In 2023, Lockheed Martin reported a profit of $7.6 billion. Its stock price has quintupled since the F-35’s first flight. That same year, the U.S. Government Accountability Office documented that the F-35 fleet’s mission capability rate—the percentage of aircraft able to perform at least one tasked mission—stood at just 55%, far below target. This juxtaposition is not ironic; it is indicative. It reveals a system where financial performance and military readiness have become decoupled. The ultimate welfare analysis of a defense program must ask: does it make the median taxpayer, the soldier, and the nation safer and wealthier? For the F-35 program, the benefits are concentrated and privatized, while the costs and risks are socialized and diffused. The Gripen endeavor, operating on a far smaller scale, showcases a model where value capture is more closely aligned with public purpose. This final analysis moves beyond spreadsheets and hangars to interrogate the fundamental political economy of defense: whom does the system serve?
A comprehensive welfare framework for a defense program must account for Security benefit (S), Industrial spillovers (I), Fiscal cost (C), Rent extraction (R), and Autonomy loss (A). The simple equation W = S + I - C - R - A must yield a positive sum for the public. The evidence suggests that for most F-35 partner states, W is negative. The program functions less as a provider of national security and more as a sophisticated mechanism for rent distribution and geopolitical binding, underwritten by public treasuries. The Gripen, while offering less peak capability, consistently delivers a positive W for its stakeholders by tightly coupling costs with realistic needs and recirculating value within the national economy.
The Anatomy of Rent Extraction#
The F-35’s political economy is a classic case of asymmetric risk socialization. The U.S. government, as noted by economist Marianna Mazzucato, acted as the entrepreneurial “investor of first resort,” funding the high-risk R&D. The private contractors, however, capture the lion’s share of the downstream profits while being shielded from the consequences of performance failures through cost-plus contracts and the program’s political untouchability. This creates a powerful incentive for gold-plating—adding complex, expensive features that boost margins but offer diminishing military returns.
The structure ensures budget maximization. As public choice theorist William Niskanen outlined, bureaucracies and their private-sector allies seek to maximize their budget, scope, and organizational survival. The distributed manufacturing of the F-35 across hundreds of congressional districts makes it a potent tool for political coalition-building. Cutting the program would mean job losses in dozens of states, a risk no elected official will willingly take. This political lock-in transforms the aircraft from a military asset into a permanent fiscal commitment, regardless of its strategic relevance. The taxpayer bears the cost of this inertia, funding sustainment budgets that will eclipse acquisition costs, trapping future generations in a cycle of escalating expense for capabilities they may not need.
Welfare, Distributed and Concentrated#
A stakeholder analysis reveals starkly different welfare outcomes. For the Swedish taxpayer, the Gripen program represents a high-transparency, cost-controlled investment in sovereign infrastructure. Jobs are created within Sweden, technological spillovers benefit the civilian aerospace sector, and the export revenue from sales to countries like Brazil and Hungary provides a partial fiscal return. The security benefit is clear and matched to doctrine: credible territorial deterrence.
For the partner-state F-35 taxpayer, the picture is inverted. They finance the premium price and lifetime sustainment costs, which can consume a disproportionate share of a modest defense budget, crowding out investments in cyber defense, artillery, or naval forces. The industrial spillovers are minimal unless they are a tier-one manufacturing partner like Italy; for most, work is limited to minor components or maintenance. The autonomy cost (A) is a permanent, if intangible, deduction from their national welfare. The primary beneficiaries are the U.S. defense contractors’ shareholders and executives, and U.S. geopolitical planners who gain deeper leverage over allied defense policies.
The Systems in Mirror#
These two programs ultimately reflect the political economies that birthed them. The Gripen is the product of a coordinated market economy with a strong social-democratic tradition. The state acts as a steward, defense is viewed as a public good, and industrial policy is explicitly linked to national resilience. The system is designed to minimize rent extraction and align production with public need.
The F-35 is the apex product of financialized U.S. capitalism applied to defense. The state acts as a risk-absorbing guarantor of demand, private firms maximize shareholder value, and defense spending becomes a primary channel for fiscal stimulus and corporate welfare, justified by grand strategic narratives. It is a rational outcome for the actors within that system, but it produces a weapon that is, in the words of defense economist Keith Hartley, “optimized for political survivability, not economic efficiency.”
The lesson extends far beyond fighter jets. It is a case study in how nations build complex systems under different logics of value. In an age of rising debt and renewed great power competition, the Gripen’s philosophy of constrained optimization and sovereign resilience may offer a more sustainable template. It proves that formidable defense does not require trillion-dollar commitments. It requires clarity of purpose, discipline in execution, and a political economy that ensures the primary beneficiary of national defense is, unequivocally, the nation itself.
