The sunset on the PMC empire is in its golden hour.

The United States foreign ministry has seemingly switched positions on the role of corporations.

Lockheed Martin. Academi (Formerly Blackwater). The Cubic Corporation. For decades, these corporations have wielded their power over the scope of international affairs, especially conflicts in distant lands.

But today, it is time for this reign to end.

At least, according to the Secretary of State.

The realisation of the “Military Industrial Complex”

The history of Private Military Companies runs deep, with the most prominent actors like Lockheed Martin playing ever-important roles within the domestic and foreign defense strategy. Especially recent in memory is the expansion in the scope of these companies in the conflicts in Iraq after the disaster of 9/11, wherein private military contractors provided United States armies with necessary military resources. The United States Department of Defence has valuable and long-term partnerships with the former Blackwater Security company, as well as Aegis Defence Services, because of their technical expertise within the area. It is evident that, as history has proven, the innovation driven by the sector has been key to American superiority in the field of defence, making them important to the national strategy.

Why the Complex matters in ASEAN

It is clear that the dynamics in the Asia-Pacific region are shifting quickly against the order introduced by American interests in the region. In the ongoing Shangri-La dialogue, the Thai minister of Foreign Affairs, of a decidedly neutral position, expressed greater trust within the Chinese military to maintain order within the region, stating furthermore that there was “objective evidence” that Private Military Companies were involved in state-sanctioned terrorism, through “Shadow Networks” supplying arms to military groups.

With interest shifting quickly in favour of the Chinese bloc, Secretary of State Marco Rubio did mention in dialogue with the press that the role of PMCs could be expanded to involve the enforcement of anti-terrorist measures.

A strange deviation in stance

Bafflingly, however, the Secretary of State also mentioned in his opening address to the rest of the Dialogue that “Private Military Companies had to be condemned” if they were involved in any terrorist activities. This runs contrary to recent deregulatory measures on Private Military Companies, as the Secretary cited the prosecution of Blackwater security guards, a ruling that was recently lifted by President Trump in 2020. The Secretary also expressed support for the international regulation of PMCs, despite a clear lack of legal precedent for these actions domestically, outside of legislation pertaining to members of the Department of Defense. In a dialogue about the defense of differing nations, it seems the Secretary has chosen to shackle the private sector despite its important role in defense strategy. Especially in the wake of China’s rise to prominence within the dialogue, the foreign department has seemed to turn a blind eye as well.

Of greater concern is also the role of investors within PMCs, where the Secretary has also expressed the need for “some sacrifices” within the private sector to suit this change in the American position.

Protectionism...but for who?

Lockheed Martin’s Stock Prices, as of 16 June. SOURCE:S&P

What could be the driving factor behind this switch in stance? It’s clear that the future of defense investors was not a primary concern of this strategy. According to the New York Stock Exchange, the prices of Northrop Grumman, a regional leader in defense capabilities and major supplier of the South Korean military, is up 4.05%, whereas General Dynamics, a major collaborator with both allied and neutral states, is up 1.10%. These are promising numbers; yet the foreign department has seemingly abandoned the stability brought upon by the government’s investments in the private sector in pursuit of measures that are acceptable by foreign nations. While it certainly looks good on paper to reduce the role of private military companies in a volatile region like the South China Sea, the Department of Defense must not become complacent upon their technological lead, as the regulation of the technologically superior private sector is destructive towards both national interests and the freedom of the arms market, as well as the voices of investors.

The Secretary’s statements hold profound impact: macroeconomically, it could mean decreased regional faith in PMCs as reliable dispensers of stability and defence, and geopolitically it could usher in a greater American secession to China. To put it lightly, this is a risky gambit that should be undertaken, for the implications are far more serious than the gains in American optics.

In the defence sector, there are bound to be winners and losers. In the words of the delegate from NATO, it seems the Secretary has become “sick of winning”.

Written by Klaus Lucas Yeo, Yee Min En, and Bethany Mary Piper