It is not an assumption, it is a fact. When has it been disproven. I assume that, because you say it is incorrect, you have a situation in which it has been disproven.
You are probably paritally right in this paragraph: there might be many different defense companies. But this is, in no way, a bad thngs. Being private companies, they would have to allocate their resources in a way that maximized their profit. How is this done on the free market? It is done by minimizing costs while maximizing the utility that your customers derive from your product. In other words, frims attempt to satisfy their customers for the smallest cost to them.

There will not be anything that unifies them as the US army is unifed within itself. But, the US Army (and when I say "army" I mean the military as a whole) has a monopoly on derfense. Monopolies are bad for the customer. When gov't grants an entity a monopoly, such as the US Army, resources are allocated ineffcently. The company loses sight of satisfying the customer (the only way to make money in the free market) and begins to do things inefficently. For evidecne of this, just remember when the defense department lost boatloads of money. It is no big deal for them because they will get more money from taxes. But if this happened to a private firm, it would have been devastating.

So, why wouldn't they fight eachother? Because fighting is expensive. Unlike the US Army, private companies much really pay attention to the ammount of money that they spend. If they go to "war" with another company, the company is going to have to pay for the "war." And to pay for the war, the company is going to have to charge its customers more money. If a company is constantly going to silly wars with other companies, its customers are going to have to pay high prices. Because customers don't want to pay high prices, the customers will get a differen company to protect them.

This answers your silly little assertion that there is no one to make sure companies don't atom bomb eachother. Atom boms cause much colladeral damage. The company that dropped the bomb would be held responsible for this damage. This will serve as an important check on their willingness to drop an A-Bomb.

Further, which country has dropped an A-Bomb on innocent people? Is it a smaller army from a small country that can't afford to piss too many people off? Or, was it the biggest Army in the world that caused such a huge ammount of destruction? I think you know which one it is.

In short, I can't see how you think a BIG army is a good thing. The colonists fought a big army because the big army was oppressive. Big, gov't armies: bad. Small, private derfense agencies: good.

Also, the CEO's decided what to produce only in the sense that they make the decisions on what the company does. A CEO can decide to make whatever he pleases, but if it does not please the consumer, he will go out of business. For example, if the CEO of Nike decides to put nails in Nike Shoes, he will likely go out of business. The same applies for defense agencies. If Defense Agency X engages in numerous wars against friendly people, it must cover the cost of the wars by charging its customers more money. This will likely cause him to go out of business.

Here is a link to an essay, "I Pencil", about the ways that the market coordinates resources.
I, Pencil | The Foundation for Economic Education: The Freeman, Ideas on Liberty

Oh, you must be kidding me. The New Deal kept America in the Depression. It did not allow wages and prices to fall, it put restrictions on the ammount of work indivduals could do, it destroyed farm products. It was a disaster.

Look at how Harding handled his downturn: he did nothing. What happened? The economy recovered before anyone knew what happened.
This is the exact opposite of reality. The market's sole motivation is to meet the needs of people. This is the basis for all trade. What you suggest is that people trade, but do not benefit from trading. This is completly insane. They would not trade unless they derived some benefit. A company can undertak monumental marketing campaigns, but the bottom line is that if people don't like the product they aren't going to buy it. If they buy the product, this means they expect to derive utility from the product. Now, you might think that the product is inferior, but you don't really matter. You are just an arrogant outsider, attempting to enact his subjective value scale into law.

The common argument is that capitalism concentrates on the indivdual while the masses are poor and destitute. This is completly wrong. The only way that one makes money in a free-market system is by meeting satisfying the needs of consumers. Contrast this with socialism. In socialsim there is no rational price system. The economic planners have no idea how much of one thing to make and how much of another to make. If a plant manager is wasting resources, making things that people would not want to buy on the free market (but they get them in the socialist country because there is no rational price system so they are cheaper than they should be) the plant stays open making the current product and wasing respurces.

If this scenario occured in a capitalist economy, the plant would stop making whatever product it is making and switch into a more profitable industry. Now, when a company makes a profit what does it mean? It means that company has satisfied consumer demand. What does it mean when a company makes a loss? It means the compay hasn't satisfied the consumers.

In a capitlist ecnonomy those companies that satisfy consumers stay in business; those that don'y satisfy consumers don't stay in business.
Two things:
First, private enterise, being motivated to allocate resources efficently, will not waste money on devoloping something that no one wants. The only people who want machine guns is the government (well, not exactly, but mostly.) It was the Soviet Government that had the guns made. If there had been a want for AK-47s on the private market, the private market would have devolped them. The Soviets went around bragging about odd things. For example, they were happy that they made a bunch of concrete. But they made too much! No one needed all that concrete and they had surpluses.

Second, are you suggesting that the Soviet Union was more successful than capitalism? If so, explain why the Soviet Union no longer exists.

This point that you are trying to make ironicly helps me make my argument. We see in the AK-47 example that the private market does not like to make guns as much as government. This means that not as many people want guns, which means that private indivduals are less violent than gov't. This means that there will be less fighting when the armies are privitized.
In what do you have more of a say: the shoes wear or the defense you recieve? I'm guessing shoes. And what is the difference between shoe companies and the army...

__________________
"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."
-Thomas Jefferson in his first inauguration address