Is Investing in Defense Contractors Actually Immoral?

Russia’s invasion of Ukraine has made a lot of us into armchair warriors. Even people who once looked askance at defense contractors are suddenly cheering on the success of the companies’ deadly wares, including Javelin anti-tank missiles, Stinger antiaircraft missiles and Switchblade drones, which “loiter” above a target before zooming in for the kill.

If we’re honest with ourselves, though, the moral calculation here is complex. For starters, the Russian soldiers who are dying are mostly kids who are following the orders of the real criminals, mainly President Vladimir Putin, who is safe back in Moscow. People may be a bit too triumphant when they share videos of tank explosions on social media. It hit me hard on Monday when one of my colleagues in the Opinion section, Alex Kingsbury, wrote in a Slack channel, “Every blown-up tank on Twitter is the breaking of several Russian mothers’ hearts.” (He gave me permission to quote him.)

The weapons that are defending Ukraine today could just as easily be used by the bad guys in some future conflict. In fact, if history is any guide, they almost certainly will be. Javelins, Stingers and Switchblades are not inherently good. They are at best morally neutral. You could even argue that they are essentially evil tools that are at times (such as now) being used for good purposes.

Plus, the war in Ukraine is accelerating the global arms race, which is costly and potentially destabilizing. The United States and other members of NATO — notably Germany — are increasing defense budgets sharply. Russia will do its best to rebuild its depleted arsenal when this is over. China’s People’s Liberation Army is undoubtedly taking notes on Russia’s dismal performance to determine what additional weaponry it would need for a potential invasion of Taiwan.

“Numerous parties with variegated interests are observing the battle performance of the weapons themselves, quite apart from battle tactics and war strategy,” Jurgen Brauer, an emeritus professor of economics at Augusta University’s Hull College of Business, wrote me in an email. “This is not new; prior to World War II, for instance, the incipient air battles in the Spanish Civil War attracted field observers from around the globe.”

The deadly logic of an arms race is that each side’s effort to gain an edge is met by an equal or greater response from the other side. It is at best a zero-sum game and at worst lose-lose: a competition that winds up causing death and destruction all around.

And yet. Even if you hate war, mourn the loss of life on both sides and fear the fueling of an arms race, it’s hard not to give at least a nod of respect to the likes of Lockheed Martin and Raytheon, the makers of the Javelin, and AeroVironment, whose Switchblade drones are being deployed against the Russians in eastern Ukraine. Without such weapons, all of Ukraine might have been conquered by now.

Jeff Sommer, who writes the Strategies column for The Times, last month cited a pair of analysts at Citigroup, Charles J. Armitage and Samuel Burgess, who argued that weapons makers should be included in funds that are labeled E.S.G., meaning they pass muster on environmental, social and governance grounds.

“Defending the free world against hostile dictators is probably not a bad thing,” Robert Stallard, who follows defense contractor stocks for Vertical Research Partners, wrote in a March 17 report. He added: “Perhaps the biggest change that could result from the invasion of Ukraine is a reversal of the lazy E.S.G. view that defense is ‘bad.’ Without the defense of our democratic system, personal freedoms and the rule of law, there would be no E.S.G.”

I see both sides on this one. Unconditional pacifism is pure but impractical. President Barack Obama said as much in his Nobel Peace Prize lecture in 2009: “A nonviolent movement could not have halted Hitler’s armies. Negotiations cannot convince Al Qaeda’s leaders to lay down their arms. To say that force may sometimes be necessary is not a call to cynicism — it is a recognition of history, the imperfections of man and the limits of reason.”

That recognition of history is why there are few unconditional pacifists. More common are people who support only “just” wars, such as those fought for self-defense, protection of innocents and perhaps punishment of wrongdoing. “I’m not a pacifist, really,” John Tepper Marlin, an economist and adjunct professor of ethics at the Stern School of Business at New York University, told me this week. “If you want peace, be prepared for war. The issue becomes how much you spend for military versus social services.”

Russia’s invasion of Ukraine puts people who would like to wash their hands of war in a tricky spot. That includes people who don’t want their companies working for the Pentagon. In 2018, more than 3,000 employees of Google signed a petition opposing its participation in Project Maven, a Defense Department venture that uses artificial intelligence to interpret video imagery and could improve drone targeting.

It’s likewise complicated for E.S.G. funds that screen out defense contractors. I spoke with Andrew Montes, the director of digital strategies for As You Sow, a nonprofit based in Berkeley, Calif., that focuses on corporate accountability. He said: “We unequivocally condemn the invasion, and the Ukrainians have a right to defend themselves. But it’s a separate question if defense stocks belong in the portfolio.”

“We try to take the view of long-term investors,” Montes went on. “If you’re investing in weapons companies, you’re essentially saying that you hope they are financially successful over the next 30 years.” In other words, even if you approve of the arming of the Ukrainians, you might not want to own shares in a company whose profits depend on the arms race continuing for years to come.

Another group raising questions about investment in defense contractors is Datamaran, a company that uses software to screen companies for E.S.G. concerns. The defense contractors can argue that they’re on the right side in the Ukraine war, but “you cannot base your position on just the current context; you must consider past, present and future actions,” Marjella Lecourt-Alma, the chief executive and a co-founder of the company, wrote in an email.

The best outcome would be for today’s weapons to serve as peacemakers — to work so well against the Russians that Putin and other aggressors would think twice before invading a neighbor. “Before the invasion of Ukraine, there was a clear pattern of diminishing war in the world,” said Joshua Goldstein, an emeritus professor of international relations at American University. “There were just smaller civil wars, and fewer of those. The whole trend was in a positive direction. My hope is that this war will be such a spectacular failure that nobody can fail to draw the lesson that war is not a good way to get what you want.”


U.S. consumer prices rose 8.5 percent in March from a year earlier, the most in nearly 41 years. But the inflation trend from now on is likely to be downward. This chart shows that there’s been some progress in relieving the pandemic bottlenecks that have contributed to the spike in inflation.

Quote of the day

“If you want me to read the vast literature, cite me two papers that are exemplars and paragons of that literature. Foundational papers, key recent innovations — whatever you like (but no review papers or summaries). Just two. I will read them. If these two papers are full of mistakes and bad reasoning, I will feel free to skip the rest of the vast literature. Because if that’s the best you can do, I’ve seen enough.”

— Noah Smith, in a blog post titled “Vast Literatures as Mud Moats” (2017)

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