Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges

Status of the arms and defense industry, political representation and role in global economy:

The purpose of this paper is to briefly analyze the current situation of the market of weapons in the
world. To understand the current status of the arms industry from an economic approach, different
sources have been taken as indicators even though the difficult access to information available in this
field. To correctly develop the analysis, the paper is divided into an introduction part which goal is to
conclude that there really exists a market of military armament. Following this part, a short global
analysis of weapons regulatory policies accompanies commented data of the top 100 companies of the
industry and the weight that the market has in the global economy. Then, the political representation
of the industry in lobbies and its fundings is shortly mentioned, and finally, the paper is concluded with
a resolutory short ethical conclusion based on economic research.

To comprehend the size and role of the arms industry it must be first verified the existence of a market
of such product. Traditional ways of understanding markets say market system is one of systematic
interaction between supply and demand. Individuals involved in markets will find themselves constantly
negotiating over products and services in the basis of a changing price, regulation policies, reputations,
and disposed information. “A market is a group of potential purchasers of a given product and brand”
(Jack Z. Sissors, 1966). A product market is one of physical attributes (size, geographical locations,
demographical descriptions, social-psychological characteristics of purchasers, reasons of purchase,
influences, purchasing process) that considers behavioral characteristics of purchasers (market
segmentation (targeted prospects), “heavy or light user” (willingness to buy expressed in quantity
purchased), frequency of purchase, loyalty to the supplier, readiness to buy)) to maximize benefits and
grow.

Although the arms industry is strong in political importance, compared to other industries, the defense
one is a relatively small industrial sector with generally a low degree of concentration. In fact, as
accounted in the SIPRI Top 100 (2002-2020) Arm Industry Database, not even the three top producers
in the arms industry (Boeing, BAE Systems, Lookheed Martin Corporation) could make it to the Fortune
Global 500 list. Even after the restructuration that has undergone, the arms industry remains an
unconcentrated one, “probably because of the domestic procurement preferences exerted by national
governments” (Economics of Peace & Security Journal, 2016). Arms firms are usually multinational
monopolies, and the industry is one of high barriers of entry (sometimes impossible because of
government links with industries). The arms industry perfectly executes the traditional ways of
understanding markets. In the supply side the industry faces dilemmas with internationalization or
domestic production, probably driven by state preferences. In the other side, the demand fluctuates,
booming whenever armed conflicts break (Global War on Terror by the US) and peaking down in special
cases such as COVID-19 lockdowns.
Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges

See the appreciation of Northrop Grumman Corporation in February 2022 when Ukraine conflicts starts.
(Investing.com, 2022).

According to the previously stated characteristics that define a market, it can be concluded that there
truly exists a market of arms and military armament as supply and demand interaction is present.

The arms industry is very limited because of regulatory policies, in comparison to other standard
markets and industries. Depending on the country and its regulations, arms producers might find
obstacles on finding purchasers. Such regulations vary not only depending on the country but also the
product (handguns may have different possession policies than long guns).

As gathered in the SIPRI Arms Industry Database, the top 100 companies of the arms industry produced
around 201b ($) during 2002, and 531b ($) in the 2020 report. The growth of the global market
represented in the top 100 companies would indicate an increase of 330b ($) (164%). Even though
usually in standard markets the top 100 of a respective market can’t be used as a representation of the
status of the market, in an industry of national monopolies, such data really gives us a real sense of the
situation. The top 100 companies list is composed of a leading 42% United States enterprises, followed
by a mix of western European countries, China, Japan, South Korea and India, besides punctual
exceptions like some middle east monopolies.

Only the top 5 companies of the industry report to make around 130.380 million of dollars in sales. The
success of the arms industry market in United States companies can be easily explained by
understanding that U.S regulatory policies on bearing weapons are much less strict than other countries,
making the interaction between suppliers and purchasers more dynamic and easier. Also, because of
not strict regulation policies, the arms and defense industry in the US enjoys a more real environment
of competition rather than a monopolistic one.
Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges

Consolidation of arms industry companies in the US (1980-2015)

Moreover, the fact that regulatory policies are not that severe opens the market to citizens, not only
government or allowed institutions, as it happens in almost every other country in the world.

(SIPRI, 2022)

The total global expenditure has increased around 0,7% (2113b $) during 2021. Only the five largest
spenders (U.S, China, Russia, India, and UK) represent a 62% of the total expenditure.

Regarding political representation, the major example of an agency attempting to influence political
representatives or members of regulatory agencies is found in the US, under the name of the National
Rifle Association (1871). The group advocates for gun rights under the Second Amendment for the sake
of personal security purposes. During the last years the NRA not only has become one of the most
effective political lobbies in the country but has held the focus of a controversial topic of discussion.
While some may argue that “the NRA deploys a disinformation campaign reliant on fearmongering and
the systematic discreditation of opposition voices” (Rukmani Bhatia, 2019), others say that “when you
ignore the right of good people to own firearms, to protect their freedom, you become the enablers of
Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges

future tyrants whose regimes will destroy millions and millions of defenseless lives” (Wayne LaPierre,
2013)

(Open Secrets on NRA, 2022)

See later funding to republican members of the congress and decrease of democrats. See also
democrats funding peaking in 1998 on Iraq and Afghanistan intervention under Bill Clinton’s mandate
(democrats might find acceptable to support arms industry and wars under the excuse of supporting
other countries on “its right for freedom” (Joe Biden, 2022).

This study argued the existence of a proliferating arms and defense industry, generally monopolistic,
less concentrated, and limited to regulation policies. The weight of the industry is shallow but increasing
in last years. The industry, specially in the United States, enjoys political representation and funding
(some republican members of the Congress and NRA). And lasts to be discussed an ethical approach
on the alleged neoliberalist policies of the United States on putting capital’s interest over people.

Bibliography list (Harvard Style):

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[online] Available at: https://www.alliedmarketresearch.com/small-arms-market.

- Z. Sissors, J. (1966). What is a market? Journal of Marketing, [online] 30(3), pp.17–21. Available at:
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Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges

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- Vision of Humanity (2018). Exactly how global is the global arms production? [online] Vision of
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- SIPRI (2022). World military expenditure passes $2 trillion for first time | SIPRI. [online] www.si-
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- SIPRI (2019). SIPRI Arms Industry Database | SIPRI. [online] Sipri.org. Available at: https://www.si-
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- Bhatia, R. (2019). Guns, Lies, and Fear: Exposing the NRA’s Messaging Playbook. [online] Ameri-
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Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges