Towards a Brave New Arms Industry

This book addresses the economic and technological dilemmas and likely future paths facing the second-tier arms-producing states (i.e. the smaller industrialized countries and the major arms producers in the developing world) as they enter the 21st century. The central argument is that, despite professed goals of self-sufficiency, most second-tier arms producers have largely failed to eliminate or even substantially reduce their subordination to foreign suppliers, due to continued deficiencies and weaknesses in these countries' defence technology and production bases. As a result, the capabilities for independent arms production among most second-tier arms producers have largely leveled off at a "mid-tech" level. More importantly, given the reduced resources available in the post-Cold War era, even this level of arms production capability is increasingly unsustainable. The author then examines the recent readjustment responses on the part of several secondary suppliers and assesses their significance and their prospects for success. These readjustment strategies include: (1) rationalizing their defence industrial bases, via workforce downsizing, plant closures, and company mergers and acquisitions; (2) exiting from certain kinds of defence work; (3) pursuing defence conversion or commercial diversification; (4) leveraging dual-use technologies; and (5) globalizing their defence industries via increased exports or internationalizing production. The author concludes that second-tier arms producers are likely to play a subordinate but more integrated role in an increasingly globalized and interdependent defence industry. Structurally, such a system could resemble a huge "hub and spoke" model, comprising a few large first-tier firms operating at the centre - and providing the process of armaments production with its critical design, development, and systems integration inputs - with lines of outsourced production of niche systems or low-tech items extending out to second-tier states on the periphery. Although such a global "division of labour" in arms production will probably bring new economic and technological benefits to many secondary states, it will likely entail the abandonment of their original objectives of self-sufficiency.