A model of the international arms market∗

Sales of arms are a significant component of international trade and raise a range of pressing policy issues. After a short review of the market, this paper provides a formal model of the trade which allows for competing forward‐looking suppliers whose welfare depends on both the economic benefits from the sales and the security repercussions of recipient behaviour. The recipient's behaviour depends on its military capability, a function of the stock of arms it has acquired. We first examine a myopic recipient, whose behaviour depends on current stocks, then a forward looking recipient for whom questions of the time‐consistency and the credibility of supplier threats to embargo or promises to resupply become crucial. Finally we examine the impact of supplier cooperation of the sort currently being discussed in the UN Security Council.     

The demand for military spending in the peripheral economies of Europe

Research on the factors that determine the level of military expenditure or military burden in countries, suggest that the dynamics of the determinants of military spending will be best understood by case studies of individual countries and studies of groups of relatively homogeneous countries. This paper provides a comparative analysis of three of the EU's peripheral economies - Greece, Portugal and Spain. A simple model based on a general theory of the demand for military spending provides the basis for an investigation of the relative importance of strategic and other social and economic factors for the three countries.     

DETERMINING THE DEFENCE INDUSTRIAL BASE

This paper models the determination of the defence industrial base – the number of different military systems a country decides to maintain. High R&D costs means that few countries can afford to produce major weapons systems and the producers also import systems. Non‐producers rely on imports and we assume their demand is driven by regional arms races. Military capability is determined by the number of systems and the quantity and quality of each. We examine how the defence industrial base is influenced by military expenditures, R&D costs, export controls, the nature of regional arms races and a variety of other factors.     

Military expenditure and employment in South Africa*

Previous research into the impact of military expenditure on employment finds considerable variation across countries. This paper adds to the debate by examining the long run relationship between military burden and manufacturing employment in South Africa. Such an analysis provides an opportunity to test for crowding‐out effects and the impact of the marked decline in military spending on the South African economy. The paper finds evidence supporting the view that military expenditure will have a detrimental impact on long term manufacturing employment, adversely affecting industrial structure and efficiency.     

Defence spending and economic growth: A causal analysis for Greece and Turkey*

There are a number of studies which consider the relation between military spending and economic growth using Granger causality techniques rather than a well‐defined economic model. Some have used samples of groups of countries, finding no consistent results. Others have focused on case studies of individual countries, which has the advantage of the researchers bringing to bear much more data than the cross country samples and a greater knowledge of the structure of the economy and the budget. This paper adds to the literature by providing an analysis of two countries, Greece and Turkey, which are particularly interesting case studies given their high military burdens, the poor relations between the two and the resulting arms race in the area. In addition to analysing the data using standard “pre‐cointegration” Granger causality techniques, this paper employs modern vector autoregressive (VAR) methodology that utilises cointegration via Granger's representation theorem. The standard Granger causality tests suggest a positive effect of changing military burden on growth for Greece, but this is not sustained when the cointegration between output and military burden is taken into account. The only evidence of significant Granger causality is a negative impact of military burden on growth in Turkey.     

THE EFFECTS ON SOUTH ASIA OF DEEP US NUCLEAR REDUCTIONS

Significant nuclear reductions by the United States can affect other states in one of five ways: by directly altering their strategic calculations and postures; by indirectly altering their strategic calculations and postures by affecting the behavior of third-party states; by undermining formal US deterrence commitments; by eroding the United States's perceived ability to provide “informal” deterrence through the maintenance of an active global presence; and by creating normative pressure for states to emulate US nuclear reductions. Only the erosion of “informal” deterrence is likely to affect South Asia; to the extent that significant US nuclear reductions affect South Asia, then, their impact is likely to be destabilizing.     

Aligning national “logics” in a European military helicopter program

This article analyzes the public side of the NH90 network consisting of four participating countries (Germany, France, Italy, and the Netherlands) and their industrial partners. Comparable to observations in earlier international projects in the defense sector, the development and production of the NH90 defense helicopter did not match original plans and costs estimates. On the basis of four mechanisms that were intended to facilitate the cooperation between the partnering countries (the General Memorandum of Understanding; coalition formation; the role of the central agency; and the process of vertical escalation) the question is posed whether or not there was a true alignment of national interests and “logics.” The lack of standardization, as well as program delays and issues concerning the division of the work-share, lead to the emerging alignment being characterized as “quasi-alignment” at best.     

The next step in Somalia: exploiting victory,post-Mogadishu

From 2006 to 2011, al-Qaeda's East African proxy, al-Shabaab, served as the de facto ruling party of Somalia despite the efforts of the internationally recognised Transitional Federal Government (TFG). During these five years, a violent struggle between al-Shabaab and the peacekeeping force of the African Union Mission in Somalia (AMISOM) resulted in thousands of dead civilians, hundreds of thousands of internally displaced persons and a strategic environment inhospitable to reconciliation, recovery or development. By 2012, AMISOM was able to break the deadlock and force al-Shabaab from Mogadishu and Kismayo. In order to continue the momentum, the African Union and other partner nations must support the TFG in neutralising al-Shabaab throughout Somalia and providing good governance to its constituents. Al-Shabaab's revenue streams must be shut down and its offensive capability must be degraded while the strategic environment is shaped to ensure that conditions conducive to a revival do not exist. Failure to do so will likely see Somalia continuing to produce Islamist extremists and pirates to menace international maritime traffic in the western Indian Ocean, destabilise East Africa and adversely impact millions.