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.

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

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.

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

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

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):

- Allied Market Research. (n.d.). Small Arms Market Size, Share, Report, Demand, Trends - 2030.
[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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- Ministerio de Defensa Gobierno de España (2021). 2021-2022 Catalogue Spanish Defense Industry
Fourth Edition. [online] Boletín Oficial del Ministerio de Defensa. Paseo de la Castellana 109,
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[Accessed 1 Dec. 2022].
Eduard Cabelo Gou Economics Learning Unit Final essay assignment-Jordi Calvo Rufanges

- SIPRI (2022). World military expenditure passes $2 trillion for first time | SIPRI. [online]
www.sipri.org. Available at: https://www.sipri.org/media/press-release/2022/world-military-
expenditure-passes-2-trillion-first-time [Accessed 1 Dec. 2022].

- SIPRI (2019). SIPRI Arms Industry Database | SIPRI. [online] Sipri.org. Available at:
https://www.sipri.org/databases/armsindustry [Accessed 1 Dec. 2022].

- Bhatia, R. (2019). Guns, Lies, and Fear: Exposing the NRA’s Messaging Playbook. [online]
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