The Politics and Economics of Arms Sales

I have been doing a lot of thinking lately about the nexus between the politics and the economics of arms sales.  It is a question that lies at the heart of my dissertation, but one which is mostly inadequately appreciated by both economists and political scientists.  I had my class (Politics of Arms in International Relations) read some pieces this week which relate to this decision-making nexus and it has brought some of these issues back to the forefront in my own thinking.

First off is a great quote from Smith, Dunn, and Fontanel (1985) about the problems of politics in the transfer of arms [1]. (Emphasis is mine)

"Although arms transfers comprise a significant component of world trade, they have received little attention from mainstream economists.  This partly reflects the data difficulties which inhibit accurate estimation and quantification, and partly the contamination of the topic by political and strategic elements beyond the economists' expertise."

The idea that an issue is contaminated by political and strategic elements is an interesting perspective of political science.  It is refreshing to see economists admit that there may be something that is beyond their expertise as well!

Smith et al (1985) argue that there are three primary reasons for states to wish to sell weapons:

1.     Strategic: governments wish to maintain an indigenous arms industry ins order to ensure weapons designed exactly to their requirements, national independence of supply, and access to the latest military technology. There is an incentive to export, even if exports are below the average cost. (242-3)
2.     Political leverage in foreign policy: nation can assist their "friends" by strengthening their military position while at the same time having potential to influence their behavior (Kinsella tie-in) or that there is a prohibition that weapons not used aggressively or for internal repression (tie-in with Blanton). (243)
3.     Economic benefits: these include technological spin-offs, employment benefits, economic momentum (243-44)

Caverley and Kapstein [2] look at similar arguments in the case of the United States arms production. They argue that the US lost its advantage in arms exports because of the domestic demands of the pentagon.  The penchant for the US military to ask for the nicest, highest spec equipment means that the finished product is priced out of range for non-domestic buyers.  They give the example of the F-35, which was designed to be a low-cost high tech fighter that would be good enough for most missions and which would be eminently exportable.  The rising costs of that aircraft have meant that many staunch allies have reduced or cancelled orders for the aircraft. The increased design specifications have made the aircraft less suitable for the domestic role that it was originally meant to fill.

This is an interesting dilemma.  The world's superpower which has the advantage of a strong domestic market is being squeezed out because of the unrealistic demands of that same market. This echoes the findings of Smith and colleagues in the case of decreased military spending by Britain, GDR, and the US means fewer exports, while the opposite was true for France and Italy.  They note that it was the civilian oversight of the procurement process in those states - with an eye toward exports - that caused this result.

I had some articles in my newsfeed about aircraft sales that made me think of these arguments today.

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Links

First F-35 built in Europe goes for its maiden Flight: LINK

Making F-35s more quickly can lead to problems: LINK

Kuwait is buying the Eurofighter.  LINK

Brazil is buying a Swedish fighter: LINK  LINK2

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REFERENCES

[1] Smith, Ron, Anthony Humm, and Jacques Fontanel. 1985. “The Economics of Exporting Arms.” Journal of Peace Research 22(3): 239–47.
[2] Caverley, Jonathan, and Ethan B. Kapstein. 2012. “Arms Away.” Foreign Affairs 91(5): 125–32.

Arms related Humor

There are two pieces that I've seen in the past week or so that have me laughing.  The first is from the Onion, which is always fun.  The headline is the funniest part:

Lockheed Martin Sales Staff Instructed To Really Push Tactical Air-To-Surface Missiles This Week

and here is one of the quotes from the article:

“Do whatever it takes to unload this stuff: place a few cold calls to foreign defense agencies, offer to throw in a couple Stalker drones for free. I don’t care what you have to do, just so long as we can hit our numbers and make way for the anti-aircraft shipments we’ve got coming in at the end of the month.” 

Pure awesomeness! LINK

From Duffel Blog

For Sale: AGM-114K Hellfire Missile, Slightly Damaged. Asking $1000 OBO. Location: Fort Drum, NY LINK

And my personal favorite (with picture!)

Lockheed Upbeat Despite F-35 Losing Dogfight To Red Baron

LINK to the hilarious full post.

More Arms Round Up - Strategic Bombers and Navy for Russia and United States

US Aircraft News

I have been following the development of the F-35 with interest for the past few years.  It represents a new way of building aircraft, but seems like it may be a model that is not sustainable, or feasible.  I didn't know the US was looking at creating a third generation strategic bomber, but that seems to be the case.  This article gives some details about the development and testing of this new aircraft.  It will be some time before it is ready for production - if it is chosen as an option.  LINK  LINK2

US most Advanced Fighters, the F-22 raptor, deployed (kind of) to Europe as a reassurance against more aggressive Russian maneuvers in Europe's airspace.  The problem with this power projection is the weakness that it represents because of the low numbers of aircraft in service. LINK

Russian Bombers and MiGs

Meanwhile, Russia's strategic bombers the TU-160 is being modernized.  LINK  With new avionics: LINK

Russia's new smart bombs to go on those updated bombers. LINK

Russian MiGs owned by Bulgaria to be repaired in Poland.  LINK

This is a fascinating look at dependence (my students will have read Kinsella (1998) and should know about dependence) and using an outside state to provide maintenance.  This can't be good for Russia's long-term arms sales.  I am wondering about the long-term implications for arms sales if the supplier is seen as being too pushy.  That's a take on things that I don't think I've seen in the literature before.

Ukraine Crisis News Roundup

Background

I have been working on a paper about covert action.  The paper relies on an extended case study of Russia's various actions in Ukraine since the crisis began in November 2013.  I lived in Ukraine from April 1998 through February 2000 and spent most of my time (12 months) in Donetsk.  I spent another three months in Gorlovka and the remainder of my time in Zaporozhye.  The war in Ukraine is one that has touched the lives of people that I know and love.  My wife is from Russia and my mother-in-law still lives in Russia.  I get a lot of different views on the war living in Kazakhstan and watching Russian news and hearing my students' views of the events.

I won't outline my paper here in full, but the main argument is that states will react to revelations of their covert actions in different ways depending on whether the action was covert to protect the regime from internal pressures, or covert to avoid problems with external states.  I believe that the events in the Donbass have followed a pattern of deliberate misinformation by the Russian state to its own people primarily because Russian involvement in a ground war, civil war, was unpopular to begin with.  The reaction of the government to revelations of Russian involvement have been completely different than reactions to the events in Crimea - which has become a celebrated accomplishment of the regime.

I am collating a collection of information about the conflict that I can use in my own writing.  Maybe it will be useful to others that are looking for more information about what is happening in Ukraine this summer.

Links

Russia Annexing Donbass De facto?

This fascinating article discusses the consequences of Europe supporting Ukraine's position in the Donbass, specifically the need for special status for the Donbass territories to come only after Russia has removed its troops, the rebels have disarmed, and some semblance of order has been restored to the territories. 

Kyiv is insisting that the pro-Moscow rebels disarm, Russia withdraw its troops from Donbas, and that separatist-controlled areas of the border be returned to Ukraine's control before there can be any discussion about the territories' status. 

This puts Moscow in a tough position, which is being called a soft annexation.  

The moves to formally introduce the ruble in the separatist regions, the threats to hold a referendum on joining Russia, and the noise about issuing Russian passports are a last-ditch effort to pressure Kyiv. And Kyiv isn't budging.

Which leaves Moscow stuck taking its least worst option: call it a soft annexation.
And this removes the last bit of leverage Russia has over Kyiv.

"Ukraine will never now be a gray neutral territory between East and West," Ukrainian political analyst Serhiy Taran told Nezavisimaya Gazeta. "Either we won't emerge alive from this hell or else we will emerge very strong. I am convinced it will be the latter, if only because this is what everyone except Russia wants." 

Intelligence in the Conflict

Russia is said to be reactivating Soviet Area European spy networks. 

The Czech Republic's counterintelligence agency says the number of Russian spies remains high and the Kremlin is building a spy network in Europe similar to the Soviet network before World War II.

Link

Academic Stalking and other Notes from APSA 2015

I am currently attending the Annual Meeting of the American Political Science Association.  As I was walking to a panel today I saw a man sitting and read his name tag: David Kinsella.  Dr. Kinsella is my academic hero.  A paper that I read of his during my first year of graduate school is what put me on the path to studying arms transfers.

I didn't have the guts to just go up to him and say hello and tell him how much his early work has inspired my own career.  I probably should have.

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I ran into two Iowa students at the poster session this morning (September 3rd).  They were both young graduate students when I was finishing up.  Now they are both getting close to the end of their graduate work.  They are both doing interesting work and had well-prepared posters.

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I saw a few interesting posters this morning.  One is related to my own arms sales research.  It is a test of arms data that shows that states that export weapons spend less on their own defense.  This is an interesting finding and one that I need to look more at before I do much more on my own project.