Introduction: the issues

What are the facts about the world’s arms industries? What is known, what is not known and what do we need to know for making sensible policy choices about arms industries? We need to know which countries are the world’s major arms spenders and which are the major arms companies and industries, we need to know their size measured by annual sales and employment, and we need to know where they are located. Information is also needed on arms R & D spending, arms exports and the trade in small arms.

What is known?

There is only a limited literature on the economics of the world’s arms industries, much of it dated. A classic pioneering book dealt with The Economics of Defense in the Nuclear Age (Hitch & McKean 1960) and this was followed by The Weapons Acquisition Process: An Economic Analysis (Peck & Scherer 1962). Subsequent publications have included NATO Arms Co-operation (Hartley 1983) and The Political Economy of Aerospace Industries (Hartley 2014).

Statistical data provides an alternative method for dealing with what is known about the world’s arms industries. For a sector dominated by security concerns, there is a surprising variety of published sources. Examples include the Stockholm International Peace Research Institute, with its yearbooks and databases (SIPRI 2016a,b,c) providing data on military expenditure, arms transfers and the world’s top 100 arms companies. Reports from the World Military Expenditures and Arms Transfers provide data on military expenditure, armed forces personnel and arms transfers (WMEAT 2016). Further sources include the Small Arms Survey (SAS 2015), the annual volumes called The Military Balance that are produced by the International Institute for Strategic Studies (IISS 2016), and various reports from the US Congressional Research Service (CRS: Washington, DC) and the Rand Corporation (Santa Monica, CA). Other data sources include national defence ministries, company annual reports and industry trade associations.

A nation’s total military spending is a starting point in identifying the major arms spending nations. Total military spending comprises more than arms spending: it includes spending on military personnel, bases and facilities.