rocks. All rights reserved.

$56 trillion is nearly three times the size of the U.S. economy. This vast pool of capital in U.S. capital markets — $46 trillion in public capitalization and another $10 trillion in private money – dwarfs that of China. The New York Stock Exchange alone is four times the size of China’s Shanghai stock exchange. America’s capital markets represent a critical, yet underutilized, strategic advantage for the Department of Defense’s ability to field new capabilities. Tapping U.S. equity and debt markets would enable the Department of Defense to remedy current capability shortfalls, fund technological advances from leading private-sector innovators, invest in generational transformation efforts across the military services, and upgrade antiquated global infrastructure to sustain U.S. forces. The Department of Defense should build upon on its participation in the venture-capital ecosystem by deepening its engagement with more commercial venture firms. It needs to reallocate research and development funding to provide more opportunities to small, medium, and large companies pursuing national security applications. Importantly, the Pentagon should adopt practices and implement programs that attract capital at scale for investment in defense, not unlike those used by the Departments of Commerce or Energy. Finally, there ought to be a comprehensive architecture of education, training, and exchange programs that builds experience and expertise amongst Defense Department professions in basic finance, capital markets, and financial engineering. The United States has no choice — America’s capital markets should be brought to bear to support critical defense priorities at scale and speed…