If you’ve been in DC anytime in the past few years, you will have heard of Arthur Herman. In case you’re unfamiliar (nerd!), he wrote Freedom’s Forge back in 2012, which has shaped a lot of the First Breakfast-type reindustrialization conversations we’ve been having lately.
Sparknotes: The book (if you haven’t read it or have only pretended to) tells the story of how American industry transformed itself during World War II to become what Herman calls an “arsenal of democracy.” Basically, he argues that the Allies were able to win the war in large part because the US government collaborated directly with industry to build ships, tanks, boats, and weapons at unprecedented speed and scale.
In recent years, a lot of the defense tech world has taken this argument and applied it to the current prime-heavy defense industry. To win against adversaries like China, they say, the US needs to let more companies through the door, work with industry to build needed tech, and massively scale up the country’s defense manufacturing capacity. Sounds simple enough when you put it like that.
Talk it out: Last month, Tectonic sat down with Herman and John Burer, founder and CEO of ACMI Group and the American Center for Manufacturing & Innovation, to chat about today’s “arsenal of democracy.”. Both feel pretty strongly about the urgent need for the US to reindustrialize (understatement of the century) and have dedicated their careers to making it happen.
Note: This interview has been edited for length and clarity.
Tectonic: Tell me about yourselves and what you each do.
Arthur L. Herman: I’m Arthur Herman. I’m a senior research fellow at the Civitas Institute at the University of Texas at Austin. I’m an author and historian. I’ve published 10 books, including a New York Times bestseller and a Pulitzer Prize finalist.
The book that has really stirred up the most discussion, especially now, is Freedom’s Forge: How American Business Produced Victory in World War Two, which I published in 2012. Ten-plus years later, people are beginning to realize that the book—which is about the hidden history of World War Two, and America’s mass mobilization for war—actually has a lot of powerful lessons about how to reindustrialize the United States more generally, and also how to revive our defense industrial base, from artillery shells to space satellites.
John Burer: Arthur was ahead of his time. We’re all catching up 15 years later. I’m John Burer, founder of the American Center for Manufacturing and Innovation (ACMI) and ACMI Group. We are an organization focused on revitalizing the American industrial base.
The effort is made up of three affiliates: ACMI Properties, which builds industrial campuses; ACMI Capital, which invests in early-stage technology companies; and ACMI Federal, which manages programs for the U.S. government that support leveraging private capital and the dynamism of the free market.
My background is in financial services. I worked in banking—first in Manhattan, then at various funds, then as a commercial banker in Austin. I founded a drivetrain and gearbox company, which ultimately led to the creation of ACMI. I recognized how expensive it is for early-stage hardware companies to scale, especially with the equipment and footprint they need.
What do you think is the greatest threat facing the United States, and why have you both dedicated so much of your careers to figuring out how America can reindustrialize?
John Burer: My belief is that it’s a combination of apathy and moving too slowly. There is a clear and present danger to the United States and to the world order we set up with the Marshall Plan and Bretton Woods post–World War Two.
For the defense industrial base, this has been caused by complacency with the status quo—not recognizing that time, technology, and adversarial countries have moved forward, and that the position we established as a result of World War Two is under threat.
The DoD has spoken about the Davidson Window and the possible take-back of Taiwan. That window is only about a year and a half away, and it’s terrifying.
Arthur L. Herman: John is right. He’s put his finger on the surge in China, both militarily and economically, and as a manufacturing competitor. Those trends have really come together in ways that are deeply threatening to the United States’ position—not just as a superpower, but even as a power of influence in the world, whether in Asia or in Europe.
When I published Freedom’s Forge in 2012, the China threat wasn’t on anyone’s radar in a serious way. But I understood then that the Pentagon had developed a series of accretions—regulations, rules, restrictions, bureaucracy, layers of lawyers overseeing every contract—that were having a dysfunctional effect on the relationship between the Pentagon and private industry.
At the time, people in the Pentagon and Congress were receptive. They said, “These are interesting ideas. At some point, somebody should address them, but maybe not right now.” Now, 10 years later, the situation has changed.
What seemed theoretical then is now very real. China’s surge in manufacturing and defense spending has only highlighted our shortcomings to the point of urgency. One metric: Chinese shipyards built more ships in 2024 than U.S. shipyards have built since World War Two. That should make us think about where we are in terms of our defense industrial base and our manufacturing base more broadly.
John Burer: I’ll tag on to what Arthur said. Ten years ago, it was a theory, but COVID gave us a preview. We saw how the Chinese government responded with PPE. They produced a lot of it, and we were dependent on them.
More recently, with critical minerals and rare earths, we’ve seen commerce weaponized. We’re not openly adversarial—hopefully we won’t be, from a war perspective—but it shows how dependent we are.
Where are the greatest shortcomings? Where has the U.S. fallen the furthest behind?
John Burer: It runs across the gamut. When I started ACMI Federal’s government contracting business, I learned that most of our critical chemical supply chains went back to China and, to a lesser extent, India. It goes as deep as the fundamental precursors needed to make inputs for most munitions and pharmaceutical products.
From a finished goods perspective, in microelectronics and batteries, for example, China has built the manufacturing capabilities needed to far outproduce us. In some cases, its simply being faster to adopt technology. With small arms munitions, the Chinese adopted CL-20 and out-range us with energetic materials we originally developed at China Lake here in the U.S.
So it really takes a holistic look—it’s not just one specific airframe or hypersonic missile. The gaps run across the entire spectrum.
Arthur L. Herman: One broad background factor has been the loss of the American manufacturing base in general, which has had a deteriorating effect on the defense industrial base since the 1980s.
Two factors stand out. First, the steady loss of competition since the end of the Cold War, when defense officials told executives at the “Last Supper” that two out of three of them would no longer exist. The number of companies able to provide manufacturing for weapons systems shrank. Loss of competition meant loss of efficiency. The surviving primes focused on working within the system rather than developing and deploying new technologies rapidly.
Second, within the Pentagon itself, there’s been the growth of regulation. Requirements from the services have made it more and more difficult for companies to get contracts. As federal regulations grew, the number of companies willing to enter that maze declined.
Commercial companies take one look at the process and decide it’s not worth it. That means the Pentagon has missed opportunities in areas like AI, robotics, and cybersecurity.
I spent two years, from 2022 to 2024, working with the congressional commission on Pentagon budget reform. We repeatedly saw how the Pentagon couldn’t keep up with the pace of innovation. The need for big reforms is urgent if we want to break the bottleneck between commercial technologies and national security needs.
What lessons from World War Two mobilization apply to today?
Arthur L. Herman: One key aspect of that mobilization was that the federal government—led by President Roosevelt—decided the threat was urgent and imminent. In the summer of 1940, before Pearl Harbor, Roosevelt realized America had to move quickly from a standing start into modern mechanized warfare. The place to turn was private industry.
He brought in business leaders to show how to turn the world’s greatest commercial economy into the world’s greatest military machine. Business was able to take the lead.
In 1940, the U.S. was the world leader in industrial technology and manufacturing. That’s not the case anymore. But I do see a bright future—a coming golden age of American manufacturing.
Why? Because we now have tremendous technologies: AI, robotics, automation, 3D printing, advanced manufacturing. These can drive a decentralized, cleaner, and more efficient industrial base—nothing like the old smokestack industries that left their ruins in the Rust Belt.
The drivers will be small and mid-size companies—what I call hidden champions. Firms with 20 to 500 employees, operating in modest spaces, will be the leaders of this new manufacturing renaissance. ACMI is mobilizing and facilitating them.
This will also bring in a new generation of leaders—young people trained in these advanced technologies, realizing they have something important to contribute to national security. We see it in space, cyber, AI, quantum. It’s going to look totally different from the manufacturing base of the past.
John Burer: Exactly. ACMI’s mission is to enable and uncover these companies that have been held back by high capital requirements and underinvestment. This Industrial Renaissance will be about smaller, modular factories with more throughput—enabled by additive manufacturing, AI prototyping, continuous-flow chemistry, and biomanufacturing.
Many of these industries haven’t been invested in for decades and have missed out on digital engineering. We’re trying to reestablish them with new technology.
There’s also an economic driver: relieving pressure on coastal shipbuilding. We’ve gone back to 1930s-style three-year build times for big ships. Kaiser’s long supply chains are back. But if you go back and look, you see how they achieved the “production miracle.” That’s what ACMI wants to replicate—specialization, horizontal integration, modular campuses.
Our ecosystems include large primes as anchors but focus on the supply chain and adaptability, marrying that with disruptive technology. That’s where the productivity gains will come from.
Arthur L. Herman: John’s right. This isn’t about displacing the primes. They’ll continue to play an important role, and by engaging with hidden champions, they’ll gain efficiency and new technology.
And we should dispose of the myth that AI and robotics mean machines replace humans. For small companies, these technologies will actually mean hiring more people to build out facilities and production lines. AI can even serve as a coach, guiding workers on machine tools.
3D printing will also decentralize manufacturing, giving small companies the ability to produce parts on demand.
What we’re seeing is a bottom-up renaissance that will eventually change how the big primes operate. For the Pentagon and the services, the challenge is to recognize how revolutionary this is and to act before China consolidates its gains.
Can this full-scale transformation happen quickly enough, without a Pearl Harbor–style moment?
John Burer: I hope so. Hopefully, we can learn by observing other conflicts and the changing nature of war. Xi Jinping has made it clear that nothing can prevent China’s “destiny” of unification. Their intentions are clear.
Our greatest superpower is the free market. But capitalism doesn’t turn on a dime. We can repurpose and adapt, but it requires clear demand signals.
How well the government sends those signals through reconciliation and the 2026 NDAA will determine how effectively the free market can align with national security.
Arthur L. Herman: Sending the right demand signal is key. One of the main points of Freedom’s Forge is that the turnaround of America’s industrial base all took place a year and a half before Pearl Harbor.
By December 1941, the U.S. was already nearing Germany’s output and on the cusp of outproducing the entire Axis. That head start was crucial.
We’re at a similar inflection point now. Either we send that signal clearly and soon, or we risk letting the moment slip away.
I’d add: space will be decisive. America’s space defense industrial base will be the key to deterring China. The more we realize that and focus our technologies there, the better chance we have of preventing conflict.
Do you ever worry that too much attention is paid to advanced technologies at the expense of basics like artillery rounds?
Arthur L. Herman: Ukraine showed us that it’s great to have F-35s and Virginia-class submarines, but you also need artillery shells, helmets, Kevlar—the basic kit of a GI.
We realized our supply chains and inventories had grown so thin we couldn’t even arm the Ukrainians properly. That highlighted the shortage.
We are addressing it, but in the long run, the decisive systems will be hypersonics, autonomous systems in all domains, and other advanced technologies. And those align with America’s commercial strengths.
John Burer: I agree. The Ukraine conflict exposed weaknesses without us being directly in the fight, which gives us time to fix them.
We don’t know what the next war’s weapons will be. But if we have adaptable manufacturing, we’ll be positioned to respond.
We also need to avoid taxpayer revolt by pairing government needs with commercial markets and private capital. That way, if factories are making cars but need to switch to tanks, the government isn’t carrying the entire cost.
ACMI’s campuses use a co-op model. Expensive equipment, like a solid rocket motor test stand, can be shared infrastructure. That makes companies more efficient and responsive without duplicating costs.
Arthur L. Herman: Bottom-up doesn’t mean you can’t start the demand signal at the top. If you brought in a company like Tesla to think about advanced unmanned systems, you’d activate hundreds of subcontractors too.
And remember: the dominant weapons of 1940 weren’t the dominant ones of 1945. Five to ten years from now, naval warfare, space, cyber—all of it will look totally different. The right technologies and leadership can flip the game quickly.
Some people say current pushes for change in defense are “innovation theater.” What do you think—and what would a real Arsenal of Democracy 2.0 look like?
Arthur L. Herman: Innovation has become a catchword that everyone throws money at without understanding it. It’s become synonymous with incremental improvements.
Real disruptive innovation comes from leadership—people who see an opportunity and pursue it relentlessly. Productivity and innovation go hand in hand.
My next book is about founders and the founder culture—the mentality that nothing will stop them. That founder spirit is the core of American exceptionalism. It’s what drives real innovation, not just slogans or budget lines.
John Burer: Innovation theater is real. ACMI avoids it because we’re building production environments. If something doesn’t reach the warfighter or the commercial market, it’s pointless.
Each of our campuses is millions of square feet. They’ll be producing real goods, adapting to new technology, and serving actual needs. We integrate startups into production, not the other way around.