Hypothetically, if all companies just refused to ever develop anything for the government, what would the government do?

Probably hire people to do it themselves. They are the government, after all.

Invoke Defense Procurement and jail a bunch of CEOs so others fall in line?

Pay someone else to develop. Usually someone shows up because people need to make a living.

Hypothetically, they will import people who will do it.

Not going to happen because building for the suckers in government pays. Or rather overpays.