Arms Production and Employment: Discourse, Scale and Methodological Challenges
Within the European Union, Council Common Position 2008/944/CFSP of 8 December 2008 defining common rules governing control of exports of military technology and equipment is based on criteria that are intended to assess the countries of destination for the respective arms based on respect for human rights and international law, conflict prevention, democracy, regional stability and peace-keeping. As a rule, these considerations take precedence over the economic and industrial arguments that arms-exporting Member States may put forward. Specifically, Article 10 of the Common Position stipulates that “[w]hile Member States, where appropriate, may also take into account the effect of proposed exports on their economic, social, commercial and industrial interests, these factors shall not affect the application of the above criteria”.[1]
Yet clearly one of the arguments most frequently advanced for the arms trade is its contribution to the economy. It is used to justify both funding for arms programmes and export sales, even in situations where the relevant arms are involved in human rights violations and deadly armed conflicts. The argument goes that for the sake of economic prosperity, there is a need to continue fuelling political violence, otherwise another country that does not have the same ethical and legal standards and is less bothered about the safety and security of civilian populations will take advantage of the situation to gain market share. In other words, the prosperity of arms producers’ shareholders and employees and its supposed ability to drive forward their local economy are regarded as reasons enough for making a sale, while victims are considered to be just unfortunate collateral damage. In public discourse and among decision-makers, this stance is clearly not morally indefensible enough to eclipse an economic argument supposedly so strong that it speaks for itself—an assertion which however needs to be backed up with proof.
Yet there is ultimately little concrete evidence to support the idea that arms sales benefit the economy, at least not in every instance or to the extent suggested by the arms industry lobbies, and certainly not as much as other economic sectors. This observation also holds for employment. For an understanding of this dynamic, it is worth bearing in mind the characteristics of defence markets and of the arms production sector, which more often than not preclude overly categorical assertions about the positive impact on the economy and the importance of the arms production sector in terms of innovation and employment.
An Industry Supported by Public Funds
Arms production is a matter of national security, and so is funded almost exclusively from the public purse. Arms are developed and (at least initially) produced mainly by drawing on financing from national governments, leveraging direct or indirect mechanisms, such as tax credits. This starts with the research and development (R&D) phase, which is viewed as risky given the challenges involved, such as the length of these processes, the possible emergence of disruptive technologies and the establishment of new priorities based on, for example, a change in the understanding of the threat faced and the means for dealing with it. After the development phase, the weapons are then also ordered by national governments, which therefore cover the manufacturers’ production costs and their margins. Thus, defence ministries determine the characteristics of weapons and pay for their development, production, use and maintenance.
It would be hard to demonstrate any positive impact of an item of government spending used to design and produce a good intended almost exclusively for the State, while allowing its makers to generate a margin in their design and manufacturing process. Given that the specialist literature has found that public spending taken as a whole has a clearly positive impact on the economy, it is tempting to conclude that this observation holds for arms spending. But this would involve a methodological error, arising from paralogism and a wish for the same observations to apply when one thing shares certain characteristics with another. However, there are differentiating factors for each of these expenditure items. Government spending overall may have a positive impact on the economy despite the corrosive effect of funding earmarked for arms production. In the absence of reliable data and of a rigorous methodology to separate out arms production and to analyse it appropriately, it is impossible to make a definite pronouncement one way or the other. What we can say is that the impact of government spending on arms is less than that in segments which contribute to the (non-military) commercial sector, in particular because the size of these markets and the number of potential buyers are very different from the arms sector.
The Impact of Exports on Employment
Arms exports require that the resources of a foreign country are used to pay for military equipment. However, it must be borne in mind that at national level, a country’s armed forces first buy weapons locally produced for their needs and then market them in various locations to promote and export them. This is a type of validation a system must get to ensure its competitiveness in export markets. Once the arms are finally sold, the volume generates additional income for manufacturers. Exports also make it possible to reduce development and acquisition costs for the country of origin (economies of scale). To a certain extent, they can also create jobs or help to keep them local.
However, the conditions associated with the contract can significantly affect the positive impact anticipated by the exporter. The country receiving the arms can request transfers of technology and production capacity. This means, on the one hand, that some of the jobs generated by the exports benefit the purchasing country and, on the other, that the transferred technologies potentially strengthen a competitor in the export markets, thereby encouraging additional R&D spending to maintain a technological advantage.
Big, but How Big?
In light of defence companies’ figures (the value of their contracts, their annual sales and the size of their workforce), these enterprises can reasonably be considered to play a leading role in the functioning of the global economy. Citizens and decision-makers sometimes have little to go on when trying to identify what the data presented to them actually mean. One way to get around the problem is to situate the arms-producing industries in the context of all economic players, especially those in the manufacturing sector. The manufacturing sector is a more appropriate point of reference than the hotel or finance sector, because the R&D and production processes are relatively similar to those of the defence sector. However, there is one notable difference that should be kept in mind: arms manufacturers have a limited pool of potential customers, i.e. governments which have little or no production capacity at national level, whereas manufacturers in the (non-military) commercial market have many more options.
The Stockholm International Peace Research Institute (SIPRI) addressed this issue in 2019, focusing its approach on sales. This Swedish think tank noted that the total sales of the top 15 manufacturing companies came to USD 2,453 billion in 2018, approximately 10 times the combined arms sales of the 15 leading arms producers (USD 245 billion). The 100 largest defence companies together have sales of USD 420 billion, i.e. only one sixth of the total for the 15 biggest manufacturing firms. SIPRI backs this up by pointing out that “the sales of one company alone—Toyota, the world’s largest manufacturing company […]—were 8.0 per cent higher than the total combined arms sales of the top 15 arms producers” (Fleurant et al. 2019).
Shifting the focus away from the manufacturing sector for a moment, in terms of innovation we can also put into perspective the importance of the arms sector by referring to the tech giants GAFAM[2], as innovation leaders today. In 2020, Amazon alone estimated the value of its R&D activities at USD 42 billion. The combined total for Amazon, Alphabet (USD 27 billion), Microsoft (USD 19 billion), Apple (USD 19 billion) and Facebook (USD 18 billion) amounts to USD 125 billion.[3] This is more than the US federal government’s proposed spending on military research and development in 2022 (USD 112 billion) (US Department of Defense 2021).
The arms sector obviously generates direct and indirect employment, but working out exactly how many jobs are involved is more complex than it appears from a methodological perspective, largely because of the dual nature of various industrial activities. This means that you cannot simply add together the workers employed by an arms producer. Instead, you have to separate out the military activities—something which often involves a level of abstraction and poses challenges, as the same individual may, for example, work on producing both weapons and commercial goods. Moreover, it is noteworthy that arms industry lobbyists (and also sometimes the press) do not make a great effort to separate out arms production from a broader general picture where we also find the aviation and aerospace sectors, areas where civilian activities are nevertheless far more promising in terms of sales than military ones.
As a result, the importance of defence-related jobs also often has to be put into perspective, all the more so as the methodology adopted is often shrouded in mystery. In France, Minister for the Armed Forces Florence Parly estimated in 2019 that the country’s entire arms industry accounted for 200,000 jobs (both direct and indirect employment). Depending on the methodology used, this estimate can be seen as generous without however being far-fetched. In 2017, there were estimated to be 47,000 direct industrial jobs and another 67,000 indirect jobs, or 114,000 jobs in total (Cops et al. 2017). We can surmise that since then, the sales of French manufacturers have exerted upward pressure on this low estimate. Going beyond methodological disputes, we must put these figures in perspective: in 2019, automotive manufacturer PSA (the group bringing together Peugeot and Citroën) alone had a workforce of around 47,000 in France, while its rival Renault had 31,000.[4] In other words, there were 78,000 direct jobs spread across just these two companies.
Primarily a Political Business
Nobody disputes the fact that the arms sector generates economic activity and, of course, jobs. Where data are available, it could be argued that under certain conditions the arms sector is able to make a positive contribution to the economy in specific segments (mainly those of dual-use goods). However, we must be selective when it comes to the technologies and goods involved and also particularly careful in making any generalisations. A lack of data makes it impossible to settle on a methodology that will give an accurate view of the situation. On the other hand, the available data are enough to put into perspective the economic importance of the arms sector and its contribution to technological innovation.
More fundamentally, we must emphasise the fact that the arms market is all about selling means of political violence. This violence cannot be disassociated from people. It is exercised by one group on behalf of a larger whole and against other people. Any desire to justify arms production and exports for the sake of a supposed economic rationale built on shaky methodological principles must, as the European Union’s Common Position reiterates, give way to political, security and legal considerations.
References
Capital.fr (2019). PSA Peugeot Citroën a sabré dans l’emploi en France en 15 ans : le conseil Bourse du jour. Capital.fr, 27 August 2019. Available at: www.capital.fr/auto/psa-peugeot-citroen-lemploi-en-france-a-fondu-en-15-ans-le-conseil-bourse-du-jour-1348282 (in French) (Accessed: 1 November 2021).
Cops, D. / Duquet, N. / Gourdin, G. (2017). Towards Europeanized Arms Exports Controls? Comparing Control Systems in EU Member States. Brussels, Flemish Peace Institute.
Fleurant, A. / Kuimova, A. / Lopes Da Silva, D. / Tian, N. / Wezeman, P. D. / Wezeman, S. T. (2019). The SIPRI Top 100 Arms-Producing and Military Services Companies, 2018. SIPRI Fact Sheet, December 2019. Stockholm, SIPRI. Available at: www.sipri.org/sites/default/files/2019-12/1912_fs_top_100_2018.pdf (Accessed: 1 November 2021).
US Department of Defense (2021). National Defense Budget: Estimates for FY 2022, August 2021. Arlington (VA), US Department of Defense (Office of the Under Secretary of Defense). Available at: comptroller.defense.gov/Portals/45/Documents/defbudget/FY2022/FY22_Green_Book.pdf (Accessed: 1 November 2021).
Footnotes
[1] Council Common Position 2008/944/CFSP of 8 December 2008 defining common rules governing control of exports of military technology and equipment.
[2] Google (now Alphabet), Amazon, Facebook, Apple and Microsoft.
[3] See the relevant companies’ annual reports.
[4] In 2019, PSA employed 211,000 workers worldwide, while Renault employed 183,000. See Capital.fr (2019).
About the author
Yannick Quéau is director of the Group for Research and Information on Peace and Security (GRIP).