It is estimated that today some 2.7% of world GDP ($1.5 trillion) is
spent on arms. In 2014 Lockheed Martin, the US defense contractor, had
revenues of $45 billion - the equivalent of the GDP of Tunisia. This
book explores the business behind these breathtaking figures and
explains how the arms industry makes its money.
The book begins by defining the industry, explaining why the sector is
important, outlining its prime contractors and key supply chains. Its
cost categories (from R&D to maintenance), the role of technical
innovation, and the sector's dependence on the monopsony buying power of
government, are all examined. The structure-conduct and performance
model is used to show the workings of the arms market and its various
entry and exit conditions, and the sector's performance is analysed
through various indicators including exports, development time scales,
cost overruns and profitability. The complex choice problems of domestic
procurement are considered alongside sales to foreign governments and
the opportunities that may present for bribery and corruption. The
Military-Industrial-Political-Complex (MIPC) is unpacked and the
behavior of its major agents - national defense agencies, the armed
forces, producer groups, political agents (voters, political parties and
budget-maximizing bureaucracies) - is scrutinized, both in times of
conflict (expansion) and peace (contraction). The book concludes by
considering future trends, such as whether arms industries are better
under state or private ownership, and how they can meet the challenge of
new threats in different forms.
The discussion throughout is anchored to case studies from all parts of
the world, including Brazil, Korea, Japan, Russia as well as UK, US and
Europe. As an authoritative non-technical introduction to the economics
of arms industries, it is suitable for students of business studies,
politics, international relations, political economy, strategic, and
defense studies as well as for courses on microeconomics and industrial
economics. As a masterly summation from one of the world's leading
defense economists, it will also be required reading for staff in
defense ministries, procurement agencies, the armed forces, and
strategic studies think-tanks throughout the world.
