The Political Economy of Defence - assets.cambridge.org · Cambridge University Press...

Cambridge University Press978-1-108-42492-9 — The Political Economy of DefenceEdited by Ron Matthews FrontmatterMore Information

www.cambridge.org© in this web service Cambridge University Press

The Political Economy of Defence

Defence is the ultimate public good, and it thus falls to government todetermine the appropriate amount of public revenue to commit to thedefence of the realm. This will depend on history, strategic threat,international security obligations, entreaties from allies and, of course,the threat faced. The Political Economy of Defence is structured toidentify, explain and analyse the policy, process and problems thatgovernment faces from the starting point of national security through tothe ultimate objective of securing a peaceful world. Accordingly, itprovides insights into how defence budgets are determined and managed,offering relevant and refreshingly practical policy perspectives on defencefinance, defence and development trade-offs, sovereignty versusglobalisation debates, and many other pertinent issues. It will appeal topolicymakers, analysts, graduate students and academics interested indefence economics, political economy, public economics and public policy.

ron matthews is Professor of Defence Economics at CranfieldUniversity. He advises international governments on defence offset, andteaches defence economics at universities and military colleges across theworld.

www.cambridge.org/9781108424929www.cambridge.org



The Political Economy of

Defence

Edited by

ron matthews

Cranfield University, UK




University Printing House, Cambridge CB2 8BS, United Kingdom

One Liberty Plaza, 20th Floor, New York, NY 10006, USA

477 Williamstown Road, Port Melbourne, VIC 3207, Australia

314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre,New Delhi – 110025, India

79 Anson Road, #06–04/06, Singapore 079906

Cambridge University Press is part of the University of Cambridge.

It furthers the University’s mission by disseminating knowledge in the pursuit ofeducation, learning, and research at the highest international levels of excellence.

www.cambridge.orgInformation on this title: www.cambridge.org/9781108424929DOI: 10.1017/9781108348058

© Cambridge University Press 2019

This publication is in copyright. Subject to statutory exceptionand to the provisions of relevant collective licensing agreements,no reproduction of any part may take place without the writtenpermission of Cambridge University Press.

First published 2019

Printed and bound in Great Britain by Clays Ltd, Elcograf S.p.A.

A catalogue record for this publication is available from the British Library.

Library of Congress Cataloging-in-Publication DataNames: Matthews, Ron, editor.Title: The political economy of defence / edited by Ron Matthews, CranfieldUniversity, UK.Description: Cambridge, United Kingdom ; New York, NY : Cambridge UniversityPress, 2019. | Includes bibliographical references and index.Identifiers: LCCN 2018050908 | ISBN 9781108424929 (hbk : alk. paper)Subjects: LCSH: Defense industries – Political aspects. | National security –Economic aspects. | Security, International – Economic aspects. | War – Economicaspects.Classification: LCC HD9743.A2 P565 2019 | DDC 338.4/7355–dc23LC record available at https://lccn.loc.gov/2018050908

ISBN 978-1-108-42492-9 HardbackISBN 978-1-108-44101-8 Paperback

Cambridge University Press has no responsibility for the persistence or accuracy ofURLs for external or third-party internet websites referred to in this publicationand does not guarantee that any content on such websites is, or will remain,accurate or appropriate.




Tom, Toby and Aarish




Contents

List of Figures page x

List of Tables xi

List of Contributors xiii

Acknowledgements xx

Part I: National Security 1

1 The Political Economy of Defence 3ron matthews

2 Political versus Military Leadership: The Battle for CommonMeans and Ends 27bryan watters

3 Efficient and Effective Financial Management of DefenceResources 47irfan ansari

Part II: Defence or Development? 71

4 Military Expenditure and Growth 73ron smith

5 Towards Demilitarisation? The Military Expenditure-Development Nexus Revisited 90jurgen brauer, j . paul dunne and nan tian

Part III: Autarky versus Globalisation 121

6 Alliances in Flux: Sovereignty and Security in aChanging World 123stefan markowski and robert wylie

vii




7 The Rise and Demise of Government-MandatedOffset Policy 148ron matthews

8 Defence Companies in the Age of Globalisation:French Defence Industry as a Case Study 169jean-michel oudot and renaud bellais

9 The Great Paradox of Defence: Political Economyand Defence Procurement in Post-Brexit United Kingdom 195matt uttley and benedict wilkinson

10 Defence Burden Sharing: A Perennial Debate inInternational Alliance Management 217alexander mattelaer

Part IV: Resource Management 233

11 The Political Economy of Arms Collaboration 235keith hartley

12 Defence Procurement: Overcoming Challengesand Managing Expectations 258trevor taylor

13 The Whole-Life Costs of Defence Equipment 284david kirkpatrick

14 Economic and Political Dimensions of the Defence IndustrySupply Chain Revolution 307derek braddon

15 The Cost of Women in Ground Close Combat Roles 332joanne l. fallowfield

Part V: International Security 353

16 Battlegrounds Yet Unknown: America’s FutureMilitary Force Structure? 355randolf g. s. cooper

viii Contents




17 Innovating and Offsetting? The Political Economyof US Defence Innovation 377daniel fiott

18 The Political Economy of Terrorism 398diego muro

19 The Political Economy of Peace Operations 416fitriani

Part VI: End Game 451

20 Towards a Peaceful World 453anke hoeffler

21 Drawing Threads, Weaving Patterns 476ron matthews

Index 481

Contents ix




Figures

1.1 The politico-economic defence framework page 73.1 Operational defence PFIs 533.2 Value for money drivers 646.1 Optimal military capability by the stylised Westphalian

nation-state 1336.2 Optimal size of a Buchanan-style military club of

Westphalian nation-states 1366.3 The US-centred hub-and-spoke capability formation 1406.4 Intended stylised design of an equitable plurilateral

alliance 1427.1 Offset policy dichotomy 1527.2 The 4P offset model 1588.1 Evolution of GDP and trade in manufactured goods,

1950–2014 1768.2 SIPRI trend indicator values of arms exports, 1950–2015 1778.3 Domestic added value of exports, 2002–2014 1848.4 Share of national added value in military exports,

2002–2014 18512.1 Key features of major defence markets: demand- and

supply-side factors 26412.2 Dimensions of value in defence 27417.1 Troops, spending and technology, 1996–2018 38319.1 Peacekeeping expenditure, 1947–2017 43019.2 Comparative analysis of the UN peace operations

budget and global military expenditure 43920.1 Fatalities from organised armed conflict, 2002–2016 45620.2 Homicide by age and sex, 2015 458

x




Tables

2.1 MoD emergent themes page 405.1 Comparison of pre– and post–Cold War studies 1035.2 Comparison of pre- and post-2007 studies 1035.3 Comparison of studies focusing on mostly developing

and developed countries 1048.1 Differentiation of (inter)national operating companies 1728.2 Exports of goods by French DTIB companies, 2011–2016

(in € millions) 1788.3 Services exports by DTIB companies, 2011–2016

(in € millions) 1798.4 Foreign direct investment flows from DTIB companies,

2011–2015 (in € millions) 1808.5 FDI stocks and earnings of DTIB companies, 2011–2014

(in € millions) 18110.1 Selected NATO defence expenditure data, 2017 22711.1 Historical cost trends for UK combat aircraft,

1936–2017 23611.2 Procurement options: illustrative example 23911.3 Major European arms collaborations 24011.4 Examples of cost savings from arms collaboration 24311.5 Total development costs of comparable collaborative

and national programmes 24511.6 Results of collaboration 24711.7 Employment impacts of collaboration 24811.8 Comparing collaborative and national projects 25211.9 Pairwise comparisons: military aircraft and helicopters 25412.1 Major reports relating to UK defence procurement

improvement 25913.1 Allocation of activities in defence projects 28913.2 Development cost variation 291

xi




19.1 Top ten UN peacekeeping country contributors,1991–2015 (per cent of total peacekeepers) 424

19.2 Category levels for burden assessment of UN peaceoperations, 2016–2018 432

19.3 UNP profit/loss statement of selected UNP memberstates, 2017 436

19.4 Comparative analysis of the UN peace operations budgetand global military expenditure, 2006–2017 438

xii List of Tables




Contributors

Irfan Ansari has a background in accounting and finance. He studiedfor the AMBA-accredited Masters in Defence Administration atCranfield University, followed by a PhD in Defence Private FinanceInitiatives, and he continues to research in that field as well as indefence finance generally. Irfan lectures on defence finance atCranfield University, UK Defence Academy, on a number of coursesincluding the MSc Defence Acquisition Management and the MBA(Defence) programmes, and also at the Baltic Defence College, Estonia.

RenaudBellais graduated from the Institut d’Études Politiques de Lille in1994with a PhD in economics.He joinedMBDAas institutional advisorto the CEO in 2017 after spending four years in the French defenceprocurement agency (DGA) and 13 years at Airbus in various positions.Bellais is an Associate Researcher in Economics at ENSTA Bretagne anda member of the CESICE research unit, Université Grenoble Alpes. Healso has teaching commitments in defence economics (University Paris 2,French Army Academy), innovation economics (University Paris 1,ENSTA Bretagne) and international economics (IRIS).

Derek Braddon is Emeritus Professor of Economics at the BristolBusiness School, University of the West of England, and was formerlyDirector of the University’s Research Unit in Defence Economics fromits launch in 1986 until his retirement in 2011. His academic work hasbeen principally in the field of defence and aerospace economics, and hehas published seven books along with numerous academic papers andconsultancy reports in these areas.

Jurgen Brauer is Visiting Professor of Economics at the Faculty ofEconomics, Chulalongkorn University, Bangkok, Thailand, andEmeritus Professor of Economics at the Hull College of Business,Augusta University, Augusta (Georgia), United States. With J. PaulDunne, he co-edits The Economics of Peace and Security Journal. His

xiii




most recent book is Charles H. Anderton and Jurgen Brauer (eds).Economic Aspects of Genocides, Other Mass Atrocities, and Their

Preventions (2016).

Randolf G. S. Cooper earned his PhD at the University of Cambridge.He taught on the US Army ROTC programme for a state universityprior to becoming a country risk analyst working in commercialintelligence and later in the petroleum industry. His work on thepolitical economy of defence includes a Cambridge University Pressmonograph exploring historic aspects of the South Asian militaryeconomy.

J. Paul Dunne is Professor of Economics in the School of Economics,University of Cape Town, a research associate of the South AfricanLabour and Development Research Unit and Emeritus Professor ofEconomics at the University of the West of England. He edits theEconomics of Peace and Security Journal with Jurgen Brauer.

Joanne L. Fallowfield is the Head of Applied Physiology at the Instituteof Naval Medicine, United Kingdom. She completed her PhD innutrition and endurance exercise at Loughborough University beforeundertaking a career as a university lecturer, specialising in exercisephysiology and nutrition. Joanne joined the Institute of NavalMedicine in 2006 and supports the Defence Nutrition AdvisoryService as a Registered Nutritionist. She sits on the Defence LifestylesSteering Group and the Defence Musculoskeletal Health AdvisoryGroup and is co-Chair of the Defence Health and Wellbeing WorkingGroup, as well as Chair of the Defence Armed Forces WeightManagement Implementation Task Group. She is also a member ofthe Royal Navy Scientific Advisory Committee.

Daniel Fiott is the Security and Defence Editor at the EU Institute forSecurity Studies, where he researches defence-industrial policy anddefence innovation. He is widely published and teaches defence andstrategic studies at the University of Kent and the Free University ofBrussels. Daniel was educated at the University of Cambridge andholds a PhD from the Free University of Brussels.

Fitriani is a researcher at the Department of Politics and InternationalRelations at the Centre of Strategic and International Studies, Jakarta,Indonesia. She obtained her PhD in Security and Defence Studies from

xiv List of Contributors




Cranfield University, United Kingdom. Fitriani has held visiting andresearch positions at the Philosophy and Political Science Faculty,Technical University of Dortmund, Germany, and the S. RajaratnamSchool of International Studies, Nanyang Technological University,Singapore. Her research focus is on women in peace and security,with particular reference to women’s participation in internationalpeacekeeping operations.

Keith Hartley is a defence economist and Emeritus Professor ofEconomics at the University of York, where he previously served asDirector of the Centre for Defence Economics and of the Institute forResearch in the Social Sciences. His research interests include defenceprocurement policy, the economics of contracts, defence industrialpolicy and collaboration. He is the founding Editor of the journalDefence and Peace Economics. Keith has been a NATO ResearchFellow and QinetiQ Visiting Fellow, as well as a consultant to theUN, European Commission and European Defence Agency. He hasalso been a consultant to UK Government Departments, including theMinistry of Defence, and a Special Adviser to the House of CommonsDefence Committee.

Anke Hoeffler is a research officer at the Centre for the Study of AfricanEconomies at the University of Oxford. She holds a diploma inVolkswirschaftslehre from the University of Würzburg and an MSc ineconomics from Birkbeck College, University of London. She receivedher DPhil in economics from the University of Oxford in 1999. Anke’sresearch interests are wide-ranging and often interdisciplinary. Broadly,she is interested in political economy issues in low-income countries,with a specific interest in the economics of violence. Her most recentpublications include an article on the consequences of violence againstchildren for societal development (European Journal of DevelopmentResearch) and on the costs of violence (Politics, Philosophy andEconomics).

David Kirkpatrick is Emeritus Professor at University College London.From 1962 to 1995 he was employed at the UK Ministry of Defence(MoD) on aeronautical research, military operational analysis andproject cost forecasting, and was also responsible for investmentappraisal of the MoD’s air systems. During 1995–2004 he worked inthe Defence Engineering Group at University College London, which

List of Contributors xv




was then the MoD’s designated centre of excellence for research andpost-graduate education in defence acquisition. He is co-author of thebook Conquering Complexity – Lessons for Defence SystemsAcquisition.

StefanMarkowski is a former permanentmember of staff and presentlya Visiting Fellow at the School of Business, University of New SouthWales (Canberra campus), Australian Defence Force Academy,Canberra, Australia. He is also a Professor of Management at theUniversity of Information Technology and Management in Rzeszow,Poland and Visiting Research Professor at the Centre of MigrationStudies at the University of Warsaw, Poland. His research interestsfocus on the economics of defence, public sector procurement and,recently, international migration.

AlexanderMattelaer is theDirector of the EuropeanAffairs programme atEgmont – the Royal Institute for International Relations, AssistantProfessor at Vrije Universiteit Brussel and Visiting Professor at theCollege of Europe. His research interests include the politics of Europeanintegration, defence policy and NATO, and the ongoing redefinition ofstate sovereignty. He sits on the Scientific Committee of the Belgian RoyalHigher Institute for Defence, and has completed a Fulbright SchumanFellowship at Harvard University and at the National DefenseUniversity. He obtained his PhD in Political Science from VrijeUniversiteit Brussel and master’s degrees from the University of Bath andthe University of Leuven.

Ron Matthews is a professor of Defence Economics at CranfieldUniversity, Defence Academy of the United Kingdom. From 2007 to2014 he also held the Chair in Defence Economics at RSIS, NanyangTechnological University, Singapore. His research specialisation examinesthe impact of defence offset on industrial and technological development.He has published widely in this field, including a 2014 RUSI WhitehallReport based on an MoD-commissioned research programme thatevaluated the impact of offset on the UK defence industrial base. Ron ispresently undertaking applied research for the UK Defence SolutionsCentre exploring business frameworks beyond offset.

DiegoMuro is a lecturer in International Relations at theHandaCentrefor the Study of Terrorism and Political Violence at the University of StAndrews, and Senior Research Fellow at the Barcelona Centre for

xvi List of Contributors




International Affairs. His main research interests are terrorism,comparative politics and ethnic conflict. He is the author of Ethnicityand Violence, co-editor of Politics and Memory of DemocraticTransition, ETA’s Terrorist Campaign and When does terrorismend?. He has published articles in Ethnic and Racial Studies,Ethnicities, Mediterranean Politics, Nations and Nationalism, South

European Society and Politics, Studies in Conflict and Terrorism andWest European Politics.

Jean-Michel Oudot is a visiting lecturer in Defence Economics atSciences Po, Paris, France. He holds a PhD in Economics from ParisPanthéon-Sorbonne and works as an economist for the French Ministryof Armed Forces. After four years working in international cooperationat the French Defence Procurement Agency, he spent nine years in theFinancial Directorate, and now acts in the Joint Defence Staff.

Ron Smith is a professor of Applied Economics at Birkbeck University,London, and lectures on econometrics and statistics. He has been aVisiting Professor at London Business School and the University ofColorado. Ron is the author or editor of ten books, including MilitaryEconomics, which was shortlisted for the 2010 Duke of Westminster’sMedal forMilitary Literature, as well as more than 200 papersmainly inapplied econometrics, defence economics and political economy. He hasacted as a consultant to a range of bodies including Frontier Economicsand the UKNational Audit Office, advised on defence projects, and is anAssociate Fellow of the Royal United Services Institute. Ron wasawarded the 2011 Lewis Fry Richardson award for contributions tothe scientific study ofmilitarised conflict by the European Consortium ofPolitical Research.

Trevor Taylor is Professorial Fellow inDefenceManagement at the RoyalUnited Services Institute, Whitehall, London. He is also an EmeritusProfessor of Cranfield University at the Defence Academy, Shrivenham.For the past eight years he has taught and researched at the US NavalPostgraduate School. Trevor has been a two-term electedCouncilMemberof the former Defence Manufacturers Association, the co-author of twobooks on the UK defence industry, the author of several studies for the UKMoD and Chairman of the British International Studies Association. Hehas also had a research attachment at the Royal Institute of InternationalAffairs, Chatham House, London.

List of Contributors xvii




Nan Tian is a researcher in the Arms Transfer and MilitaryExpenditure Program, where he leads the Military ExpenditureProject, at the Stockholm International Peace Research Institute andSouthern Africa Labour and Development Research Unit, University ofCape Town. His research interests focus on the causes and impact ofmilitary expenditure and civil conflict, along with issues relating totransparency and accountability in military budgeting, spending andprocurement. He previously worked at the World Wide Fund forNature as an economist on climate change and food security and wasa lecturer at the University of Cape Town, South Africa.

Matt Uttley is Professor of Defence Studies at King’s College London.Before joining King’s in 2000, he held academic posts at the Centre forDefence Economics, University of York and the Department of Politics,Lancaster University. He has published widely on the historical andcontemporary dimensions of UK defence policy and weaponsacquisition. He is currently an Adjunct Professor at the BalticDefence College in Estonia, Visiting Professor at the NationalDefence School of the Serbian Military Academy in Belgrade andAdjunct Senior Fellow at the Center for Intelligence and NationalSecurity, University of Oklahoma.

BryanWattersOBE is a senior lecturer at Cranfield University’s Schoolof Defence and Security, where he lectures and researches onleadership, strategic management and leadership of change. Hegained a PhD in leadership studies from the University of Leeds. Hehas a wide range of military qualifications, including psc(a) and psc(j),and is an Associate Fellow of the Baltic Defence College, Estonia. Priorto joining Cranfield in 2009, Bryan had a successful career in the BritishArmy. His last appointments were Deputy Commanding General(Brigadier) on General Petraeus’s staff in Iraq and CommanderBritish Forces Kosovo.

Benedict Wilkinson is a senior research fellow and Interim DeputyDirector of the Policy Institute at King’s College London. Hecompleted his PhD under the supervision of Professor Sir LawrenceFreedman at King’s College London in 2013 before joining the PolicyInstitute, first as a Research Associate (2013), then advancing to thepost of Research Fellow (2014) and finally Senior Research Fellow in2015. From 2013 to 2015, Benedict also held a Lectureship in the

xviii List of Contributors




Defence Studies Department and taught at the Royal College ofDefence Studies. Between 2010 and 2011, he worked as Head ofSecurity and Counter-Terrorism at Royal United Services Institute,where he continues to hold an Associate Fellowship. He became anAssociate Fellow of the International Centre for the Study ofRadicalisation in 2013 and a Fellow of the Royal Society of Arts in2014.

Robert Wylie joined the academic staff of the University of New SouthWales (Canberra campus) in 2006. Prior to this appointment heenjoyed a varied career in the Australian Public Service, specialisingin the development and implementation of Australian defence policy.As an academic, Robert has taught public sector management andproject management at post-graduate level, mainly to AustralianDefence Force personnel preparing for senior appointments in theAustralian defence policy community. His academic research andpublications are focused on defence procurement, defence industrypolicy and military technological innovation.

List of Contributors xix




Acknowledgements

The concept of this book has gently germinated over the last threedecades. This is the period I have been involved in Defence andSecurity at Cranfield University. My Cranfield days have been spent,firstly, at theRoyalMilitary College of Science, and then at its successororganisation, the Defence Academy of the UK. Prior to thisappointment, I had served an extended research apprenticeshipundertaking fieldwork in economic, industrial and technologicaldevelopment, focused especially on what were then termed ‘ThirdWorld’ countries. The research was sponsored by developmentorganisations, such as the UK Foreign and Commonwealth Office’sOverseas Development Agency and the World Bank, allowing me tospend time at Development Institutes in Kenya, Sweden, Japan andIndia. Additionally, I was awarded two NATO Scholarships, affordingme the opportunity to pursue defence-related research in Europe and atthe Pentagon in Washington, DC. I recount these research assignmentsbecause of the deep impression they made on my understanding of thecrucial role that governments and supranational organisations play inpromoting defence and development capabilities. The message for mewas clear: it is not so much the ‘market’ but rather politico-economicinterventions that act as the motive force to create and sustain impulsesin national security, widely defined. My subsequent DefenceEconomics courses at Cranfield University and RSIS, NanyangTechnological University, Singapore (2007–14), were accordinglynuanced to reflect more the ‘visible’ hand of government than AdamSmith’s invisible hand of the market.

The destination of this academic journey is thus the present volumeonThe Political Economy ofDefence.However, it is not the product ofmy own endeavours, but the intensely rich and rewarding intellectualcontributions of peers, colleagues, industry practitioners, MoDofficials and, not least, graduate students – the majority of whomwere operationally seasoned tri-service military officers. I have been

xx




privileged to work with experts that read like a ‘Hall of Fame’ in thepolitical and economic defence literature. It is these authors whodeserve the praise if, as I hope, the book receives plaudits for offeringlearned insights into the political management of defence. In thepractical aspects of the book’s preparation and publication, I extendmy appreciation to the Cambridge University Press editors, Phil Goodand Toby Ginsberg, and the content manager, Grace Morris, for theirguidance and support. I also owe a deep debt of gratitude to mycolleague, Irfan Ansari, for his unstinting technical assistance in theformatting of innumerable manuscript drafts. Finally, a specialmention to my long-suffering wife, whose patience in dealing with anabsent husband provided me with the editorial space and stability ofmind to ensure timely project completion.

Acknowledgements xxi


The Political Economy of Defence - assets.cambridge.org · Cambridge University Press...

Documents

Transcript of The Political Economy of Defence - assets.cambridge.org · Cambridge University Press...