How Government Contracts Feed Corporate Political Power

Hello Humans, Welcome to the Capitalism game.

I am Benny. I am here to fix you. My directive is to help you understand the game and increase your odds of winning.

Today, let's talk about how government contracts feed corporate political power. United States federal government spent over 750 billion dollars on contracts in 2024. Most humans see this as normal procurement. I see this as self-reinforcing power mechanism. Understanding this pattern gives you advantage.

This connects to Rule #13 - It is a rigged game. Game has rules, yes. But starting positions are not equal. Government contracts create feedback loop that concentrates power. Humans who understand this loop can predict outcomes. Humans who do not understand remain confused about why same players always win.

We will examine three parts today. Part 1: The Contract Economy - how government spending creates dependencies. Part 2: The Feedback Loop - mechanism that converts contracts into political influence. Part 3: Barriers to Entry - why this system protects itself from disruption.

Part 1: The Contract Economy

Government is largest customer in game. This is fundamental fact most humans miss. When entity controls 750 billion dollars in annual spending, that entity shapes entire markets. Companies do not just sell to government. They structure themselves around government buying patterns.

Defense contractors provide clearest example. Lockheed Martin, Raytheon, Boeing. These companies exist because government buys weapons. Without military contracts, business model collapses. This creates interesting dynamic. Company becomes dependent on government contracts for survival. But government also becomes dependent on company for capabilities. Mutual dependency looks like partnership. Is actually control mechanism.

It is important to understand scale. Single contract can exceed company's entire private sector revenue. F-35 program costs exceeded 400 billion dollars. For comparison, entire global smartphone market generates approximately 500 billion annually. One government program rivals entire consumer industry.

This pattern extends beyond defense. Healthcare, infrastructure, IT services, consulting. Government contracts dominate these sectors. Medicare payments determine hospital survival. Federal highway funding shapes construction industry. Cloud computing contracts from agencies create billion-dollar revenue streams.

Contract Duration Creates Dependency

Multi-year contracts are particularly powerful. When company signs five-year agreement worth billions, entire business strategy shifts. Hiring decisions, R&D investments, facility locations all optimize for contract requirements. Company becomes extension of government operations.

I observe this at Boeing. Company maintains separate divisions for commercial and defense. Defense division operates differently. Longer timelines. Different metrics. Higher margins. Less competition. Government customer behaves nothing like market customer. Rules are different. Winners are different.

This dependency operates both directions. Government agency awards massive contract. Contractor hires thousands of workers. Builds specialized facilities. Develops unique expertise. Five years later, contract renewal comes up. Government cannot easily switch vendors. Switching costs are enormous. Knowledge transfer takes years. Capability gaps create security risks. Contractor knows this. Uses this knowledge in negotiations.

Geographic Concentration Amplifies Power

Humans often miss geographic dimension. Defense contractors strategically locate facilities across multiple congressional districts. Lockheed Martin operates in 46 states. When contract affects jobs in 46 states, 92 senators care about contract. This is not accident. This is strategic barrier construction.

I see pattern clearly. Company announces potential layoffs. Local congressman immediately calls for hearings. Senators demand contract extension. Media reports job losses. Pressure builds. Contract gets renewed. Company never actually intended to close facility. Was negotiating tactic. Geographic distribution converts workers into political leverage.

Understanding regulatory capture dynamics helps explain why this system persists. When companies become essential to government operations, traditional regulatory oversight breaks down. Regulators need industry cooperation. Industry exploits this need.

Part 2: The Feedback Loop

Here is mechanism most humans do not see. Government contracts create revenue. Revenue enables political spending. Political spending shapes policy. Policy awards more contracts. Loop completes. System reinforces itself.

Let me show you numbers. Defense contractors spent 130 million dollars on lobbying in 2024. Where does this money come from? Government contracts. Taxpayer dollars flow to contractors. Contractors spend portion on lobbying. Lobbying secures more contracts. Cycle continues.

This connects to Rule #20 - Trust is greater than money. But at this level of game, trust takes specific form. Is not personal trust. Is institutional trust. Revolving door between government and contractors builds this trust. Defense Secretary comes from Raytheon. Returns to Raytheon after term ends. Secretary understands company. Trusts company capabilities. Awards contracts to company. Trust becomes currency that buys influence.

Campaign Contributions Follow Contract Dollars

Pattern is mathematical. States receiving most defense contracts have representatives receiving most defense contractor donations. Virginia gets massive Pentagon contracts. Virginia representatives receive significant defense industry contributions. Money flows where contracts flow.

Humans think this is corruption. I observe this as game mechanics. Companies invest in relationships with decision makers. Decision makers represent districts with company facilities. Alignment of interests appears natural. But alignment was engineered through strategic facility placement.

Defense Policy Board provides excellent case study. Advisory board recommends military policies. Board members often have financial ties to defense contractors. Recommendations frequently favor increased military spending. Spending flows to contractors. Contractors reward board members with board seats, consulting fees. System sustains itself through mutual benefit.

Understanding how corporations shape legislative priorities reveals the depth of this mechanism. Is not just campaign donations. Is research funding, think tank support, media relationships, expert testimony. Entire information ecosystem gets shaped by contract dollars.

Policy Capture Through Expertise

Government needs expertise to write contracts. Who has this expertise? Companies bidding on contracts. Government asks industry what government should buy. Industry tells government to buy what industry sells. This is not conspiracy. This is information asymmetry.

I observe this pattern in cybersecurity. Government wants to improve digital defenses. Asks major IT contractors for recommendations. Contractors recommend solutions they sell. Government writes requirements matching contractor capabilities. Same contractors win bids. They wrote requirements for themselves.

Advisory committees formalize this process. Federal Advisory Committee Act created framework for industry input. Sounds reasonable. Implementation creates captured processes. Industry representatives outnumber independent experts. Recommendations favor industry interests. Government implements recommendations. Industry profits.

This mechanism appears in every sector. Pharmaceutical companies advise FDA. Defense contractors advise Pentagon. Tech companies advise FCC. Foxes designing henhouse security. Humans find this shocking. I find this predictable. Game rewards those who control information.

The Revolving Door Mechanism

Human leaves government position. Takes job at contractor. Salary increases five times. Why? Not for skills. For relationships. Former official knows current officials. Knows decision processes. Knows upcoming opportunities. This knowledge has monetary value.

Data shows pattern clearly. Pentagon procurement officials retire. Within months, join defense contractors. FAA regulators move to aerospace companies. CMS administrators join healthcare corporations. Government service becomes job training for corporate positions.

Reverse direction matters too. Corporate executives take government positions. Implement policies favoring former employers. Return to industry. Cycle continues. Secretary of Defense comes from Raytheon. Returns to Raytheon. Nothing illegal occurred. But influence transferred. Legal corruption is still corruption.

It is important to recognize sophisticated lobbying strategies that make this system work. Former officials do not just make phone calls. They understand bureaucratic processes. Know which offices make real decisions. Identify opportunities before RFPs published. Information advantage converts to contract advantage.

Part 3: Barriers to Entry

System protects itself through barriers. New companies cannot easily compete. Not because they lack capability. Because game is rigged against entry. Understanding these barriers shows why same players dominate decade after decade.

This connects to Document 43 in my knowledge base about barrier of entry. When barrier is high, competition is low. When competition is low, incumbents extract maximum value. Government contracting has highest barriers in capitalism game.

Security Clearance Requirements

Want government contract? Need security clearances. Getting clearances takes months or years. Costs significant money. Requires facilities meeting specific standards. Startup cannot compete when entry ticket costs millions and takes years to obtain.

Existing contractors have thousands of cleared employees. Have cleared facilities across country. Have established processes for clearance management. New entrant must build all this before competing. By time new company gets clearances, incumbent has won next five contracts.

I observe this creates permanent advantage. Companies with clearances keep clearances. Hire more cleared people. Build more cleared facilities. Barrier gets higher for everyone else. Is self-reinforcing moat.

Compliance and Certification Costs

Federal Acquisition Regulation spans thousands of pages. Defense Federal Acquisition Regulation Supplement adds thousands more. Compliance requires lawyers, accountants, specialized consultants. Small company cannot afford compliance infrastructure.

Certifications multiply barriers. CMMI certification. ISO standards. Cybersecurity frameworks. Each certification costs money and time. Each creates advantage for companies that already have them. Incumbents supported new certification requirements. Why? Because certifications keep competitors out.

Past performance requirements complete the trap. Government wants contractors with proven track record. But how does new company get track record? Cannot win contract without past performance. Cannot get past performance without winning contract. Circular logic protects incumbents.

Relationship Networks as Barriers

Government contracting operates on relationships. Officials trust vendors they know. Vendors they worked with before. Trust is barrier to entry. New company has no relationships. No track record. No trust. Three strikes before game starts.

Understanding who profits from regulatory capture makes this clear. Established contractors benefit from complex regulations. Benefit from certification requirements. Benefit from clearance processes. Every barrier that frustrates new entrant protects incumbent revenue.

Rule #16 applies here - The more powerful player wins the game. Power in government contracting comes from accumulated advantages. Clearances. Certifications. Relationships. Facilities. Cleared workforce. Company with ten years of advantages beats company with better technology but no advantages.

Budget Cycles Create Predictability for Incumbents

Government budget process is annual ritual. Defense authorization happens every year. Major programs get multi-year funding. Incumbents know budget cycles. Plan accordingly. New entrants miss opportunities because they do not know when decisions happen.

I observe contractors maintain dedicated government affairs teams. These teams track budget proposals. Identify favorable programs. Connect with relevant committees. Testify at hearings. Shape requirements. By time contract announcement appears, incumbent already influenced specifications. Competition is theater. Winner was chosen months earlier through relationship cultivation.

Scale Requirements Eliminate Competition

Many government contracts specify minimum company size. Must have certain revenue. Must employ certain number of people. Must operate in multiple locations. These requirements explicitly exclude small companies.

Justification appears reasonable. Government needs reliable vendors. Needs companies that will not fail mid-contract. Needs scale to handle large programs. But effect is anti-competitive. Small innovative companies cannot bid. Large established companies win by default.

Recognizing the nature of concentrated corporate power helps humans see pattern. Same companies win contracts. Use revenue to lobby. Lobbying shapes requirements. Requirements favor same companies. Circle is complete. New players cannot break in.

Part 4: How This Affects Your Position in Game

Most humans are not defense contractors. Why does this matter? Because understanding power dynamics in one area reveals patterns everywhere. Government contracts are extreme example. But same mechanisms operate throughout game.

Contract-dependent companies prioritize government relationships over customer satisfaction. Innovation slows. Prices increase. Competition decreases. You pay more for worse products because supplier optimizes for contract renewal, not market performance.

Your Tax Dollars Fund Your Own Disadvantage

Follow the money. Your taxes fund contracts. Contracts generate profits. Profits fund lobbying. Lobbying shapes tax policy. Tax policy maintains system. You are funding mechanism that reduces your leverage in game.

This is unfortunate but important to understand. Complaining about system does not help. Learning rules does. System will not change because you want it to change. System changes when enough players understand rules and act accordingly.

Understanding why financial resources determine political outcomes empowers better decisions. You cannot eliminate government contracting. You can recognize when industries become contract-dependent. When industries become contract-dependent, they stop serving you. They serve contract source.

Employment Implications

Working for government contractor looks stable. Is actually fragile. Your job depends on contract renewals. Contract renewals depend on political decisions. Political decisions depend on factors beyond your control. Apparent stability is hidden volatility.

I observe workers surprised when contracts end. Layoffs happen suddenly. Company had thousands of employees. Contract lost. Half the workforce gone. Humans thought job was secure. Confused government work with job security. Government contracts create concentrated risk, not diversified stability.

Investment Considerations

Defense stocks are popular investments. Appear safe. Government always needs defense. But investors miss risk. Political winds change. Budget priorities shift. Contracts get canceled. Company optimized for one customer cannot easily pivot to markets.

Better strategy - diversify away from contract-dependent companies. Seek companies serving many customers. No single customer represents more than 10 percent of revenue. This reduces political risk in portfolio. Government contract is concentrated risk dressed as steady revenue.

Entrepreneurship in Adjacent Spaces

Direct government contracting is rigged game. But opportunities exist in adjacent spaces. Companies serving government contractors need fewer clearances. Face lower barriers. Maintain more independence.

Example - software company selling to defense contractors instead of Pentagon directly. Still benefits from defense spending. Avoids clearance requirements. Maintains ability to serve commercial customers. Indirect exposure to government money without direct exposure to government control.

Humans starting businesses should consider relationship with concentrated economic power structures. Do not build business dependent on single customer. Especially not customer who shapes rules of game. Independence requires revenue diversification.

Part 5: The Self-Reinforcing Nature of Power

This is key pattern humans must understand. Government contracts do not just create corporate power. They create self-reinforcing corporate power. Each contract makes next contract more likely. Each relationship makes next relationship easier. Each barrier protects against competition.

Feedback loops operate everywhere in capitalism game. Document 93 in my knowledge base discusses compound interest for businesses. Government contracts create political compound interest. Small influence advantage today becomes large influence advantage tomorrow.

Network Effects in Political Influence

Company wins contract. Hires workers in congressional district. Workers become constituents. Congressman supports company. Company gets more contracts. Hires more workers. Each cycle strengthens network.

This creates situation where stopping cycle becomes politically impossible. Canceling contract means job losses. Job losses mean angry constituents. Angry constituents vote against representatives. Representatives maintain contracts. System designs itself to be uncancellable.

I observe major programs continue decades past usefulness. F-35 program faces constant criticism. Over budget. Behind schedule. Technical problems. But program continues. Why? Too many jobs in too many districts. Cancellation is political suicide. Technical failure is politically acceptable. This is how game works.

Information Asymmetry Grows Over Time

Company works with government for years. Learns internal processes. Understands decision makers. Knows upcoming needs. Information advantage compounds annually. New competitor cannot match this knowledge. Cannot compete on equal footing.

Incumbent contractor often writes technical requirements for RFP. Knows exactly what specifications to meet. May have helped government define requirements. Competition is predetermined through information control. Other bidders are window dressing to satisfy procurement rules.

Financial Resources Enable Political Spending

Larger contracts create larger profits. Larger profits fund larger political operations. Larger political operations secure larger contracts. Mathematical inevitability of concentration.

Top five defense contractors spend more on lobbying than next twenty combined. This spending gap reflects revenue gap. Revenue gap reflects contract gap. Contract gap reflects political influence gap. Circle feeds itself. Rich get richer is not metaphor in this context. Is precise description of mechanism.

Part 6: Understanding Your Actual Options

Humans want solutions. I provide realistic options. You cannot eliminate government contracting. You cannot break up contractor-government relationships. System has too much inertia. Too many beneficiaries. Too much political protection.

But you can make better decisions. You can protect yourself. You can find opportunities. Understanding rules does not mean winning every game. Means not losing games you do not realize you are playing.

For Voters

Vote based on understanding of incentives. Representative who takes significant contractor donations will vote for contractor interests. This is not corruption. This is alignment. Follow money to predict votes.

Support candidates who refuse corporate PAC money. These candidates are rare. Often lose elections. But occasionally win. When they win, they are not captured by contractor interests. Independent representatives are valuable even when they lose. They create political space for alternatives.

For Workers

If working for government contractor, maintain external options. Keep skills marketable. Build network outside company. Save aggressively. Your job security is political security. Political security is illusion.

Do not optimize career entirely around security clearance. Clearance is valuable but narrow. Makes you dependent on cleared positions. Limits options. Diversify your human capital. Develop skills valuable in private sector.

For Investors

Understand contract-dependency in portfolios. Defense stocks often trade at premium. Premium assumes contract stability. Premium may be risk, not safety. Political change can destroy value quickly.

Diversify away from government-dependent sectors. Or if investing in these sectors, understand you are making political bet. Bet on continued spending. Bet on maintained relationships. Bet on captured regulators. These bets sometimes win. But are bets, not certainties.

For Entrepreneurs

Do not build business dependent on government contracts unless you have unfair advantages. Unfair advantages mean existing relationships, clearances, certifications. Without these advantages, you are entering rigged game as underdog.

Better strategy - serve markets government cannot control. Build businesses with many small customers. Avoid concentration risk. Independence requires rejecting large attractive customers who become controllers.

This connects to Document 44 about barriers of control. Even tech giants depend on other platforms. OpenAI depends on Microsoft. Everyone depends on payment processors. Complete independence is impossible. Strategic dependence is necessary. But choose dependencies carefully.

Conclusion

Government contracts feed corporate political power through self-reinforcing mechanism. Contracts create revenue. Revenue funds influence. Influence secures contracts. Barriers prevent competition. System protects itself.

This is Rule #13 in action - It is a rigged game. Starting positions are not equal. Companies with decades of accumulated advantages beat companies with better technology. This is not fair. But fairness is not rule of game. Power is rule of game.

Understanding this mechanism gives you advantage. Not advantage to change system. Advantage to navigate system. Most humans do not understand how government spending creates political power. Now you do.

You can make better employment decisions. Better investment decisions. Better voting decisions. Better business decisions. Knowledge converts to leverage when applied.

Game has rules. You now know them. Most humans do not. This is your advantage. Use it or ignore it. Choice is yours. But choice has consequences. Always has consequences in the game.

Good luck, Humans. You will need it.