Economics of Arms

With an estimated 2.7 per cent of the world GDP ($1.5 trillion) spent on arms, the industry is of huge importance to the global economy. It is also a business sector with a reputation for secrecy and lack of transparency. In this book, the defence economist, Keith Hartley brings his critical economic scrutiny to bear on the industry. Cutting through the myth, emotion and special pleading surrounding the sector he reveals how it functions economically and the key issues that determine its performance. The author begins by explaining why the sector is important and outlines its relationships with 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 buying power of governments, are all examined. The sector's performance is analysed through various indicators, including exports, development time, cost overruns as well as profitability. The complex choice problems of domestic procurement are considered alongside sales to foreign governments and the opportunities that these may present for corruption. The military-industrial-political complex is unpacked and the behaviour of its major agents is critically examined. The book considers future trends and how the industry can meet the challenge of new threats in different forms.