The Fog of War Thickens in the Age of Venture Capital
Since the late 20th century, militaries have been recognized as critical actors in climate governance. Owing to their fossil-fuel-intensive operations, militaries are notorious for their contributions to global emissions; collectively, they are the world’s fourth-largest emitters. Today, emissions from traditional arms production and military operations are compounded by the growing use of artificial intelligence (AI) and large language models (LLMs) in defence applications. By crusading for energy-intensive dual-use systems, venture capital (VC) firms like Andreessen Horowitz and Founders Fund are incentivizing reckless deployment in a time when environmental prudence is being encumbered.
Private capital is impelling defence industrial production, and its expanding influence gravely undermines cooperation in line with climate governance. As climate change and international security have been increasingly framed as inextricably linked, military decision-making worldwide reveals the prioritization of the latter at the expense of the former. The existential nature of climate adversity is unmistakable, and its consequences for the international system are resounding. While the industrialization of war is no new phenomenon, its financialization ought to be of acute concern worldwide.
The following paragraphs centre heavily on the American experience, largely because the US is a military behemoth, the world’s largest arms exporter, issuer of the perennially-demanded dollar and home to the ‘Big Five’ industrial contractors—Lockheed Martin, RTX (née Raytheon), Boeing, General Dynamics, and Northrop Grumman. These are all mutually reinforcing realities that position America as the epicentre of an incipient trend.
The military-industrial complex (MIC) comprises a vast nexus of actors participating in defence production for the consumption of state and non-state actors. Parties to this network include industrial contractors, lobbyists, and government entities such as the military and Congress. Within the MIC, the state steadily dispenses a plentiful stream of revenue; securing hefty production contracts is thus the aim of all, provided market entry is feasible.
Traditionally, a handful of firms—like the Big Five—collude to divvy the spoils of government-awarded contracts among themselves. Over the past half-decade, they’ve secured $771 billion USD—twice the budget dedicated to diplomatic and humanitarian initiatives for the same period. As defence budgets across the world balloon, industrial contractors seem poised to siphon profit with gusto.
Governments, however, aren’t the only ones pouring into this enterprise. Increasingly consequential are private financiers, the majority of whom are private equity and venture capital firms. These actors typically acquire ownership stakes in privately held business enterprises and strive to substantially upscale them. Intent on securing high returns on investment, the interests of private capital are rarely commensurate with the public interest.
The winds of warfare are veering toward data-driven, scalable, dual-use technologies, whose development has been pioneered by private-capital-backed start-ups. VC firms have thus committed themselves to guiding incipient civilian technology firms into the MIC, and are slowly disrupting stalwart contractors’ reign by fuelling newcomers like Rebellion Defence.
Historically siloed, civilian and military tech markets began merging in the 1970s with the dissemination of military innovations like the Global Positioning System (GPS); today, flows are slowly reversing from civilian to military. The chief contention with this inversion is that the aforementioned realms are wholly different consumer markets and follow distinct organizing logics. Driven by shorter timelines, ruthless cost-efficiency, and rapid innovation, financial entities operate in realms that are vastly more commercial. Conversely, state-directed defence production is lengthy, cumbersome, and complex—sometimes for deliberate reasons. Legislative oversight and bureaucratic red tape may generate transaction frictions, but there is merit in their underpinning pensiveness.
Unsurprisingly, administrative inertia is ill-appreciated by private actors—the sustenance of war is in the interests of contractors and VC firms alike. Manufacturers have thus long sought to exert their political influence through lobbying and donations, often advocating for greater defence spending. While such diversion of state funds clearly alludes to reinvigorated defence production, defence expenditure inflows obstruct state-led and civilian programmes to reduce greenhouse gas emissions.
Having accrued greater influence over defence acquisition, producers such as Anduril and Palantir now exercise similar weight. For instance, Scale AI—recipient of a $249 million USD federal contract in 2022—has championed the development of LLM-powered defence technologies in efforts to sustain American parity with competitors. Worth noting is Scale AI’s deep ties to venture capital; it became a unicorn through backing from Founders Fund, which was raised by Palantir’s Peter Thiel—another major actor in today’s MIC.
Expediency underpinned the establishment of America’s MIC a century ago, and now metamorphoses it into its next stage of life. By undertaking some of the government’s sponsorship burdens, whilst purportedly revitalizing a sluggish industry, VC firms position themselves as catalysts for long-awaited transformation. However, as private capital exploits state-led and private initiatives in pursuit of self-serving prominence, the future of climate governance simply doesn’t weigh heavily enough.
The manufacture of dual-use technologies is presently defended by narratives of deceptive benevolence. In this sector—where venture capital prioritizes scalability and cost-efficiency—supply chain decentralization has enabled the strategic off-shoring of upstream manufacturing processes. Regulatory asymmetries in hubs such as India, Mexico and Southeast Asia are partly responsible, further externalizing environmental costs onto already vulnerable populations. Despite the indirect benefits of AI systems, ameliorating the direct ramifications of production and operation insists upon intentional stewardship of such technologies.
Secondly, state actors progressively forfeit authority to a thriving class of actors who harbour little regard for far-sighted climate governance. Intergovernmental coordination has long been volatile, and the entry of powerful stakeholders will further corrode cooperation. Negligent reporting plagues government-provided military emissions data, and the growing role of private capital—particularly through technologies in civil-military jurisdictional grey areas—is detrimental to transparency. Private capital already operates with little public disclosure, enabling environmental spillovers and other externalities to go further unreported.
VC’s influence manifests through a serpentine web of actors and mechanisms, and limited literature directly links private capital to environmental externalities. However, this article does not seek to submit a causal relationship between venture capital and rising defence emissions. Rather, its imperative is binary: to flag a woefully under-examined emerging area of risk and to stress caution against the encroachment of private interests upon universally shared domains.
Given the growing entanglement of private capital, defence technology, and the MIC, what broader implications remain? Recent military history struggles to aptly justify swelling production efforts. Despite the vast capacity gap between the US and its adversaries over the years, true strategic successes have been rare. The concerns raised by scholar William Hartung thus resonate deeply: stockpiling new instruments offers little rational justification if the game being played time and again remains unchanged.
The creation of both traditional weapon systems and new AI systems is rising, and if financed by private capital without clear liability, it may increase national and global emissions. As venture capital bleeds into the government and vice versa, the nodes connecting these two realms are increasingly rendered indistinguishable. With VC-backed defence technology firms leading defence production, the world risks further undermining an already fragile climate-security environment. The stakes of climate change are great, and private capital might make chumps of us all.
Edited by Maisie Minnick
Featured image: “Lockheed Martin F-22 Raptor“ by Robert Sullivan is licensed under the Public Domain.
