War, Peace, and Security (Contributions to Conflict Management, Peace Economics and Development)

Contributions to

Conflict Management, Peace Economics and Development volume 6 SERIES EDITOR

MANAS CHATTERJI BOOKS IN THE SERIES

Eurasia: A New Peace Agenda, edited by M. D. Intriligator Cultural Differences between the Military and Parent Society in Democratic Countries, edited by G. Caforio Managing Conflict in Economic Convergence of Regions in Greater Europe, edited by F. Carluer Military Missions and Their Implications Reconsidered: The Aftermath of September 11th, edited by G. Caforio and G. Kuemmel Conflict and Peace in South Asia, edited by M. Chatterji and B. M. Jain War, Peace and Security, edited by Jacques Fontanel and Manas Chatterji Armed Forces and Conflict Resolution, edited by G. Caforio, G. Kuemmel and B. Purkayastha (Forthcoming) European Defense Policy by M. Foucault (Forthcoming) Crisis Management and Regional Cooperation by I. J. Azis (Forthcoming) Peace Science: Theory, Methods and Cases by P. Gangopadhyay and M. Chatterji (Forthcoming) Arms Embargo Implementation—Comparing Experiences for Improving Effectiveness by Michael Brzoska and George Lopez (Forthcoming) A Society in Conflict-The Poverty-Growth Big Paradox and Its Solution in a Brazilian State by Raphael Bar-El (Forthcoming)

Contributions to Conflict Management, Peace Economics and Development volume 6

WAR, PEACE AND SECURITY EDITED BY

JACQUES FONTANEL University Grenoble, Grenoble, France

MANAS CHATTERJI School of Management, Binghamton University, New York

United Kingdom – North America – Japan India – Malaysia – China

Emerald Group Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2008 Copyright © 2008 Emerald Group Publishing Limited Reprints and permission service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. No responsibility is accepted for the accuracy of information contained in the text, illustrations or advertisements. The opinions expressed in these chapters are not necessarily those of the Editor or the publisher. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-0-4445-3244-2 ISSN: 1572-8323 (Series)

Awarded in recognition of Emerald’s production department’s adherence to quality systems and processes when preparing scholarly journals for print

To all people interested in Peace, Security and Justice

LIST OF CONTRIBUTORS Renaud Bellais

CREPPEM, University of Grenoble, France; Institutional Relations, Astrium, Paris, France

Liliane Bensahel

CREPPEM, University of Grenoble, France

Jurgen Brauer

James M. Hull College of Business, Augusta State University, Georgia, USA

Manas Chatterji

School of Management, Binghamton University, New York, USA; George Mason University; Poznan University of Economics, Poznan, Poland; Peking University, Beijing, China

Paul-Marie Clouet

CREPPEM, University of Grenoble, France; De´le´gation Ge´ne´rale de l’Armement, Paris, France

Steven Coissard

CREPPEM, University of Grenoble, France; IDRAC, Lyon, France

Fanny Coulomb

CREPPEM, University of Grenoble, France

Claske Dijkema

CREPPEM and Modus Operando, University of Grenoble, France

Paul Dunne

Bristol Business School, University of the West of England, Bristol, UK

Yann E´chinard

CREPPEM, University of Grenoble, France

Jacques Fontanel

CREPPEM, University of Grenoble, France

Martial Foucault

Political Science Department, University of Montreal, Montreal, Que., Canada

Albane Geslin

CESICE, University of Grenoble, France

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Keith Hartley

Centre for Defence Economics, University of York, York, England

Jean-Paul He´bert

Ecoles des Hautes Etudes en Sciences Sociales, Paris, France

Peter D. Hoff

Department of Statistics, University of Washington, Seattle, Washington, USA

Michael D. Intriligator

Political Science and Public Policy, University of California, Los Angeles, California, USA

Alexander Karlik

University of Economics and Finance of Saint-Petersboug, Saint-Petersboug, Russia

Urs Luterbacher

Graduate Institute of International and Development Studies, Geneva, Switzerland

Igor Maximtsev

University of Economic and Finance of Saint-Petersbourg, Saint-Petersbourg, Paris

Ali A. Mazrui

Institute of Global Cultural Studies, Binghamton University, New York, USA; University of Jos, Jos, Nigeria; Cornell University, Ithaca, New York, USA; Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

Carla Norrlo¨f

Department of Political Science, University of Toronto, Toronto, Canada

Ivan Samson

CREPPEM, University of Grenoble, France

Carlos Seiglie

Rutgers University, Newark, USA

Nade`ge Sheehan

CREPPEM, University of Grenoble, France

Ron Smith

Birkbeck College, University of London, London, UK

Michael D. Ward

Department of Political Science, University of Washington, Seattle, Washington, USA

FOREWORD There has been drastic change in the world’s political economy during the last two decades. The era of super power rivalry is over. However, examples of ethnic conflict and human rights violations are abound. As a result of globalization, the emergence of economic super powers like China and India threaten future military confrontation with the U.S. and Western World. The military expenditure of the U.S. has again increased, and it is now more than 60 percent of the world total. There has been no peace dividend, and military spending by major countries including India and China is increasing. The lingering conflict in the former Soviet Union is still alive. Potential nuclear confrontation has emerged due to the possibility of Iran becoming a nuclear power. The cycle of nuclear confrontation with North Korea is not over. A possible nuclear deal with the U.S. and India is seen by many as a breech of non-proliferation agreement. The eternal conflict in the Middle East between Israel and Palestine, and recent conflict in Iraq, will keep it burning for years to come. Many people think that Middle East conflict is nothing but conflict over energy in another form. In the 21st century, the prospect of conflict over water is looming. Another subject that will lead to confrontation between nations is an environmental conflict starting with global warming, water conflict and environmental health. All these factors will threaten human security The greatest and most imminent threat of all is the threat of terrorism which started on 9/11. This threatens economic, social, and political security of all people in all countries. Although co-operative efforts with a strong world government can handle other threats, security from terrorism cannot be assured. I do not intend to emphasize these negative and bleak prospects. Due to technological advancement, the living conditions of many people (but not the majority) have greatly improved. But we need to devise policies that deal with these serious problems in order to secure not only military security (including security against terrorist threats), but also economic, social and

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political security. The papers in the volume are geared in that direction. We need scientific analysis and objective studies. This book provides such an attempt. The views express by the contributors in these papers are of their own and not of the editors. Manas Chatterji Editor

PREFACE To many scholars, this preface may seem to be highly critical of their work in this and other volumes. It is also critical my own books and the many articles I have written in the past on peace economics and peace science. For the moment, I refrain from being critical of the work of peace science scholars since peace science is a new science, less than half a century old. What is occurring now in our global system is a process of environmental degradation. It is clear-cut that policies to control the intensity of that degradation have not yet been set in operation. Despite the advances achieved by the Kyoto Protocol and subsequently by the Bali Roadmap, major differences regarding what these policies should be are already developing. We face one set of policies, elimination of greenhouse gases, beginning to be proposed by the United States, and its friends in the global community. Another set of policies with emphasis on significant elimination of coal and use of other energy resources is likely to be proposed by China or a China–Indian conglomerate or other Asian grouping. Such major differences among these two groups of major powers can easily escalate to catastrophic proportions, perhaps likely to lead to another world war, World War III. The urgency for achieving effective mediation processes to rule out these kinds of actions is imperative. As I now examine the set of papers in this book, some incorporating excellent economic analysis, I see no advance toward mediation analyses and science. I hope that such advances will occur. First, I want to stress that in many conflict situations, adequate mediation analyses will most likely require collaborative work between several different scientific fields, including the social sciences such as political science, sociology, psychology, regional science, and economic geography, as well as physics, entomology, agro-biology, and other hard-science fields. Any single field, such as economic analysis, may often prove to be inadequate by itself. I discuss below elements of mediation science that demonstrate this. Let me begin with the mediation processes that have led to the formation of the European Union. I start by calling attention to the work of Jean xix

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Monnet. He was in fact a regional scientist but lived and functioned before the emergence and recognition of that field of study. He had been the Secretary of the League of Nations that was set up after World War I. But while this League was on the books, it never turned out to be an effective existing organization. The USA decided not to join. After the collapse of the French economy in 1940, Jean Monnet was asked several years later by General de Gaul to tackle the problem of the post-World War II modernization of France. As Monnet wrote in his Memoirs, ‘‘It was obvious to everyone that France had emerged from the war severely weakened. Less well known, or less willingly acknowledged, was the technological weakness from which France was already suffering when war broke out. This, no less than military or moral shortcomings, explained her sudden collapse in 1940’’ (p. 232). It was with regard to a basic industry, namely iron and steel, that was most disturbing for France. That industry was important for production of military weapons and equipment and for urgent economic development and growth. Germany had the finest coking coal deposit in the Saar, and had access to high quality Swedish iron ore. In contrast, France was dependent on relatively low quality Lorraine ore and the use of coal much lower in quality than the Saar’s (if Saar coal was not available owing to trade restrictions). In short, she was most certainly facing rapid decline relative to her centuries-old competitor, Germany. It was in 1951 that Monnet, via the Schuman Plan, was able to push through the establishment of the European Coal and Steel Community, a first major step in the attainment of a realistic treatment of Europe as a single region. The Community was set up to establish pricing and other policies to preserve the iron and steel industry of France and that of the surrounding small nations. Later, the success of the community led in 1957 to the establishment of the European Atomic Energy Community (Euratom) and the European Economic Community. The establishment of Euratom was particularly important for it brought Britain, hitherto an independent major power, to join France and Germany. That resulted in an important extension of Europe as a single region, administratively. Euratom was formed in order to allow the three major nations, France, Germany, and Britain, to pool their nuclear research budgets so that the level and quality of their joint nuclear research could better match that of the United States, which was devoting extensive funds to nuclear research. In effect, the Euratom development represented another small mediation step, taken by physical scientists and psychologically affected actors, to achieve an important objective. Subsequently, other mediation efforts occurred, most

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recently the establishment of a common currency, the euro, which represented a very large agreement of major financial and banking institutions and major political and economic leaders. In effect, this step has cemented Europe together as a global region (with a number of sizeable subregions) – a region which is still enlarging via new mediation efforts. I could set down other small and perhaps larger bits of mediation procedures, which I have pointed to in the past. For example, these procedures might embrace the Saaty relative priorities (mathematical) approach, or the prospect theory of psychology, or the multi-factor gravity models, or the industrial complex approach of regional science. But what I have indicated in this preface is sufficient to question the relevance of much of the research, however fine, involving military and defense actions and concerns reported upon in this book. While this preface may seem to be very critical of current research, it is intended to spur us on – to forward the development of mediation science. Walter Isard Cornell University March, 2008

INTRODUCTION: THE CONTROVERSIAL ECONOMIC QUESTION OF PEACE AND WAR Jacques Fontanel and Manas Chatterji The economists are not always interested in the scientific research of wars and peace, as if it was phenomena that were not clearly relevant to economic analysis. Their questions are mainly concerned with the fundamental questions they have always tried to answer, such as the dilemma between guns and butter, the bang for a buck, and the optimal level of spending. Normally, they use the current hypothesis of a normal situation of peace. However, the main economists had an analysis of war and peace (I). Today, new analyses are developed, but the same kind of doctrines seems to be maintained in their oppositions, by other means and other research methods (II). This book has the ambition to propose new economic analyses about defense and security in order to summarize the ‘‘inventory’’ of modern economic knowledge.

THE MAIN ECONOMIC THOUGHTS ABOUT PEACE AND WARS There are two main doctrines about the relation between war and national economy. The first considered that economy based on the market is a cause of war. The second one established that market and economic knowledge are essential for the realization of peace. War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 1–12 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06001-3

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Economy as a Factor and as an Instrument of War For some economists, economy is a factor, an objective, and an instrument of war. For mercantilists, the power of the Prince is the basic objective of all national economy. Therefore, a cosmopolitan economy has no sense, because the state’s power is the main issue and not the consumer’s welfare. War encourages national feeling and if victorious, it enriches the state. These ideas were to be taken up again partially by List (1840), an advocate of the national system of the political economy, who suggests that when the ‘‘natural boundaries’’ of states are not still established, liberal ‘‘laissez-faire’’ leads to the domination of the strongest and those nations must protect themselves against foreign domination. For the German historic school, economic power often leads to political power. Nations have always been organized vertically in a hierarchical and pyramidal division of labor. Economics is not a matter of good or wrong, it is a matter of strong or weak, there is no code of honor and protectionism is certainly not a sin. For Marx and Engels, peace and market have no intrinsic moral virtue. War and conflicts relate to the superstructure and are conditioned by antagonistic social relations. Capitalism is a factor of war between social classes. Rosa Luxembourg considered military investment to be very useful for the development of capitalist economies, in the first instance as a catalyst of primitive accumulation; then as an instrument of colonial domination; and lastly as a hegemonic factor of the struggle between the capitalist countries to divide up the world. Lenin also thought that imperialism, the highest stage of capitalism, necessarily stigmatized by total wars and the capitalist exploitation of the world, ruled out any noneconomic disarmament process without the advent of socialism. In the same way, Baran and Sweezy argued that military expenditure serves to absorb the economic surplus that monopoly capitalism creates; on that view the arms race matches the logic of capitalism, which seeks to maintain a constant ratio between production and solvent demand through unproductive expenditure. Other analyses went to the same direction, notably those of J. K. Galbraith, who agreed with the idea that the American economy needs armament support in order to maintain its hegemony. Today, the economic importance of the military sector in the capitalist economies seems indisputable; it would be compared to the role played by the military research and development, in the development of the ultramodern technologies. Jacques Attali regards war as an extreme manifestation of industrial competition. Conflict provides a stimulus to production and transforms the

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patterns of consumption and social habits. Thinking along the same lines, Marc Guillaume distinguished the code of capital and the code of power; the former demonstrates the social significance of commodities as the main basis of their value; the inequalities that these occasions lead to a continuous struggle against scarcity and have the inevitable result of maintaining class demarcations in a highly oppressive capitalist system. The code of power, on the other hand, is built up from the bureaucratic hierarchy and the monopoly of knowledge, and is the will for power. If civil war is developed in the code of capital, international war is written into the code of power. Military force is an important instrument in the redistribution of consumer rights between countries.

Economic Knowledge as a Factor of Peace For the classical British economists, except Malthus, war and preparation for war are mainly political phenomena determined by the monopoly spirit. They condemn the mercantilism thought dominated by the hegemonic drive of the ruler. But for Smith, the art of war is the noblest of arts and he approves tariffs that would keep defense-related industries strong. Defense is of much more importance than opulence. For Ricardo, armed forces must be established to ensure the states’ sovereignty, threatened by less developed economies. Then, the disarmament process of rich countries is dangerous, having regard to the covetousness of their neighbors. For the classical British economists, generalized development thanks to industrialization and the diffusion of the market system precedes disarmament. These ideas were to be picked up by Jean-Baptiste Say. Generally speaking, the neoclassic thought is not mainly concerned by the problems of armament and disarmament. If for Walras, the field of study of the economics throws the national defense back, the universal search for peace underlies its entire scientific project. The economic theory has to lead to the refusal of the wars, what constitutes an objective for the generations to come, thanks to the free trade. For Bhagwati, the globalization process, based on free trade and ‘‘laissez-faire,’’ means the disappearing of the economic role of the states. The national defense is not presumed to be developed on the basis of economic interests. The international trade is good for all countries with the exercise of comparative advantages. There is a horizontal relationship among countries and not a hierarchical one. There is no national interest beyond the welfare of the individual consumers. Capitalism produces peace.

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THE NEW ECONOMIC ANALYSES OR POLICIES OF WAR INSIDE THE ECONOMISTS FOR PEACE AND SECURITY ASSOCIATION Three main analyses of war were developed during this last half century: the arms race models, the analysis of economic arms, and the development of the exchange of ideas about war and peace by Economists for Peace and Security.

The Failure of Arms Race Models The arms race can define itself as a dynamic process of interaction and competitive increase of the quantity and\or the quality of armaments by two or several states (or coalition of states). The model of Richardson (1960), established by three equations representing respectively the political factor, the strategic factor, and the economic factor constitutes the basic model. It introduced the military expenditures of the enemy or the enemies, the economic burden (the effect of fatigability), and the grievances. Brito and Intriligator developed this model, introducing more complexity. Several critics of these approaches carried on insufficient analyses of the internal determiners of military expenditures. First, the econometric tests did not generally allow to validate the hypothesis of a determination of the level of the budgets of defense by the mutual stimulation of the rival or the enemy states. In contrary, Seymour Melman (1974) and J. K. Galbraith stressed on the national auto stimulation. Second, these models were not able to show evidence of the crisis of Soviet Union, because the definition of the threshold of the fatigability is not easy to determine. Finally, they emphasize economic considerations, forgetting to specify the structural characteristics of the studied states.

The Concept of Economic War The concept of economic wars is developed, from Hirschman and Schelling to Baldwin and Gilpin. Several formalized models have also analyzed the link between the conflicts and the intensity of trade relations between nations (S. W. Polachek, J. E. Roemer). The neomercantilist analysis is not based on precise theoretical foundations. The national security may not only be threatened by an arms race, international military and economic domination, but also by indirect strategies of dissuasion and economic

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forms of retaliation such as embargoes and boycotts. With a declaration of intention from states, economic factors become weapons. The use of the economic weapon may generate various strategies.  Impoverishment resulting from the strain of preparing for war is probably a basic reason for the collapse of the Soviet economy. The development of military expenditure becomes an economic burden for the poorless country. Under these conditions, a state seeks supremacy by indirect means, not so as to gain short-term military supremacy, but so as to weaken the enemy to the point of its economic destabilization.  For the breaking off strategy, the aim is to create economic problems in the rival country so as to increase its political and social difficulties. Flows of trade and finance are broken off in the attempt to destabilize a country unilaterally exposed to such a decision. An embargo is an instrument of reprisal or deterrence capable of changing the behavior of the potential enemy, but it is a weapon that is dangerous to the user because prolonged interruption of trade flows may lead to a permanent loss of markets.  The aim of the containment strategy is to develop ties of economic interdependence capable of ensuring peace. The Ostpolitik considered that commercial ties had a moderating role on ideologies.  The aim of the strategy of political violence is to take economic power when it is hostile and progressively to weaken the dominant social groupings. The political forces of the machinery of state and the trade unions must be brought under control to that end.  The strategy of domination leads the dominant countries to influence the military and strategic decisions of the countries that they dominate. This permits both to create dependence and then to have a political influence and to improve their terms of trade and their global strategic situation. In that case, the economy is no longer the quest for material well-being, but one of the means of ensuring social domination. The economic war is difficult to manage. There are always only losers and no winners. The Heterogeneity of the Economic Analysis in the Association Economists for Peace and Security Inside the same international association, it is possible to have more than an economic analysis of peace and wars. (1) At first, there is a basic hypothesis, in conformity with the liberal values; peace is the normal situation of the market economy. Then, the

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improvement of the knowledge of the economics favors simultaneously the economic development and the disarmament. For the upholders of the theory of the globalization (as Jeffrey Sachs or Robert Solow), the increasing economic interdependences tend to reduce the intervention of authorities in the economy. In this logic, the political area should be reduced gradually in front of the economic imperatives. Economic knowledge in favor of the market is the best friend of peace. Finally, the international economy underwent irreversible national structural alterations, which are in favor of peace conditions. (2) The Marxist thought transposes the analysis of the class struggle into the international level, making this situation, the explanation of the international conflicts whatever is their nature. The arms race is a factor of national cohesion in order to hide the inherent inequalities produced by the market economies. For Claude Serfati, it is also an important factor of the hegemony of the most developed countries, in particular in favor of the United States. For heterodox American thought, war or threat of war are useful for the development of the capitalist system (John Kenneth Galbraith). (3) For Reich, according to the policy of Bill Clinton, a country must be driven as a company, in its relations of concurrence and competition. The inevitable destruction of the coherence of the national economies in favor of globalization produces the risks to increase the world insecurity and the growth of impoverishment. For Ann Markusen, by an adapted industrial policy, the United States intended to be the only referee of an economy henceforth global, within the framework of an international ‘‘controlled’’ peace. In this perspective, states try to promote their appropriate interests on the world scene, but the example of the American society based on democracy and freedom, constitutes an example and a factor of international peace. (4) War is a consequence of the domination of the rich. A lot of economists, notably those specialized on the developing countries (as Amartya Sen) or on former socialist economies (as Stanislav Menschikov), dispute this last position. For them, globalization may be a factor of conflict. It is often (but not only) the economic expression of the domination of the rich countries to the detriment of the poorest and the outcasts. Besides, the sanctions intended to provoke important economic damages for a country, so that it changes its national politics (such as apartheid, violation of the rights of minorities, tyrannies, etc.), constitute indisputable power instruments. The ideology of the globalization by the market is the revealing of the dominant thought, the objective of

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which is the preservation, without pressure, of the Western hegemony. In this case, economic thought is only an argument to preserve the acquired advantages. (5) The conquest of markets substitutes itself, at least partially, for the territorial invasion. It is about a permanent war, engaged by nations and their companies, with the aim of a more favorable division of the world production and richness in favor of the national interests. The constant search for ‘‘monopolies’’ is for destructive weapons. In this system, the competition is not only military but also mainly economic (Jacques Fontanel). It is then impossible to separate the objectives of economic and military security. (6) The flourish of the institutionalist and historic analyses established the fact that there are not one but several types of capitalisms, more or less well adapted to the economic war. For Jean-Paul He´bert, today the links between the economic and military branches play an essential role for the national economic power, but it is the countries that perceive the stakes in the ‘‘economic war’’ which are the best placed in the international economic competition. The analyses on the various forms of capitalism remain fruitful to explain the evolution of the international competition and the reorganization of the international economic relations, according to more or less conflicting modes (Douglas North). The question that arises is to know if it is necessary to develop international public goods (Jurgen Brauer) notably that of the world security by the progressive reduction of military expenditures (Lloyd Dumas). For Roland de Penanros, the disarmament drives to an improvement of the conditions of life, on the condition of making a success of the process of the conversion of military plants. Considering the importance of the differences between the members of the Association, EPS joins however a will for an exchange of economy of conflicts and domination, in favor of a peaceful and welfare economy. It also proposes a general scientific debate in order to develop at the same time the idea of the inescapability of the war and the cumulative process of arms race leading inexorably to the armed conflicts. At first, a world war would have dreadful consequences on the humanity. In these conditions, it is certainly necessary to look for the theoretical causes of the conflicts. Second, the arms race constitutes an act against economic values, when it does not supply an improvement of the need of security. Finally, the search for peace can also be improved by the refusal of the dominations, excessive disparities, and the world poverty. These situations are mainly of economic nature.

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SUMMARY OF THE CONTENT OF THE BOOK For Paul Dunne and Fanny Coulomb, the economics of peace, war, and international security is a huge wide-ranging topic that is difficult to summarize. Peace, war, and international security are scientific areas, in which economists are often absent. The supposed imperialism of economics of the social science is reversed. After outlining some general perspectives on international security, the authors propose a schematic presentation of the main theoretical approaches. Then, they develop neoclassical theories, Keynesian and institutional, Marxist, and monopoly capital of the economics of security, introducing an economic debate on the economic causes of war and peace. For Ron Smith and Jacques Fontanel, security has a large variety of meanings and situations. If during the Cold War the major problem of the international security was the threat of a nuclear war, now the main questions are of global warming, famines, and terrorism. Globalization is not new. Nations remain very important. Then, analysts must take account of the internal determinants of military expenditures. Moreover industrial and political interests, interservice rivalry, and a variety of bureaucratic forces are often a threat for peace. There are international institutions, but their effectiveness depends on the willingness of the nation states to support their activities. ‘‘Today, the military actions are privileged, neither but nor for predation objectives. With the economic international dependence, the superpowers understand that without the threat of the use of their weapons, they are dependent of all states that are in situation of force for a special strategic production or resources.’’ For Michael Intriligator and Fanny Coulomb, the complexity of the problem of global security is growing. The global security is the absence of threats to the vital interests of the planet. Then, the idea of security must extend well beyond its traditional military dimension. Now is an opportune time to build global consensus on these issues. ‘‘Human security concerns freedom from pervasive threats rights, safety or lives of human beings, involving both fights against violent threats, such as wars, violations of human rights or terrorism and violent crime’’ and safety from nonviolent threats, such as environmental degradation, drugs, infectious diseases, and natural disasters. The authors propose two main actions in order to secure the world system: the restructuring of the UN system, with new international roles attached to international agencies, NGOs, or multinational corporations and an investment on 50 Manhattan Projects with the resort to science in dealing with global threats.

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For Fanny Coulomb and Jacques Fontanel, as the military and strategic needs are different from those of the past military needs for international security, the new armament demand are also realized on the basis of some ‘‘disarmament process’’ for obsolescent armament productions. The reorganization of industries of armament was initially presented as a factor of ‘‘creative destruction.’’ From a cultural point of view, the military sector is expressed mainly in the field of the high technology, but the ‘‘priority defence’’ that it exerts is likely to delay or modify technological progress. It privileges some specific technologies, which influence the civil sector. It is possible, in spite of the rigidities and the ‘‘practice effects,’’ to apply the military research and development to its civil counterpart. States always used the military sector to set up their industrial policy. Within the framework of the globalization, the United States made a success of the conversion of their military effort, while remaining as the great world economic and military power. For the United States, the opening of the economic borders is a factor of world peace. The paradigm of ‘‘laissez-faire’’ reminds dominant and as underlines in the liberal thought, it is a factor of peace and disarmament. This hegemony is likely, in the long term, to pose problem. For Keith Hartley, Renaud Bellais, and Jean-Paul He´bert the European defense industry has been considerably transformed since the 1980s: privatization of state-owned firms, national consolidation, and Europeanization of the industrial base. This restructuring process not only reflects political changes but it also and mainly results from major economic trends in the production of defense systems: the rising cost of R&D, scale and learning effects, and imperfections of supply and demand. Beyond the adaptations already engaged by both states and firms, there is a growing contradiction between the challenges of restructuring the European defense industry and the economic trends, from which firms (and nation states) cannot escape. Current stalemates result mainly from the fragmentation of the European defense equipment market. It is necessary to go beyond the current limits of both market size and the industrial base to overcome these constraints. If cooperative programs provide gains from scale and learning economies, they have many limits. It is only by creating a single defense market that European states can expect to keep the production of defense systems affordable. Moreover a convergence on the demand side constitutes the very condition for the creation of a competitive European industry. Beyond capitalistic consolidation, firms must be able to integrate and restructure their capabilities at the right level, the European one. By its achievements as well as its limits, the evolution of the European defense industry underlines the specific features of this industry. It can help us

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understand both the transformations of defense industry worldwide and the possible transformations that could take place in Europe, especially in order to preserve a local defense-industrial base. For Alexander Karlik, Igor Maximtsev, Jean-Paul He´bert et Louis-Marie Clouet, the national defense industry is closely connected with the potential military threat. They analyze three main characteristics: the reaction to external threats, the commercial pragmatism of the Russian arms exports policy, and the main evolutions of the Russian aeronautic industry. After a definition of Russian Defense-Industrial establishment and its evolution, they explain the increase of Russian military expenditures. The commercial arms export policy is pragmatic, selling to ‘‘anti-American states,’’ in a successful combination of debt reduction, energy, and arms deals. Russia has to cope with other new competitors for technology low-intensive products. Russian authorities regularly criticize East-European countries for producing Soviet-designed armaments without patent. Finally, there are a radical concentration, a restoration process on the external markets, and a development of links with Western countries of the Russian aviation industry. Jacques Fontanel and Ivan Samson consider the explanatory factors of US military expenditures. What are the main explaining factors of the constant increase in the American military expenditures? What is the share of internal determinants in the process of resource allocation to the military budget? They point out the arms race mechanism, the emergence of new threats, the existence of a national armament industry, the importance of the national military R&D, and the growth of the state budget. For Michael Ward and Peter D. Hoff, many empirical trade models assume that the flows of goods among countries is independent that goods and services flowing from France to China are independent of goods and services flowing from France to Japan, for example. Despite the obvious mistake in this assumption, gravity models of international commerce tend to assume that the world is inhabited by independent economic actors. This analysis provides a new perspective to describe and detail the complex patterns of actual geoeconomics interdependence in the context of the well-known gravity model on international commerce. It also explicates geographical and geopolitical factors that influence these interdependencies. Results from contemporary data show strong out of sample forecasting ability. For Mike Intriligator and Steven Coissard, the new era of terrorism came within the scope of geopolitical and economical issues since the collapse of the USSR. Economic factors could not explain this mutation; since 1990s the motives of terrorists refer to religion and fundamentalism. Terrorism,

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structured around political claims, is gone. Now, attacks could hit anyone, anywhere, anytime, without explicit demands. With such new form, traditional concepts of war or terrorism were smashed to smithereens. The aim of the paper is to analyze terrorism as an economic phenomenon, in order to understand and control it. Such an economic approach is complementary to other approaches that treat terrorism in terms of law and order enforcement, psychology, international relations, and military studies. The paper will examine terrorism toward two main actors, terrorists and antiterrorists, how they are using media, collaboration, intelligence, or innovation. Nade`ge Sheehan discusses the characteristics of peacekeeping operations. Member states are mainly motivated to contribute according to their national interests, because UN missions generate joint products and contributor-specific benefits. However, these operations are responsible for the UN financial crisis. As UN peacekeeping budgets grow up, the members of United Nations Organization show their reluctance to pay to the contributors of personnel and equipments. Then, they affect future missions, especially as deployments of forces depend on voluntary contributions by governments. The author analyzes some potential deployment options for producing peacekeeping. For Liliane Bensahel, Steven Coissard, and Claske Dijkema as a result of the first world conferences on the status of women held in Mexico in 1975 to Nairobi in 1985 (The UN decade for women), women issues were taken into account or mainstreamed in all programs. Nevertheless, there are two key texts in the gender analysis. The first one was produced at the 1995 Beijing Conference, the second one was published by the United Nations Security Council Resolution 1325 in 2000. This paper presents the slow development of gender approach in institutional responses to conflict. Seven years after the UN resolution 1325 and the Beijing Conference þ5, the authors review advances in terms of women representation, justice, and recognition of women civic and citizen rights. For Jacques Fontanel and Albane Geslin, since 1990s, there is a new system of security, with three fundamental changes, partially managed by the United Nations system. First, with the process of the globalization, the protection of the ecosystems is highlighted. Second, human rights and protection of minorities suppose an agreement of universal values in the world order, with the development of the process of democratization. Third, with the creation of international criminal tribunals and court, the political leaders became responsible individually of the crimes of their regimes. In this context, the political economy of the humanitarian supposes two dimensions. First, it makes reference to the ‘‘voluntary’’ role of the political

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system for the satisfaction of the human needs. It supposes a collective and peaceful action, engaged by states, international organizations, or nongovernmental organizations to reduce the poverty, improve the conditions of life, and insure the dignity and the security of all people. Second, the political economy refers to the humanitarian intervention, as an action of force organized at the international level by UN, regional organizations, or states to fight against systematic violations of the humanitarian right on the territory of another state. Third, if the economic development of nations is a fundamental factor of the international security, the defense of a country is a condition of its development. For Carlos Seiglie and Steven Coissard, economic intelligence is an important factor in the modern life. ‘‘Know your enemy’’ is a basic precept of warfare and it emphasizes the key role of intelligence. The American system of economic intelligence is the best in the world even if with the creation of the US Department of Homeland Security, which is dysfunctional and has been largely ineffective, it concluded to the disastrous response to hurricane Katrina. However, organized around a private public partnership and public structures mobilization, the US system of intelligence has no competitor. The issues of this paper is to understand why the American system is the best and how economic intelligence is impacting on national security and also increasing the country’s future income. For Jurgen Brauer, the links between and among international security, economic development, and a sustainable ecosystem particularly with respect to how international organizations have dealt with these subject matters. The paper finds that for the most part work done emphasizes bilateral unidirectional causality, for example, from disarmament to development and argues not only that bilateral reverse causalities can often be established but also that the topics of development, sustainability, and security need to be dealt with en bloc, in trilateral fashion. Moreover, the main practical issue does not lie primarily with proper amounts of funding, but rather with the quality of domestic and global public sector decision-making.

REFERENCE Melman, S. (1974). The permanent war economy, American capitalism in decline. New York: Simon and Schuster.

PEACE, WAR AND INTERNATIONAL SECURITY: ECONOMIC THEORIES Paul Dunne and Fanny Coulomb 1. INTRODUCTION Peace, war and international security is an area in which economists are often conspicuous by their absence, to a degree that rivals the importance of economic issues to the problems at hand. It is getting to the point where the supposed ‘imperialism’ of economics in the social science (Fine, 2001) is reversed and the political scientists, international relations and other such groups exclude the economists and take on the economics themselves. It is not unusual to find studies of post-conflict reconstruction in which economics is surprisingly found to be important. In the case of the World Bank, it came as a great shock to the other social scientists when economists started to argue that economics might have a major role to play in understanding civil wars (Collier et al., 2003). Economists do have the gift of overstatement and a tendency to state unpleasant truths in a clear and precise way that can disturb other social scientists, whose indignation and overreaction reflected this. More recently the debate has reached a more civilised recognition of the complexity of such issues (Arnson & Zartman, 2005; Berdal & Malone, 2000). In considering the economic theories that are relevant for the study of peace war and international security one has to consider the overlap between

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 13–36 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06002-5

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the social sciences and has to think of an organisational framework upon which to hang the discussion. One useful approach is to consider different levels of generality of the analysis. To consider the answers to the big questions of international security, usually the domain of international relations, and then to move on to the general economic theoretical perspectives, before focusing on some specific developments in economics and security. This is the approach taken here. A short overview as this cannot but fail to provide an adequate coverage of the extent and detail of theories, but hopefully will serve to bring out the main developments and their context. The first section outlines some general perspectives on international security followed by a brief schematic outline of the main theoretical approaches. Then it considers the economics of security distinguishing neoclassical theories, Keynesian and institutional, Marxist, and monopoly capital. The second part considers the economics of military spending and the issues involved in engaging in debate between the schools of thought. The economics of conflict is then considered, starting with the approach economists have taken – mainly neoclassical, before considering more general political economy perspectives. The final section presents some conclusions.

2. THE ECONOMICS OF SECURITY The economics of security has been developed around three different perspectives. The first, dealing with the link between the objectives of national security and economic development, where the old opposition between liberalism and mercantilism still remains relevant. The second approach uses economic models to study conflicts and militarism and the third approach considers the consequences of militarism on the growth and the stability of capitalist economies, from a Marxist, Keynesian or institutionalist perspective.

2.1. General Perspectives on International Relations: The Opposition between Mercantilism and Liberalism An important debate has been taking place in international relations that has implications for economics. It raises the question of whether conflict is inherent to interstate relations, as stated by the mercantilists and subsequent economists, or whether the rise of international trade and capitalism support the pacification of the international relations, as suggested by the liberal view. At the beginning of capitalism, the dominant mercantilist

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perspective considered the nation state as needing to produce wealth in the form of gold and this required running trade surpluses – encouraging exports and discouraging imports in a world in which trade volumes were considered fixed. This was one of the first instances of significant government intervention in the economy and encouraged wars in Europe and imperialism, as the powers fought over available markets. Clearly creating wealth would require military strength, which in turn would require economic strength. In such an economic system, openness only comes with a hegemon to provide the collective goods of security and stability, but that state will only do so if it is in its own best interest (Kapstein, 1992; Goodwin, 1991; Heckscher, 1955). More recently this has developed to a neomercantilist perspective and is linked with a realist perspective on international relations, which sees countries and states motivated primarily by the desire for military and economic power or security rather than ideals or ethics. The ceaseless economic war between nations justifies economic interventionism, with trade restrictions and subsidies for national firms. The military strength may go with the economic development, through economic intelligence, technological spillovers or imperialist foreign policies. War is considered an irreducible human trait in earlier works but curable in more modern ones. In general, conflict will be inevitable unless there is some dominant hegemonic force – Pax Britannica, or more recently the US hegemony (Waltz, 2000). In contrast the liberal perspective that developed from the work of Adam Smith saw capitalism as the best way to create wealth and maintain individual freedoms. Laissez faire capitalism and the global division of labour allow all to benefit from trade, it is no longer a zero sum game. States intervene because of market failure and the public good nature of defense means they have to provide it, but it is seen as costly to the economy. Globalisation promotes peace and free trade with competition both internationally and domestically. War is likely to be very costly and should disappear with the spreading of economic liberalism, as all countries would get richer thanks to the rise of international trade. This liberal economic theory is directly linked with the political theory of the society of states at an international level. Despite the condition of anarchy, in the sense of the lack of a ruler or world state, governance is provided by the key institutions that regulate international relations, treaties, diplomacy and the mutual recognition of sovereignty. This was followed by more recent developments of the idea of democratic peace (following from Kant’s perpetual peace), which implies that democracies do not fight each other. More recently the theory of

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democratic peace has had globalisation added to it, suggesting at first a role for multi-layered governance structures to deal with weak states with anti capitalist and anti-liberal attitudes which were reinforcing their backwardness in a globalising world. But more recently this has been replaced by the US hegemony pursuing democracy within states and protecting democracy from the external aggression1 (Gleditsch & Hegre, 1997). This new orthodoxy that sees war as a result of pro- or anti-capitalist sentiments and groups; sees the solution to conflict as a global neoliberal system; accepts that military action might be needed in the short run to create the right conditions (dealing with rogue states and terrorists); sees the need to maintain the basis to produce the means of destruction through high military spending; accepts the hegemonic role of the US. It is certainly not what was expected by the end of the Cold War and represents a limited view of the world that is coming into question with the continuing problems in Iraq and Afghanistan. Contrary to the predictions of the first liberal economists, the worldwide spreading of economic liberalism does not induce a decrease of world military expenditures. It was not demilitarisation that followed the Cold War but remilitarisation with closer integration of the civil and the military, through homeland security and the privatisation of defense functions (Lovering, 2003). It is also not without its conceptual problems. The liberal perspective can be argued to oversimplify the nature of capitalist development – focusing on particular problems it may be fine, but for the big picture it is lacking. There are also alternatives, idealist (as opposed to rationalist) and Marxist, the latter drawing out the importance of economic processes and emphasising the inherent tendencies within capitalism to conflict and imperialism (Coulomb, 2004; Dunne, 1990; Georgiou, 1983). These are discussed below. Within these world views, the economists have often ignored the general context they operate in and how their theories fit into them. Yet clearly the discourse of international relations can often provide the context and points of reference within which debates on the economics of security take place.

2.2. Neoclassical Theories and Arms Races Theoretically the basic neoclassical perspective would see the state as reflecting national interests and providing security, recognising the trade off guns versus butter. Defense is considered a pure public good (though in actual fact the state is usually providing security for itself rather than the population – for example nuclear shelters tended to be for the state officials

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and politicians). There are developments of this simple perspective to arms race models, the importance of property rights, the analysis of alliances – burden sharing free riding and rational agent theories of conflict. As is characteristic of neoclassical economics, that sees itself as the science of the social sciences providing tools with which to analyse any social setting, its approach to analysing war is ahistorical. As Hirshleifer’s book states the basic economic problem is simply the possibility of predation and conflict, rather than production and exchange. Despite the existence of such analysis in Adam Smith traditional economics, it has tended to ignore the former and focus on the latter.2 A related literature but one, which has developed a clear perspective in which military effort can be explained in terms of one country reacting to increases of another. This started with Richardson’s (1960) ‘arms race’ model that supposes two countries whose military expenditure/level of arms/ military capability, m1 and m2, are related at time t by the equations: dm1 ðtÞ ¼ a1 þ b1 m2 ðtÞ  c1 m1 ðtÞ dt dm2 ðtÞ ¼ a2 þ b2 m1 ðtÞ  c2 m2 ðtÞ dt Where ai are the exogenous ‘grievance’ terms, bi the ‘reaction’ terms, whereby each country responds to the military capability of the other and ci the ‘fatigue’ terms, usually representing some internal limitations on a country’s military spending/capability. Interestingly this was not well received by the US government as it implied that arms races had no ‘good’ and ‘bad’ guy but were simply the result of one reacting to the other. This basic model has been developed theoretically and empirically in a variety of ways, theoretically including the explicit modelling of rational economic decision-making, different dynamic specifications, game theory approaches and empirically with the use of approaches such as co-integration. The search for clear empirical evidence of ‘arms races’ has, however, met with rather limited success, with even apparently obvious examples as the Cold War superpower arms race proving ambiguous and very much dependent on specification.3 An early attempt to deal with strategic effects more generally by Rosh (1988) who developed the concept of a security web where, instead of dyadic relationships neighbours and other countries (such as regional powers) that can affect a nation’s security as being part of a country’s Security Web. Rosh calculated the degree of militarisation of a nation’s security web by

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averaging the military burdens of those countries in the web, finding it to have a significant positive effect on a country’s military burden. More recently, a number of authors, including Dunne and Perlo-Freeman (2003) and Collier and Hoeffler (2002), have sought to generalise the concept of an arms race by looking at the demand for military expenditure across a large group of countries, using either cross-section or panel data, incorporating a range of economic, political and security variables, and including variables for the aggregate military expenditure of neighbours and rivals. These models have typically shown that a country’s military expenditure is significantly and positively influenced by that of those around them. Dunne and Perlo-Freeman (2003) broke this down, finding that the significant positive influence comes through the military spending of ‘Potential Enemies’.4 They suggested that it indicated, if not an arms race as such, then at least arms race-like effects, or spillover effects, where there is some tendency towards an action-reaction pattern of military spending between hostile nations. In addition, Murdoch and Sandler (2002, 2004) have focussed on the ‘spillover effects’ of military spending. Dunne and Smith (2007) provides more detail on the econometric issues.

2.3. The Analyses of the Role of Militarism on Capitalist Economies Whereas the liberal perspective grants little importance to military expenditure, other schools of economic thought emphasised the specificity of this particular form of public expenditure and its role in the long-term survival of capitalism. 2.3.1. Keynesian, Marxist and Institutional Economists A basic Keynesian perspective would see military spending as one component of government spending, with effective demand/multiplier effects. In this way military spending can be good for an economy, getting out of recession and helping plan expansions in effective demand. It is generally accepted, however, that war would have a negative impact upon the economy. This approach has also been combined with a form of institutional analysis which would take it beyond a liberal perspective and sometimes close to the underconsumptionist theory discussed below (Pivetti, 1989, 1992). In response institutionalists have provided a more complex understanding of the processes at work and the role of military power and conflict.5 The institutionalist perspective is predicated on existence of a MIC (Eisenhower),

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where internal pressures for increases in military spending and forces are independent of threat. They create inefficiencies in the economy and so can have negative economic effects, particularly as the nature of defense production changed during the Cold War and became very different from civil). This can also have other externality effects through influences on the civil sector and crowding out (Melman, 1970; Dunne, 1995) A more Marxist interpretation, would suggest that the capitalist mode of production still would not necessarily be wonderful if military spending and the MIC were removed. Melman (1974) underlines the harmful effects of militarism on the American economy such as the loss of competitiveness, the development of the bureaucracy and the fall in productive investment. Evoking the development of a militaro-industrial complex, he uses the concept of a ‘permanent war economy’, with limited spillover effects from the military to the civil sector. Similarly, Dumas (1986) presents the military production as an economically non-contributary activity, which channels valuable productive resources and their outputs. The opportunity cost of the military activity is measured by the economic value that could have been created by using the same labour and capital for consumption or investment. 2.3.2. The Marxist Perspective The Marxist perspective is rather mixed. Indeed, Marx had little to say on militarism and it was Engels who provided most of the specialist writing even when jointly penned. His main statement is in Anti-Duhring and was influenced by Clausewitz, though there he argued there were no benefits to war only the prospect of financial ruin, wars were won by technology, but this led to ruinous arms races, such as the dreadnoughts (Engels, 1987). Militarism can certainly be considered as having an impact within the context of Marx’s crisis theory, but this gives a complex story, with different form of crisis (financial collapse, long waves and cyclical downturns) and mechanisms (realisation, distributional, rising OCC and disproportionalities). These are usually not monocausal but the backdrop is the law of the tendency for the rate of profit to fall plus countervailing tendencies and militarism can potentially have positive or negative effects. As a result there have been considerable disagreements among Marxists. Following Marx, Kautsky considered the need for capitalism to expand its markets by colonial expansion but suggested that this plays a contradictory role, as it has costs. Boosting consumer demand benefits the capitalists but they will resist if it is funded by a tax from profits. Lenin developed his analysis of imperialism from Kautsky, essentially providing a

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pseudo-mercantilist view that war is a continuation of economic competition by other means. Luxemburg offered an analysis based on the expanded reproduction schema, suggesting that there could be positive effects depending how military spending was financed. Taxes on workers change composition, taxes on profits reduce overall profit and deficit finance will provide demand stimulus if below full employment. There would also be social and ideological benefits and military spending provides an external market. She stated that the military sector made it possible to release a surplus that is generally higher than that which would have been obtained in other sectors. But at the same time, the fixed capital becomes increasingly significant relative to the variable capital which is, in the Marxist theory, one of the factors influencing the fall of the rate of profit in a capitalist economy. It is thus necessary to distinguish the short-term effects of militarism, which are beneficial, and the long-term effects, which are negative, since they accentuate the internal contradictions of the capitalist mode of production. Bukharin developed an opposing view, arguing that military expenditure cuts into surplus value and so hinders reproduction and so rather than helping realise surplus value it destroys the production of value. Luxemburg’s contribution has given rise to controversy: for some economists, it is a theory of underconsumption, with military expenditure a way to invest the surplus without increasing production capacities. For others the theory shows the important role of military expenditure as a stimulant of the capital accumulation, by its encouraging technological progress and destroying the internal obstacles to capitalist expansion. By 1939 the Stalinist orthodoxy was underconsumptionist, as it suited Stalin to see the West as needing military spending to overcome crisis and so to be economically dependent on its military spending (Semmel, 1981). The debate continued after the Second World War, with some Marxist economists defending the idea of a positive impact of military expenditure on the capitalist system, presenting militarism as a factor in the stabilisation of capitalism. Kidron (1969) focusing on the threat of overproduction, rather than underconsumption, saw military spending as diverting capital from accumulation so creating a ‘permanent arms economy’. Thus, overproduction and unemployment were contained in the 1950s and 1960s thanks to a high level of military expenditure, which prevented overinvestment and which generated technological spillovers to the civil sector, while favouring exports. While military expenditure slowed down economic growth, by inducing a high level of profit tax, it also slowed down the growth of the organic composition of capital in civil activities, by diverting

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resources that could have been used for the productive investment. Thus, the permanent arms economy represents a powerful means by which to thwart the fall of the profit rate. The theory of underconsumption is the only economic theory that has military spending as an integral and important part of capitalist system. Based on Baran and Sweezy (1966) ‘surplus’ approach to Marxist analysis,6 it emphasised the monopoly nature of the post-war system, this approach saw military spending as important in preventing realisation crises, through absorption of surplus without raising wages or capital. Other government expenditure could not do this. Baran and Sweezy were more circumspect than later proponents of the effective demand/underconsumption. Despite the influential critique of the underconsumptionist approach in Smith (1977), Pivetti (1989b) and Cypher (1987), suggested that military spending is a conscious instrument of economic policy and military spending has a stimulating effect on the economy.7 Later long wave analyses were developed from Kondratief’s attempts to periodise cycles of capitalist development. Mandel seeing high organic composition of capital in military production accelerating the decline in the rate of profit, and the wave of post-war prosperity resulting from countervailing tendencies. In a more general analysis the Regulation School, argued that regimes of accumulation existed, coordinating production and consumption and dealing with the contradictions between the forces of production and social relations. They identify a move from competition to monopoly regulation, with changes in the nature of the superstructure and governance (Aglietta, 1987; Lipietz, 1987). In the US the Social Structures of Accumulation School of saw an accord between capital and labour, that allowed prosperity in the US, though country and historically specific (Bowles, Gordon, & Weisskopf, 1983; Kotz, Mc Donough, & Reich, 1994). Neither of these two approaches explicitly focused on military spending, but Serfati (1995) developed the regulation approach to consider the military industrial complex within the globalised world economy. Rather it is just one facet of the US hegemony that was a factor in the post-war ‘Golden Age’. One can integrate military spending into the analysis but it is very different to the story told, particularly with regard to defense production. There are indirect benefits for the US from its international hegemony that outweigh the direct costs, but they are at the expense of the economy and it was these negative effects on the economy that showed up in the long-run. For Europe these indirect effects were less clear. Even if one rejects the specifics of the Marxist analyses it is still possible to see Marx’s method as providing valuable contributions in understanding the

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economics of international security. To see the processes as history specific, contingent rather than deterministic and as contradictory/dialectical processes that reflect the balance of power between groups within society. It is interesting that this is close to the approach Kennedy (1987) took implicitly, seeing empires growing as a result of their military development, through building empires, but in the end empire overstretch forces them into decline.

3. THE NEW ECONOMICS OF CONFLICT8 The international strategic environment has become considerably more complex since the end of the Cold War. In the industrialised countries, armament industries and armies have been transformed, while the elsewhere there has been the emergence of new actors, such as terrorist groups and the ‘lords of war’, as well as a multiplication of the new conflicts, often internal rather than inter-state. All of these have presented a challenge to contemporary economic analysis and this section considers how economists have responded, to understand the causes, conduct and consequences of conflicts; to identify the characteristics of new conflicts; and to consider the economics of peace.

3.1. The Causes, Conduct and Consequences of Conflicts There have been three strands to the linkage between economics and generalised conflict that can be identified, namely the consequences, causes and conduct of war (Dunne et al., 2006; Anderton, 2003; Sandler, 2000). The first strand is the need to understand the causes of conflict, particularly when there may be economic elements in those causes. The liberal view can only explain interstate conflicts as resulting from unjustified trade measures or a foreign policy contradictory with the general interest of the population. The mercantilist–Leninist view presents war as the continuation of economic competition by other means. Also institutionalists would see conflict as likely because of the vested interests in the MIC. Though interestingly in the Cold War the last thing anyone wanted was to use some of the advanced weapons systems in earnest – they often did not work, as in the case of early cruise missiles. Recently, some economists have explained civil war in poor countries as often driven by attempts to control natural resources like oil or diamonds.9

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Most economists have tended to ignore issues of conflict and security, often assuming exogenous provision of property rights, that is that there is a sovereign or state whose duties include protecting the society from the violence or invasion of other societies and establishing a legal system, which administers justice and enables exchange and investment to proceed with security.10 This may be a reasonable first approximation for some times and places, but is certainly not for others, including much of the world today. However, there is now a fairly large literature concerned with endogenous property rights. When conflict is an option, the resulting distribution of property reflects agents’ ability to protect their resources from others or steal resources from others. The simplest models have individuals who can allocate their time between investment in growing food, stealing food from others and defending the food they have from theft by others. Typically the models will have a number of agents each subject to a budget constraint, with production possibilities for various goods, including military ones and exchange possibilities. This includes attempts to understand civil wars, Collier (2000), Gershenson and Grossman (2000), and Sambanis (2002); to integrate the models of production and exchange with models of conflict and struggle, Rider (2002); to understand intervention in conflicts by third parties (Siqueira, 2003); to consider issues of terrorism, organised crime, post-conflict demobilisation and reconstruction, etc. A common formulation is that the objective function of a state, say welfare, depends on consumption and security, a function of own and opponent’s armed forces. Welfare is maximised subject to a budget constraint, thus determining the optimal level of armed forces. Security can have many levels depending on what the threat is.11 The second strand is the use of economic analysis to improve the effectiveness of the prosecution of war. This runs from Adam Smith’s discussion of the relative effectiveness of standing armies and militias to 20th century applications of economics, and other types of applied mathematics, to develop effective military tactics and strategies. The application of game theory to nuclear targeting is a classic example; von Neumann was the model for Dr. Strangelove. In the literature that deals with potential conflict with an identified enemy the analogy to the production function is the conflict success function, CSF: the inputs are the investments in fighting efforts of the two sides and the outputs are their relative degree of success in the conflict: either the probability of winning or the share of the pie that goes to each side.12 While there is a vast military literature on success in battle, there is relatively little econometric work on conflict success functions.13

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One problem with this type of analysis is that it either treats aggregate military strength as a single aggregate, or distinguishes just between labour and capital, members of the armed forces and their equipment. In fact determining the optimal force structure involves four main choices for both labour and capital. The first choice is the number of varieties of types of forces: army, navy and air force, each made up of specialised types of soldiers, sailors and airmen, each with distinct roles and associated equipment. There is some substitution between these varieties, a target may be destroyed by a tank shell, a bomb dropped from an aircraft or a cruise missile launched from a submarine. The second choice is the quality of those forces, determined by R&D for equipment and training for labour. The third choice is the quantity of each. The final choice is whether they are obtained domestically or from abroad. This choice is primarily important for equipment, where security of supply for spares in case of conflict is often important, but does occur for labour for those countries that use foreign soldiers.14 The third strand is the need to understand the economic consequences of war and adjust policy accordingly. From Ricardo on the Bullion Controversy, provoked by the suspension of the Gold Standard during the Napoleonic Wars, through to Keynes, on how to pay for the Second World War, managing the war economy has been a central question.15 Within much of the developing world, particularly Africa, civil wars are a major cause of economic dislocation and the international financial institutions are struggling to come to terms with this linkage. In particular, managing postconflict reconstruction and providing incentives for combatants to return to civilian life has proved difficult.16 We shall return to this below.

3.2. The New Economics of Conflict The period since the end of the Cold War has seen major changes in the economics preparing for war. New threats appeared, budget constraints changed with large cuts in military expenditure during the 1990s, major innovations in military technology took place, and they resulted in changes in the structure of the arms industry, and the armed forces. Two concepts became central to in the development of military discourse, the Revolution in Military Affairs (RMA), the term used for the way that changes in technology were transforming fighting, and asymmetric warfare, the term used for the way that opponents would respond to a dominant military power by fighting in ways that the dominant power did not expect or

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prepare against. Several examples, like certain African conflicts or the attacks of September 11, showed that the technological superiority was not a guarantee of security nor of victory in the event of war. However the RMA testifies to a constant search for technological improvement by major powers and the existence of hostile zones to the mode of Western development has led to a persistence of instability, with a return of the strategies of predation. 3.2.1. The RMA The RMA is potentially the latest of a sequence of technological changes that have transformed the military.17 Such revolutions usually also change the balance of power, as one group or country adopts the new technology faster than their antagonists and use it to change the way war is fought. The technological changes can involve new products, like the tank, or new processes, forms of organisation, like Blitzkreig, that make better use of existing products. In the military, process innovation tends to be much slower than product innovation, particularly in peacetime. In general, new technologies have been most effective when used in ways that are unexpected by the enemy and have often been associated with the rise of new revisionist powers.18 Actual weapons are very R&D intensive: small performance advantages over the enemy can translate into victory, but getting that last 5% of performance is very expensive. This produces a race to improve technology and the real cost of weapons has grown at between 6 and 10% per annum between generations. Because the weapons are so expensive the gaps between generations get longer and as a result much military equipment is very old.19 Old economy military technology was very centralising; rapid cost growth between generations of weapons means that almost nobody, not even the US, can afford it. Most military equipment is obsolete in commercial terms before it enters service, because it takes on average seven years to develop and deliver it.20 Current fighting power is very much old economy, the question is whether this will change and what a new-economy military might look like. The new-economy civil industries tend to have high-fixed costs but low marginal production costs, for example software is expensive to develop but cheap to produce in quantity. They tend to have network effects, the more people who use the product the more effective it is, and innovation tends to be a series of winner-take-all races. At any moment in time a single firm, which produced the killer application, tends to dominate the market; but when innovation is rapid their dominance is precarious.21 Most weapons production does not show these characteristics. Although they do have high

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development costs, they are also so costly to produce that they are limited to small batches with long gaps between generations. A further consequence is that innovation is slow. The defense industry is fragmented and the market leaders are the same old firms who have been producing weapons for decades. The arms industry is still waiting for the killer applications that displace most of the competition, typical of the new economy.22 Cost is central to the RMA and there are clear issues of affordability, especially as governments continue to support legacy weapons systems.23 Government’s attempts to make defense more affordable include acquisition reform; use of commercial-off-the-shelf, COTS, technology; improved logistics and the like, which, it is hoped, will generate a revolution in defense business affairs which will pay for the RMA, but history of past procurement reform does not encourage optimism. A recurring theme in military procurement reform is the attempt to learn from the commercial world and the thrust of reform has been to commercialise the military, by importing private sector practices into military organisation. However, because military time-horizons are so long, much of the equipment is old and there are major problems of obsolescence, since commercial markets, particularly in electronics, do not support systems and devices designed to last for decades.24 The changes taking place are significant. During the 1991 Gulf War 9% of the ordinance dropped consisted of ‘smart’ (precision-guided) munitions, while in the 2003 Iraq war it was over 90%.25 The increase in sophistication and cost of the most advanced military equipment, means it is impossible even for relatively rich countries to maintain a comprehensive defense industry as the nature of confrontations and conflicts has changed. It is unlikely that two sets of allies will face each other with similar weapons and tactics, as in the two world wars. It is more likely that there will be an asymmetry between antagonists and this will likely change the nature of the conflict.26

3.2.2. The New Wars The idea of asymmetric warfare is not new but the changing nature of conflict in the modern world, for example in Iraq, suggests that asymmetric responses are likely to become increasingly important.27 Definitions have emphasised asymmetries in technology, what each side fights with; asymmetries in tactics, how each side fights; or asymmetries in the stakes, the costs of defeat to each side.28 Much of the military discussion prior to the coalition attack on Iraq in Spring 2003 centred on the extent to which

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Iraq could neutralise technological superiority by using guerrilla tactics and urban warfare. The challenge to researchers is to develop models that can deal with such asymmetries and provide insights into the behaviour of adversaries. Dunne et al. (2006) developed a game theoretical model that attempts to capture the main features treating asymmetric warfare as involving either different technologies, types of weapon; or different tactics, ways of fighting, though in practice it may often involve both. The contestants are also asymmetric; there is an incumbent and a challenger: government facing potential rebels, dominant power facing potential revisionist power. Such conflicts are often characterised by periods of armed peace interspersed by outright war as one or the other side, or both sides, decide to attack. Fighting over a prize, for example the revenue derived from a natural resource such as oil, diamonds or drugs, each side has to invest effort in preparing for conflict and chooses its tactics (or technology) and its military strategy: attack or defend. In the first period the incumbent makes decisions on effort and tactics; in the second period, the challenger makes decisions about effort and tactics, conditional on those of the incumbent; in the third period, they simultaneously decide to attack or defend and receive their payoffs. The asymmetry arises because one side can gain an advantage by choosing to fight in a way that the opponent is not prepared for, i.e. choosing tactics very different from the enemy.29 Such a situation is most likely to arise when the conflicting powers are themselves asymmetric in nature. The most likely scenario is an incumbent power with dominance in available resources, but committed to a certain type of technology, and a smaller challenger, with limited resources but more flexibility in choice of technology. Most incumbent powers one could think of tend to have military capabilities whose characteristics are very similar and when similar sized powers engage in conflicts or arms escalation they do so with those very similar technologies. The Cold War, for instance, was mainly a vertical arms race, with similar types of technology on both sides and effort/quality the main strategic variable (Walker, 1994). Having invested considerable resources in a particular conflict technology and having developed the industry to produce it (and export it), incumbent countries would find it difficult to change (Dunne et al., 2006). The post-Cold War era has led to many other changes in the nature of conflicts. Within the wider literature the political economy of conflict underwent considerable changes as it confronted the post-Cold War environment (Stewart & Fitzgerald, 2001). The end of proxy wars and

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superpower involvement had not reduced conflict, though it had reduced their intensity, and changed them. Civil or intra-state wars were the most common and the nature of war had clearly changed. Kaldor (1999) considered the new wars to be very different and only understandable within the context of political, economic and military globalisation. There was a blurred distinction between war and organised crime and local wars tended to have a transnational connection. There were no real military battles as in the past but skirmishes and in general civilians were targeted by militia. New war economies were seemingly based upon plunder and black marketeering and sometimes supported by aid and were sustained through continued violence. This was not helped by the tendency of the ‘international community’ to work with the protagonists to broker peace deals rather than the civil society that existed outside of the conflict (Kaldor, 2006). A harder look at the endemic and continuing conflicts in Africa was particularly challenging and it became clear that the continuing struggles needed some source of income, and that resources control had become the object of struggle overtaking any previous goals. This was not simply a breakdown of the system but a way of creating a new system of income, profit and power. When the World Bank group led by Collier started to investigate the economics of civil war, what became known as the greed versus grievance debate, there was a profound impact on the subject area. Collier and Hoffler produced a series of careful and detail empirical studies, which looked at the cause of conflict and explanations for their continuation/duration.30 The results suggested that it was greed (often represented by the proportion of primary commodities in GDP and other such indicators) rather than grievance that explains civil wars. There was little impact of the factors that had tended to be assumed of primary importance in the past. There was a furious response and lively debate. The results was to accept that grievance may be involved in starting conflicts, but that they are likely to be captured by more economic concerns over time. Collier (2000) focussed on feasibility, durability and opportunity of civil war explained by greed rather than actual start of conflict. More recently their work has become more nuanced as better data has become available and Collier and Hoffler (2008) emphasises opportunity. When this work was being produced there was no real reason why this should have been done in the context of a neoclassical model of rational agent, other than publishing in the economics journals, but it was.31 A lot of the responses were not. Cramer (2002) makes an interesting point, from a Marxist perspective, arguing that some conflicts may be the primitive accumulation stage of development, that concentrates wealth to allow industrialisation and, while

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painful, may be a necessary part of development, rather than some simple greed or grievance trade off. Important findings came out of these debates that have important implications for policy. It is important to recognise that war economies have a logic and incentive structure, that shell or shadow states exist as do commerce and trade links and financial links within such structures and that the distinction between criminal and non-criminal transactions is rather blurred in such environments. It is important that international agencies recognise this and the design of peace accords reflects this complexity. Otherwise policies will have unforeseen and potentially catastrophic effects, for example criminals may be maintaining vital trade links within a conflict zone, to simply normalise trade relations without proving an alternative could lead to serious problems, such as famine in particular local areas (Duffield, 2001).

3.3. The Economics of Peace We saw earlier that concepts of eternal peace and the democratic peace, suggest that peace is a normal state for republics and democracies. In general one would have to see peace as the absence of war and the schools of thought would differ on how this is perceived. The mercantilists would certainly see conflict as inevitable and peace as the gap between wars, with realists taking a Clauswitzian perspective on war as the extension of politics. Marxists would also suggest a conflict ridden development process of capitalism with some arguing for tendencies to armed conflict through attempts to overcome inherent contradictions and crisis, including new forms of imperialism, though not all. Institutionalists would see the MIC vested interests creating arms spending in economies, though it would not necessarily be in anyone’s interest to go to war – though it could be. Liberal and neoclassical perspectives would see peace as the best situation for accumulation and so seek to identify economic incentives for it. In terms of the effectiveness in the prosecution of peace this will clearly require the development of peacekeeping and peace making forces and related equipment, which could be very different to what is available now and have implications for the nature and extent of the DIB and its related vested interests. In addition, the development of international governance structures that operate considerably better than those at present will be required as well as the recognition of wider concepts of security. To develop successful policies and support for post-conflict reconstruction (following

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from previous discussion) it is clear that we have to understand economics of war better, to make a better job of designing and maintaining peace accords and designing reconstruction packages that makes the incentives of peace greater than those of a return to war.32 During the Cold War, there was considerable debate about the economic impacts of reducing military spending and how to convert resources to civil uses. This now seems like a strange debate as the argument of cutting military spending would lead to significant economic problems is difficult to argue given the degree of cuts after the Cold War and the relative success of the affected economies. There are of course transition costs but these are no longer seen as significant. Swords to ploughshares is no longer considered sensible, but the macro, and meso conversion policies of industrial restructuring relevant. It is an interesting debate to look back on and there are some useful analyses (Gleditsch, Cappelen, Bjerkholt, Smith, & Dunne, 1996). Peace does not necessarily mean demilitarisation and reduced military spending, but if it does then the evidence suggests improved economic performance is possible. It is in fact likely to lead to moving resources away from existing defense industrial bases to other civil sectors and this should have positive effects. It should also allow the focus to move from military to alternative concepts of security, such as human and environmental. This could improve the situation for developing countries as well as the poor in developed countries. It could also provide increased demand for industry, through investment in alternative technologies; and could also allow policies to reduce inequalities, support sustainable development etc. and so improve the economic situation for all countries. Improved trade and wealth should reduce the likelihood of conflict, but the experience of this century does make one wary of making such statements with confidence. Nevertheless, it is difficult to see anything but economic benefits resulting from peace.

4. CONCLUSIONS This paper has considered the economic theories used to understand peace, war and international security. In doing so, it started by outlining the theories that dominate international relations and provide the context for economic debate. It then identified a number of different schools of thought that differ in their understanding of the nature of international relations and the propensity for conflict. The dominance of the neoconservative perspective seems to be on the wane, but the context for the debate on

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the economics of conflict still remains a liberal realist one, with an expectation of democratic peace. Economic theories of conflict are seen to provide very different perspectives but do provide useful insights into aspects of national and international security. They also provide tools with which to analyse the new developments in the international security environment, namely, the Revolution in Military Affairs and Asymmetric Warfare. It is also possible to develop the framework to analyses the economics of peace and some pointers have been provided of the issues that need attention. Clearly economics has an important role to play in this area, despite the dominance of other subject areas in the general debate. What is needed is more recognition of the importance of the economics of security and the value economists can bring to the existing literature, but also a recognition of the value of the contributions of the other subject areas, by economists. One only has to read copies of the Economics Peace and Security Journal (epsjournal.org.uk) to see the important contributions economists have made and the range of subject areas that require their attention, for example issues on water conflict, peacekeeping and peacemaking. It is to be hoped that economists continue to take up these challenges and make a contribution to the achievement of security and peace in the modern world.

NOTES 1. This also reflects recent Democratic peace: that have to make everyone a democracy even by force then will get peace. 2. In addition, we could consider new classical theory tends to take a rather different perspective as it considers transitory and permanent shocks to the growth of the economy and recognises war as a permanent shock. 3. India and Pakistan provides one of the few examples where researchers have been able to provide consistent evidence of a Richardsonian arms race. Numerous attempts have been made to estimate arms races for Turkey and Greece, using a variety of theoretical and econometric models, without clear evidence of an arms race emerging (Brauer, 2002; Dunne, Nikolaidou, & Smith, 2005). 4. Which includes actual enemies. 5. This literature overlaps with the Marxist perspective outlined below. 6. Basically identifying value with observed quantities, so for example profit in price terms is seen as the money representation of surplus value (Baran & Sweezy, 1966). 7. Evidence goes against this but that certainly did not bother Pivetti (see Smith & Dunne, 1994; Pivetti. 1994). 8. This section is based on early versions of Dunne, Garcia-Alonso, Levine, and Smith (2006). 9. See Kaldor (1999) and Collier (2000).

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10. Coulomb (1998) discusses Smith’s writing on defense economics, which showed a clear awareness of the need for security before trade could take place. 11. From 1945 to 1989, the central concern was the potential conflict between NATO and the Warsaw Pact; a classic arms race between two militarised powers. In many parts of the world, such arms races continue to be important. Other countries face internal threats against which military preparations are effective. These are mainly poor countries, but also include Spain and the UK. Some countries, such as the US feel threatened by external non-state actors. Some states want to project power to intervene for human rights or other ways, while some, such as the small European powers, have no obvious threats but retain military forces as a general insurance policy. Given US military dominance there is a natural international concern about what its security objectives in fact are. 12. There are two main functional forms used in which success depends either on the ratio of the forces or the difference of the forces. Hirshleifer (2000) provides a discussion of CSF, with many military and non-military examples, which captures the spirit of the literature. 13. An exception is Rotte and Schmidt (2002), who use a data set of 625 battles 1600–1973 to estimate an equation to explain victory by the attacker in battle: a zero one dependent variable. The explanatory variables include the force-ratio of the two sides and expert assessments of relative advantages in leadership, surprise, morale, logistics and intelligence which were significant; and training, defensive posture, and technology, which were not significant. The estimates bring out the importance of the intangibles of battle: leadership, morale, etc.; but even with all these included the fit is low, with a pseudo R2 of less than a third: outcomes of battles are relatively unpredictable even with the benefit of hindsight. As they point out there is a sample selection problem. We only observe a battle when both sides think they have a reasonable chance of winning, otherwise it does not take place. 14. Such as the UK with the Ghurkas and France with the Foreign Legion. 15. Indeed Stone (1988) refers to work by Gregory King in 1695 on the question of how long England could sustain the war against the league of Augsburg. 16. See Harris (1999). 17. Definitions of the RMA tended to emphasise the way that improvements in information technology, precision targeting and smart munitions created the possibility of a new form of network-centric warfare. 18. For example the Japanese defeat of the Russians in 1905, through the use of the latest technology and a more effective strategy. Also while some military revolutions concentrate power, because the equipment is so expensive and specialised that only an elite can afford it; the rise of the armoured knight in their siege-proof castles, for instance. Other revolutions disperse power as they put cheap capability into mass hands; the guns that displaced the knights and castles (Freedman, 1994; Parker, 1988). 19. For example the B52, still being extensively used, is a 1950s bomber with newer avionics and weapons. 20. Eurofighter, not yet in service, is based on early 1980s designs; and when it enters service, it will do so without its main missile, Meteor, which is mired in collaborative politics. 21. Netscape fell to Microsoft and Yahoo fell to Google. Bresnahan and Greenstein (1999) discuss some of these issues.

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22. There are some new economy elements. The Global Positioning System, GPS, is a system of military satellites that has spawned a myriad of commercial applications. The system was expensive, but receivers are cheap. GPS was crucial in the 1991 Gulf War. For the first time in desert warfare, commanders could rely on soldiers knowing where they were. 23. Matthews and Treddenick (2001) in their collection of essays on managing the RMA conclude ‘ultimately, however, managing the RMA means finding the resources to make it a reality’ (p. 97) and, ‘a technical revolution is only feasible if it is affordable’ (p. 4). Some spreadsheet simulations for NATO countries provide the conclusion: ‘Given the RMA is assumed to be characterised by increasing equipment intensity, it appears that no country, including the US, would be able to undertake the RMA without either significant reductions in personnel numbers or significant increases in defence budgets, or some combination of both’ (p. 113). 24. The Department of Defense has a special programme DMEA (Defense Microelectronics Activity) for the manufacture of replacement parts no longer supported by the commercial market. 25. Both the strap-on kits, JDAM (the GPS guided Joint Direct Attack Munition) and WCMD (Wind Corrected Munitions Dispensers) were cheap in military terms because they used more commercial development programmes and commercial components. 26. The military distinguish three levels of analysis: the strategic, the conduct of the war as a whole; the operational, the conduct of a campaign; and the tactical, the conduct of a particular engagement with the enemy, for example a battle. Since the meaning of strategy is different between the military and game theorists, who use it to refer to state contingent moves, we will always refer explicitly to military strategy, rather than strategy, when we refer to the planning of a war as a whole (Dunne et al., 2006). 27. Indeed, one feature of the Lanchester square law formulation is that numbers matter more than technology. 28. Despite having massive technological and military superiority; the US withdrew from Lebanon in 1983 after a suicide bombing killed 241 troops and from Somalia in 1993 after a battle in Mogadishu, in which television covered the brutal treatment of two American corpses and one injured prisoner. In neither country did the US have large stakes. 29. For instance, before World War II, French tactics were largely defensive based on the Maginot line, which the Germans outflanked with a Blitzkreig attack in 1940 defeating superior British and French forces. In the late 19th century, the machine gun was a major technological advance, which gave the British a great advantage in Colonial Wars; but the Boers were largely able to neutralise this advantage through their tactics and although the British did eventually win it was a longer and more expensive war than they expected. 30. For example Collier and Hoffler (1998, 2002). 31. It is also interesting to note the materialist nature of the analysis, that conflict should be understood by material rather than ideological consideration, which could almost place it in the Marxist fold. 32. See the papers in the Economics of Peace and Security Journal (2006).

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ACKNOWLEDGEMENT We are grateful to Ron Smith for comments and suggestions.

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Dunne, J. P., Garcia-Alonso, M., Levine, P., & Smith, R. (2006). Managing asymmetric conflict (Vol. 58, pp. 183–208), Oxford Economic Papers. http://oep.oxfordjournals.org/content/ vol58/issue2/index.dtl Dunne, J. P., & Perlo-Freeman, S. (2003). The demand for military spending in developing countries. International Review of Applied Economics, 17(1), 23–48. Dunne, J. P., & Smith, R. (2007). The econometrics of arms races. In: K. Hartley & T. Sandler (Eds), Handbook of defence economics (Vol. 2). Amsterdam: Elsevier. Dunne, P. (1990). The political economy of military expenditure: An introduction. Cambridge Journal of Economics, 14(4), 395–404. Economics of Peace and Security Journal. (2006). Peacemaking and peacekeeping, Economics of Peace and Security Journal, 1(2), 807–821. http://www.epsjournal.org.uk Engels, F. (1987). Anti-Duhring. Moscow: Progress Publishers. Fine, B. (2001). Economics imperialism and intellectual progress: The present as history of economic thought? History of Economics Review, 32, 10–36. Freedman, L. (1994). Military intervention in European conflicts. Oxford: Blackwell. Georgiou, G. (1983). The political economy of military expenditure. Capital and Class, 19. Gershenson, D., & Grossman, H. I. (2000, Dec.). Civil conflict: Ended or never ending? Journal of Conflict Resolution. Gleditsch, N. P., Cappelen, A., Bjerkholt, O., Smith, R., & Dunne, P. (1996). The peace dividend. Amsterdam: North Holland. Gleditsch, N. P., & Hegre, H. (1997). Peace and democracy. Journal of Conflict Resolution, 41(2), 283–310. Goodwin, C. D. (Ed.) (1991). Economics and national security: a history of their interaction. Durham and London: Duke University Press. Harris, G. (1999). Recovery from armed conflict in developing countries. Routledge. Heckscher, E. F. (1955). Mercantilism (Revised 2nd ed., Vol. II). London: Allen and Ulwin. Hirshleifer, J. (2000). The macrotechnology of conflict. Journal of Conflict Resolution, 44(6), 773–792. Kaldor, M. (1999, 2006). New and old wars: Organised violence in a global era. Cambridge, UK: Polity Press. Kapstein, B. (1992). The political economy of national security. New York: McGraw-Hill. Kennedy, P. (1987). The rise and fall of the great powers. New York: Unwin. Kidron, M. (1969). Western capitalism since the war. Harmondsworth: Penguin. Kotz, D. M., Mc Donough, T., & Reich, M. (Eds). (1994). Social structures of accumulation: The political economy of growth and crisis. Cambridge: Cambridge University Press. Lipietz, A. (1987). Mirages and miracles: The crises of global Fordism. London: Verso. Lovering, J. (2003). Introduction: The new orthodoxy. Paper presented to the Association for Heterodox Economists Conference, NTU, July 2003. Matthews, R., & Treddenick, J. (2001). Managing the revolution in military affairs. New York: Palgrave. Melman, S. (1970). Pentagon capitalism: The political economy of war. New York: McGraw-Hill. Melman, S. (1974). The permanent war economy: American economy in decline. New York: Simon & Schuster. Murdoch, J. C., & Sandler, T. (2002). Economic growth, civil wars, and spatial spillovers. Journal of Conflict Resolution, 46, 91–110. Murdoch, J. C., & Sandler, T. (2004). Civil wars and economic growth: Spatial dispersion. American Journal of Political Science, 48(1), 138–151.

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Parker, G. (1988). The military revolution: Military innovation and the rise of the west, 1500– 1800. Cambridge: Cambridge University Press. Pivetti, M. (1989). Military expenditure and economic analysis: A review article. Contributions to Political Economy, 8(1), 55–67. Pivetti, M. (1992). Military spending as a burden on growth: An underconsumptionist critique. Cambridge Journal of Economics, 16(4), 373–384. Pivetti, M. (1994). Effective demand, ‘Marxo-Marginalism’ and the economics of military spending: Rejoinder. Cambridge Journal of Economics, 18(5), 523–527. Richardson, L. F. (1960). Arms and insecurity: A mathematical study of the causes and origins of war. Chicago: The Boxwood Press. Rider, R. (2002). Plunder or trade. Defence and Peace Economics, 13(3), 199–214. Rosh, R. M. (1988). Third world militarisation: Security webs and the states they ensnare. Journal of Conflict Resolution, 32(4), 671–698. Rotte, R., & Schmidt, C. M. (2002). On the production of victory: Empirical determinants of battlefield success in modern war. IZA Discussion Papers 491, Institute for the Study of Labor (IZA), Bonn, Germany. Sambanis, N. (2002). A review of recent advances and future directions in the quantitative literature on civil war. Defence and Peace Economics, 13(3), 215–243. Sandler, T. (2000). Economic analysis of conflict. Journal of Conflict Resolution, 44(6), 723–729. Semmel, B. (1981). Marxism and the science of war. Oxford: Oxford University Press. Serfati, C. (1995). Production d’armes, croissance et innovation. Paris: Economica. Siqueira, K. (2003). Conflict and third-party intervention. Defence and Peace Economics, 14, 389–400. Smith, R. (1977). Military expenditure and capitalism. Cambridge Journal of Economics, 1, 61–76. Smith, R., & Dunne, P. (1994). Is Military spending a burden? A Marxo-marginalist Response to Pivetti. Cambridge Journal of Economics, 18, 515–521. Stewart, F., & Fitzgerald, V. (2001). War and underdevelopment. Oxford: Oxford University Press. Stone, R. (1988). When will the war end? Cambridge Journal of Economics, 12(2), 193–210. Walker, M. (1994). The Cold War. London: Vintage. Waltz, K. (2000). Structural realism following the Cold War. International Security, 25(1), 1–28.

INTERNATIONAL SECURITY, DEFENCE ECONOMICS AND THE POWERS OF NATIONS Ron Smith and Jacques Fontanel INTRODUCTION Defence economics is often not perceived as a subject, but as a series of questions that arise in the intersection between the spheres of strategy (the art of a general, the specialist in the use of force) and the sphere of economy (the processes of production, distribution and incentives). This overlap between economics and strategy occurs at the individual, the national and the systemic levels. This intersection or overlap is a contested terrain since economists and strategic studies specialists bring very different presuppositions to the party. Defence economics study take account of the realities of strategy, but the models it brings to the party are those of economists. In these overlapping spheres of economics and strategy, occurring at the individual, the national and the systemic levels, at each level one outcome of the interaction is the production of security. We are going to use this very simple framework to try and organise a lot of questions about defence economics. The framework is the interaction between the spheres of economy and strategy, producing as one output security or insecurity, happening at an individual, national and systemic level.

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 37–51 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06003-7

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SECURITY The Definition of Security Security has a large variety of meanings. Individuals are secured if they can have reasonable confidence in their safety and their ability to meet the basic needs that allow them to pursue a reasonable life. Threats to security can come from many sources: from environmental forces, such as disease and floods, from economic forces, such as financial crises and mass unemployment, and from strategic forces, such as war or terrorism (Fontanel, 2007). For nations, security might be thought about as the aggregate of the security of their citizens. But this is not how national security is normally defined because the definition given by the elites is not well-aligned with the interests of their citizens. So for instance, in some cases, the security of the citizens might be greater if that particular nation state ceased to exist. But the cases, where elites will accept that as an acceptable outcome, are rare; Czechoslovakia seems to be the only modern example. National security is a problematic concept, which can differ with the interests of the social categories. International security is less problematic because it can be regarded as the security of most people in the world, though some might want it to be the security of most nations in the world. Threats to international security are threats to the security of a large proportion of the world’s population. During the Cold War the major threat to international security was the danger of a nuclear war. Now the major threats are probably global warming, famines and terrorism. Perceptions of economic security reflect the importance or danger of actual conflicts, the evolution of military expenditures and of outlays for economic intelligence and interior security, notably the anti-terrorism fight. The growth of information technologies has introduced new threats, including information warfare by terrorist groups. The security research uses the functions of appropriation (intelligence), interdiction (limitation of the information access) or of manipulation (intoxication). However, it has to include the economic development, famine and poverty questions. The development model of USA, European Union and Japan is not compatible with a sustainable development. In this case, if there is an economic conflict the military power becomes an important component of the negotiations.

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The Production of Security At each level (individual, national, global) there is an input–output process as agents decide how much to allocate to their security budget, use it to procure forces, which provide them with capabilities that enable them to acquire security. This process is most obvious at the national level, but it operates at all three (Fig. 1). The linkages of Fig. 1 are not simple processes. There is massive variability and uncertainty in the links and the strength of each link. In the modern world, the production of capabilities for a State produces a reduction of the security for another State. At the individual level, economics emphasises Adam Smith’s observation of man’s natural propensity to ‘truck, barter and exchange’. But the strategist asks why ‘truck, barter and exchange’ when you can rob, pillage and loot. The interaction of these two spheres is the subject of a large literature on the economics of conflict. There is the literature on the optimal allocation between production and expropriation, the classic being by Hirshleifer (2001). Of course, Adam Smith got there first; both in the Theory of Moral Sentiments, which argued that empathy inhibited baser instincts, and in The Wealth of Nations on the duties of the sovereign to maintain property rights. Following Smith, it is the function of the state to stop people from choosing to rob, pillage and loot. However, sometimes, it is the state and their hierarchs who did most of the robbing, pillaging and looting. This question, where does enforcement come from, arises at all three levels. If two parties interact why does one or both of them not cheat, for example by stealing or using force. Enforcement may be by a third

Budgets Strategic Environment Forces Capabilities Economic Environment

Fig. 1.

Security

Inputs and Outputs to the Production of Security.

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party: The law or the social group who will ostracise the cheater? It may be second party enforcement, for example retaliation by the other party. It may be first party enforcement through morality or considerations of a long term self-interest in reciprocity. What is central to many of these analyses of the interaction of economy and strategy, at the individual, national and systemic levels, is solving collective action problems (e.g., Schelling, 2006). What are the incentives that cause people or nations to work together in their joint interests: the costs and benefits of cooperation, whether to trade together or to fight together against some common threat; Cooperation involves trade-offs. There are costs, particularly loss of autonomy, but there are also benefits from interdependence. When we talk about the international community we assume that this collective action problem has been solved, which it rarely has. One can look at the world as a pessimist and ask ‘Why is there so much conflict’? Alternatively, one can look at the world as an optimist and ask ‘Why is there so much less conflict than we might expect’? Quite a lot of the interesting economics of conflict is now about the economics of lack of conflict: how, even without legal enforcement of property rights, cooperation can arise. It may do this because cooperation dominates conflict in terms of self-interest. Cooperation within a group has been central to human survival since pre-historic terms, lone individuals could not survive. Cooperation between groups is more problematic but again it evolved very early as the evidence for pre-historic long-distance trade shows. Seabright (2004) discusses the role of trust; Dixit (2004) shows how alternative institutions to support trade can arise in the absence of state enforcement.

NATIONAL SECURITY At the national level, defence economics has traditionally been about the economic aspects of defence policy. Again, defence policy lies in the intersection of the spheres of economics, which provide the resources that supply defence output and strategy, that provide the demand for it. When economists have to work with defence and security problems, they try to give some replies to three fundamental questions that have guided studies links between the economy and defence policy (Fontanel, 2002):  Guns or butter? What are the opportunity costs of military spending on economic development? However, there is an apparent paradox. It is possible to have a large amount of defence expenditure with economic

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growth and sometimes no good economic results without any military expenditure. What new synergies between private and public military enterprises will be coming to light?  What is the Bang for the Buck? Considering the military efficiency of arms and strategies, what are the best arms purchased between the same kinds of weapons (such as what choice of tanks or guns) in relation with economic constraints? Nuclear weapons or not?  What is the optimal level of spending? Given that societies have military as well as civilian goals with relatively limited resources available, what are the allocations of public funds on defence in relation with the uncertainty of particular threats? It is the main question of the policy of arms race (Fontanel, 2005). The classic question is: ‘how much is enough’? What is the right share of output to devote to defence? There is a set of input–output relations, each of these, with links to the economic and strategic environments. At the top there is the defence budget, the 500 billions of dollars and the 25 billion pounds that the USA and the UK pour into the system. This buys forces, the things listed in the IISS publication The Military Balance: the number of personnel, tanks, aircraft, etc. These forces provide military capabilities: the ability to do things, in particular to prevail in specified sorts of conflicts. These military capabilities can then be used for defence or deterrence to provide security, measured in terms of the ultimate goals of society. All these links are problematic. In the mid-1970s the CIA doubled its estimates of the share of output that the USSR devoted to the military. This was not because they thought that they had underestimated the forces that the Soviets could field, but because they had over-estimated the efficiency of the Soviet defence industry. They now thought that it cost twice as much as they had previously estimated to field those forces. Although the revision was widely interpreted as indicating that the Soviets were more threatening, in fact it indicated that they were less threatening, only half as efficient. Much modern defence economics centres on arms races. It analysed itself as a dynamic process of interaction and competitive increase of the quantity and/or the quality of armaments by two or several States (or coalition of States). The two equation model of Richardson (1960), with the race driven by political, strategic and economic factors, constitutes the basic model. It introduced the military expenditures of the enemy or the enemies, the economic burden (the effect of fatigability) and the grievances. Brito and Intriligator developed this model, introducing more complexity. However

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several critics of these approaches argued that insufficient account is taken of the internal determinants of military expenditures. Firstly, the econometric evidence for such action–reaction processes determining defence budgets is relatively weak. In contrast Melman (1974) and others stressed the internal forces driving military expenditures. Secondly, they were not capable of putting in evidence the crisis of Soviet Union, because the definition of the threshold of the fatigability was not easy to determine. Thirdly, they give a ‘security’ justification to the increase of military expenditures. These models of arms race tended to emphasise economic considerations, forgetting to specify the structural characteristics of the studied States. They so made the implicit hypothesis of the resemblance of the rival States. However, the technological superiority is not a guarantee of security or of a victory in case of war. How much capability you get for your forces depends on all those military skills: leadership, training, strategy, tactics, logistics, morale, maintenance of the equipment, etc. How military capabilities translate into security is a matter of grand strategy. In particular, there may be more effective means of maintaining security than military means. In 1946 France had been invaded by Germany three times in the last 75 years. It could have constructed another Maginot Line to protect itself, but instead worked at creating such economic interdependence that war would be impossible. Of course, to be on the safe side during the Cold War, it did keep its nuclear missiles targeted on West Germany. The standard defence economics model of security is through an arms race with a similar competitive nation, but this often loses many of the interesting features. The strategic use of the budget by the State and the military staff is very important for national security. In the example of Maginot Line, the money was used for a defence strategy that was not successful. This structure provides a way of determining the defence budget by thinking forward, working out where you want to be, and reasoning back. In principle national powers look at the threats to their security; work out the capabilities required to deter or defend against those threats; establish the forces necessary to mount those capabilities; and cost those forces to get the budget. At its optimum the marginal security benefits of the defence budget are equal to its opportunity cost: the benefits got from spending the budget on other needs. However, the strategic games are not easy to interpret. Should strategy be offensive or defensive? What is the right balance between capital (more aircraft) and labour (more soldiers)? The Defence Ministry has to make a lot of choices, which usually do not concern the short run, but set the national strategy for decades.

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Moreover, industrial and political interests, inter-service rivalry and a variety of bureaucratic forces are often more important. Examples of models involving such calculations can be found in much work on the demand for military expenditure (e.g. Smith, 1995). While the process is simple in principle, in practice it is difficult and highly controversial, even without the operation of vested interests. What are the possible threats to the UK or France and how likely are they? Some would say currently there are no likely threats and the threats we do face, global warming or terrorism are not amenable to a military solution. It is then possible to conclude to a defence budget of zero. Others would say, while there are no obvious military threats you never know what may happen, so it is sensible to maintain a military as an insurance policy. Then it is a question of what is a sensible insurance premium: 2 percent of output? One percent? How much is enough? But of course, the government may then decide that while it is only willing to pay a basic insurance premium for the military, but once they are there it may as well use them; so it sends them off to Sierra Leone, Afghanistan or Iraq. Thus we get overstretched because of the failure of the government to match the commitments it incurs with the capabilities that it is willing to pay for. The Treasury is quite sympathetic to the fact that the UK armed forces are overstretched, but it is deeply suspicious of the resource allocation process in the Ministry of Defence (MoD). If it provides more money, it will not go to relieve overstretch but will be poured into those equipment black holes such as, Typhoon, the aircraft carriers and now Trident replacement.

Military Budgets and the Economy What are the macro-economic effects of military budgets on the economy? The answer may not be very interesting for relatively low shares of military expenditure. In financing large wars, the macroeconomic effects are crucial, but under about 3% of Gross Domestic Product (GDP) by year for a decade they may be small. Currently, decisions about defence budgets probably should be taken in terms of threats and opportunity costs, and not just macro-economic effects. There are more effective economic policy instruments than the defence budget. Higher military expenditure means other government expenditure is relatively lower, taxes are higher, or the budget deficit is higher. Higher budget deficits may mean higher interest rates, which may reduce consumption and investment. A lot of the peace dividend in the 1990s in the US and UK, following the post Cold War reductions in military

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expenditures, came through budget surpluses and lower interest rates. If there is unemployment, higher military expenditure boosts demand and can reduce unemployment. This happened after the Great Depression of the 1930s a period of high unemployment when military expenditure went up for World War II. However, the German armament industrialisation was part of a process of preparing for war. With relatively full employment, using labour in the armed forces or ministry of defence diverts them from other productive activities. Military expenditure may reduce investment, perhaps through the crowding out caused by higher interest rates as a result of government deficits. There may be an effect on technical progress. The arms trade may have effects on the balance of payments (e.g., Garcia-Alonso & Smith, 2006). We do not think any of these effects are particularly large. There is a vast statistical literature, on this ‘guns and butter’ or ‘swords and ploughshares’ issue. Some get positive effects, some negative, some near zero. Overall the literature has no definite conclusion. In this respect, the literature is the same as the bible. In Isiah 2:4 ‘They will beat their swords into plowshares and their spears into pruning hooks. Nation will not take up sword against nation, nor will they train for war anymore’. However, Joel 3:10 ‘Beat your plowshares into swords and your pruning hooks into spears. Let the weakling say, ‘I am strong’’. There is a large economic literature on the conversion of military resources to civilian use, for example, after base closures or reduction of arms production. The reason that there are no clear conclusions is that there is a classic identification problem. There are both positive (demand) and negative (supply) relationships and the net balance will depend on the threat influencing the demand for military spending and the growth potential of the economy influencing the supply side. As a result anything is possible; you can observe all four combinations of high and low growth and high and low share of military spending in GDP.  Countries with a high threat, not so high military expenditure but great growth potential, such as, South Korea and Taiwan in the 1970s and 1980s, show a high share of military and a high growth rate.  Countries where a high share of military expenditure did displace productive investment and other factors were unusable to growth, such as, the Soviet Union, where the share was probably over 20%, show a high share and low growth.  Countries such as, post-war Japan and Germany that restricted their military expenditure and could devote it to investment showed low shares and high growth.

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 Countries such as, most of Sub Saharan Africa where shares of military expenditure are low, so is growth.

Budgets and Forces How many forces you get for your budget is the ‘bang for a buck’ issue. It depends on national wage rates, with volunteer forces; the efficiency of the defence industry in building the weapons; the costs of other inputs, fuel, food, etc.; the size of the non-fighting bureaucracy and the efficiency of the expenditure and acquisition process itself. This raises a range of standard defence economics questions about importing–collaborating–producing– exporting; defence industrial strategies; types of procurement process, costplus fixed price etc.; the balance between quality and quantity of equipment, etc. Some of these issues are addressed in Dunne, Garcia-Alonso, Levine, and Smith (2007). What forces you get for your expenditure is a more microeconomic issue. In the labour market there is the issue of the relative advantage of volunteers and conscripts. Economists are strongly in favour of volunteer forces, just like they tend to favour free trade. There is an issue of the relationship between the armed forces and civil society, both in the role of the warrior ethos and the treatment of gays and women. In the product market, there are the issues of where you get your weapons from abroad, collaboratively or at home. How you procure them, cost-plus or fixed price. Whole cycle goes round, with the problems of time and cost over-runs. What sort of defence industrial strategy you should have? What is the value of arms exports? There are vast economic literatures on all these topics. In technology there has been substantial debate about the value to civilian society of spin-offs from military technology. There certainly have been spin-offs, the internet was originally developed by DARPA and GPS was originally a military system. But this is not a justification for military spending any more than the fact that the World Wide Web was developed at CERN is a justification for spending on particle physics. The important issue is how the military gets the technology it needs to meet its military objectives. There is now a defence technology strategy that tries to address that issue. In many cases the military gets the technology from commercial sources. The main problem is that military time-scales are so different from commercial ones. By the time the weapon system enters service, not only are

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the electronic components in its obsolescence, they are often no longer even being produced. Since that system may be in service for 30 years or more, causing big problems with spares. Big commercial producers such as, Microsoft are also unwilling to provide the guarantees that military customers have traditionally demanded.

Forces and Capabilities The transformation of forces to capabilities, the ability to win, depends on all the standard military virtues: training, logistics, leadership, morale, tactics and strategy and because of the vagaries of all these things it can be a very uncertain transformation. Voltaire argued ‘God Was on the Side of the Big Battalions’. If so God’s help does not seem an asset: it is very often the case that the small battalions win particularly when those smaller forces fight in ways that the big guy was unprepared for, so called asymmetric warfare, for example the references in Dunne, Garcia-Alonso, Levine, and Smith (2006). This means that the contest success functions used in much of the conflict literature must be a lot more complicated than is usually the case.

INTERNATIONAL SECURITY Globalisation At the systemic level defence economics concerns the overlap between the global economic environment and global strategic environment. The economic environment is the sphere of trade, globalisation, the price of oil, the future of the dollar, etc.; the strategic environment is the sphere of nuclear proliferation, interacting national interests, threats, failed states, etc. The main examples of analyses of the interaction of economy and strategy at the systemic level are historical works, such as Kennedy (1988) who examined the interaction of economic change and military conflict since 1500 and Diamond (1997) who examines the interaction over the last 13,000 years. There are a variety of less complex systemic theories. Mercantilism/ Leninism, which sees strategic conflict as a continuation of economic competition by other means and Manchester Liberalism which sees close trading links as inhibiting military conflict both have their adherents today (e.g., Coulomb, 2004).

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Although globalisation is the current buzz word, it is important to note that globalisation is neither new nor inevitable. To note that it is not new, consider this quote: ‘Modern industry has established the world markety. This market has given an immense development to commerce, to navigation to communication’. That was Marx and Engels in the Manifesto of the Communist Party in 1848, over 150 years ago. They go on to say: The bourgeoisie, by the rapid development of all the instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization. The cheap prices of its commodities are the heavy artillery with which it batters down all the Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate.

This passage was quoted in an article on the implications for China of joining the World Trade Organisation (WTO). The article took joining the WTO as an event of historic significance comparable in importance to China’s opening up after the Opium Wars. That was a case where Britain, promoted free trade, by battering down the Chinese Walls against trade with real artillery. The first Opium War between Britain and China was from 1839 to 1842 so Marx and Engels, writing in 1848, were possibly being ironic about the artillery. Again it is the intersection between economy and strategy. So globalisation is not new. The impact of the telegraph and steamships, which disrupted European agriculture and politics in the late nineteenth century as cheap North American grain arrived, were as large as modern changes in communications technology. The nineteenth century flows of labour were much larger proportionately than the immigration we worry about today. On some measures we have only recently passed the degree of globalisation observed in 1913. That also makes it clear that globalisation is also not inevitable, it was ended by World War I and the inter-war depression. It might be ended again. The historical perspective is also useful in looking at an industry where economy and strategy interact and which has been quite slow in globalising: the arms industry. Because more advanced weapons give a potential advantage to adversaries, restriction on their transfer has been common: in the eighth century Charlemagne declared the death penalty for Frankish merchants selling swords to Vikings. Organised arms production on a large scale, for example, naval dockyards and royal arsenals, has a long history; but the modern arms industry dates from the mid nineteenth century and from the beginning it was global. Nobel’s dynamite and cordite, both dual use systems, were produced in subsidiaries around the world. Technological

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developments in metals production in the second half of the nineteenth century were rapidly applied to arms by Krupp in Germany and Armstrong and Vickers in Britain, all of whom relied heavily on foreign sales. Sir Hiram Maxim, an American operating in Europe, sold his guns all over the world. By the beginning of the twentieth century there was a dense multinational network of interlinked arms firms and specialised arms merchants. George Bernard Shaw’s play of 1905, Major Barbara, addresses the issues of international arms manufacture as perceived in the early twentieth century. This phase also ended with World War I, which was attributed by many to the ‘Merchants of Death’ and subsequently states intervened in their arms industries much more extensively. In the late twentieth century, the involvement of nation states slowed the process of globalisation of the arms industry, compared to other industries, but that phase may be changing.

The Power of Nation States Both in the economic sphere and in the strategic sphere there is a perception that the power of the nation state to act is reduced, that it is more constrained and less effective at meeting its national goals. This should not be exaggerated. There is a saying that economists study how people make optimal choices, while sociologists study how people have no choices to make. So it is with nation states. The fact that it is often optimal for nation states to surrender sovereignty does not mean that they have no choice about it, merely that the costs of not doing so are very large. Countries can try to be autarkic, such as, Albania did, but the costs are very high. Geopolitics centres on the balance of power between states, those who dominate and those today that appear less capable. To be a major power, it is necessary to benefit from a strong economy, to master progress in communication and in energy, to take advantage of a State very capable of projecting a real diplomatic policy, of having a reliable currency of spare instrument and international deals, of being able to act outside its own borders to insure the transfer of the vital resources (water, petroleum or networks), to possess a nuclear strategic force and to have a universally enough cultural life to establish a force of attraction. The probability of an armed conflict is often taken into account in the economic decisions (Fontanel, 2002).

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Nations remain very important. The vast bulk of economic production and activity takes place within nation states, but it is the times that it does not, for example offshore gambling over the internet, that attract attention. The vast bulk of nation states provide at least the minimal law and order and infrastructure that is required for economic activity to proceed. But again it is not the majority but the minority of failed states that attracts attention. There are international institutions, but their effectiveness depends on the willingness of the nation states to support their activities. But permeable economic and security borders make states nervous and they feel threatened by global movements, from outsourcing of jobs to the Far East to the pressures of immigration, that seem outside of their control. Is this hypochondria? They are not ill; a nation state really has the power to act if they have the will, or is there really a reduction in power? Life in this overlap can be difficult. Firstly, there is ‘separate tracking’ of issues in the two spheres. The people who go to international economic negotiations are not the same people who go to international security negotiations. The people who go to the WTO meetings are not the same as the people who go to the meetings of the Wassenaar Arrangement. Oddly while we have just one organisation, the WTO, to regulate trade in goods, we have four for weapons (Wassenaar Arrangement, conventional; Australia Group, chemical and biological; Nuclear Suppliers Group, nuclear; Missile Technology Control Regime, missiles). Similarly, the people who go to the UN and NATO are not the same as the people who go to meetings of the World Bank and IMF. This separate tracking can be good in that it insulates the spheres, countries can be in dispute in one sphere and cooperating in another, but there is a danger of actions in one sphere having unintended consequences in another.

CONCLUSION The pace and nature of change in the spheres of economics and strategy is quite different. In economics change is fast but gradual, things are changing steadily all the time, albeit with the occasional crisis. The Strategic sphere is more like plate tectonics, tensions build up, often as a consequence of economic pressures, but nothing happens for a long time, the system is locked in stasis. Then there is an earthquake, a rapid and extreme

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adjustment that upsets the system, occurs. Often these earthquakes are associated with major wars, but not always; the collapse of the Soviet Union was an exception. For Machiavelli, laws and arms constitute the main foundations of States. In this situation, the military force may be perceived as a necessary, and not sufficient, condition for the national economic development. Today, the military actions are privileged, but not for predation objectives. With the economic international dependence, the superpowers understand that without the threat of the use of their weapons, they are dependent on all states that are in situation of force for a special strategic production or resources. Globalization and universality are not going together; instead they are exclusive one and the other. Globalization regards technologies, markets, tourism or information. Universality concerns values, human rights, liberties, culture, and democracy. Globalization seems to be irreversible, the universal is dying out. (Baudrillard, 1996)

REFERENCES Baudrillard, J. (1996). Le mondial et l’universel. Libe´ration, March 18. Coulomb, F. (2004). Economic theories of peace and war. London: Routledge. Diamond, J. M. (1997). Guns germs and steel: A short history of everybody for the last 13,000 years. New York: Random House. Dixit, A. (2004). Lawlessness and economics, alternative models of governance. Princeton: Princeton University Press. Dunne, P., Garcia-Alonso, M., Levine, P., & Smith, R. (2006). Managing asymmetric conflict. Oxford Economic Papers, 58, 183–208. Dunne, P., Garcia-Alonso, M., Levine, P., & Smith, R. (2007). Determining the defence industrial base. Defence and Peace Economics, 18(3), 199–222. Fontanel, J. (2002). Globalisation e´conomique et se´curite´ internationale. Coll. Coˆte´ Cours. Avant-Propos de Kenneth Arrow. Grenoble: Universite´ Pierre Mendes France. Fontanel, J. (2005). La globalisation en analyse. Ge´oe´conomie et strate´gie des acteurs, Collection ‘‘La Librairie des Humanite´s’’, Paris: L’Harmattan. Fontanel, J. (2007). Le concept de se´curite´ et l’e´conomie. In: La securite´ internationale entre rupture et continuite´, Me´langes en l’honneur du professeur Jean-Franc- ois Guilhaudis, Bruxelles: Bruylant. Garcia-Alonso, M. & Smith, R. (2006). The economics of arms exports controls, Chapter 2 of D. H. Joyner. The future of multilateral nonproliferation export controls (pp. 29–45). Ashgate: Aldershot. Hirshleifer, J. (2001). The dark side of the force, economic foundations of conflict theory. Cambridge, UK: Cambridge University Press. Kennedy, P. (1988). The rise and fall of the great powers: Economic change and military conflict from 1500 to 2000. London: Unwin Hyman.

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Melman, S. (1974). The permanent war economy, American capitalism in decline, Simon and Schuster. New York. Richardson, L. F. (1960). Arms and insecurity. Pittsburg: Boxwood Press. Seabright, P. (2004). The company of strangers, a natural history of economic life. Princeton, NJ: Princeton University Press. Schelling, T. C. (2006). An astonishing sixty years: The legacy of Hiroshima. American Economic Review, 96(4), 929–937. Smith, R. P. (1995). The demand for military expenditure. In: K. Hartley & T. Sandler (Eds), Handbook of defence economics (Vol. 1). Amsterdam, North Holland: Elsevier.

GLOBAL SECURITY AND HUMAN SECURITY Michael D. Intriligator and Fanny Coulomb The world peace and the international cooperation through common institutions are recurring ideas since the first philosophic and economic thoughts. The idea of the pacification of the international economic relations by the growth of the trade interdependences goes back to the first economists and notably to Adam Smith. In the continuance of this idea, the contemporary globalization was often interpreted after the end of the Cold War as marking the end of the risks of major conflict. There has been much recent discussion of globalization, that is, of course a reality in the current world system. It should not be forgotten, however, that the current age of globalization is just the latest manifestation of this phenomenon. An earlier period of globalization, extending over the 19th century, from the end of the Napoleonic Wars in 1815 to the outbreak of World War I in 1914, ended with four blows. The first was ‘‘The War to End All Wars,’’ World War I; the second was the influenza pandemic of 1918–1919; the third was the Great Depression starting in 1929; and the fourth was World War II starting in Europe in 1939 and even earlier in Asia. The UN system today must be prepared to deal with comparable challenges in the future including wars, pandemics, economic depression, and other threats. In 1905, before these four blows materialized, the philosopher George Santayana wrote, ‘‘Those who cannot remember the past are condemned to repeat it.’’ We should take that the world system of the 21st century could War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 53–66 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06004-9

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travel the same disastrous route that the 20th century charted. We should consider the possible repetition of these earlier disasters and how they could be avoided through effective reform and revitalization of the UN system. Indeed there are disquieting similarities between 1913 and now – the unprecedented threat of extreme nationalism then and that of global Islamist terrorism today, the Spanish flu pandemic lurking then and a potential avian flu pandemic lurking today. Therefore, I consider it vital that the UN take the global initiative on today’s issues and major threats to the international system. In fact, when comparing 1913 and 2006, the presence of UN as an institution is the major difference in the world affairs and the global system. In an address in 1993, I defined ‘‘global security’’ as the absence of threats to the vital interests of the planet and I argued that this new concept should replace that of ‘‘national security.’’ Furthermore, the idea of security must extend well beyond its traditional military dimension to encompass the interrelated military, political, economic, environmental health, and other threats I list above. Now is an opportune time to build global consensus on these issues and the logical party to take the initiative would clearly be a revitalized UN. International cooperation will become increasingly important in achieving our shared global security goals. We will need new theories and analytic frameworks for global security to replace traditional theories such as containment, balance of power, deterrence, and hegemonic stability. ‘‘Human security’’ will be defined here as the absence of threats to the vital interests of individual people on a worldwide basis. In the words of the UN Development Programme, which originated the concept, human security is ‘‘freedom from pervasive threats to people’s rights, safety or lives,’’ involving both ‘‘safety for people from violent threats, such as organized conflict, gross violations of human rights, terrorism and violent crime’’ and ‘‘safety from non-violent threats, such as environmental degradation, economic crises, illicit drugs, infectious diseases and natural disasters.’’ These two concepts of security, global security and human security are not inconsistent; rather, they are both complementary and mutually reinforcing.

THE CURRENT THREATS HANGING ON THE WORLD PEACE F. Fukuyama resumed the idea, according to which the humanity inevitably progresses toward a pacification of the international relations after the end

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of the cold war in his theory of the end of history. Observing the political turnovers at the end of the 1980s and the world spreading of democracy and liberalism he so considered that wars would be less and less likely. But 15 years after the end of the cold war, the perspectives of a durable international disarmament have been disappointed by the ascent of the international terrorism and the American rearmament. The phenomenon of the globalization has made most industrialized countries more vulnerable to attacks, due to the globalization of communications, the development of international transport (notably aerials), the concentration of populations and resources in urban zones, etc. The greater liberalization of international economic activities does not so seem to correspond to a pacification of the international relations and does not thus confirm the liberal hypothesis of the peace by free trade set up as dogma from the end of the 18th century with the English classic school. The main current world economic power, the United States, is engaged in a process of unprecedented increase of its military expenditures, based on a new doctrine that weakens the international strategic balance and increases the risks of military conflicts.

The Special Threat Posed by U.S. Nuclear Weapons Policy under the Bush Doctrine Attention should also be directed to the remarkable changes in recent years in U.S. nuclear weapons policy under the administration of President George W. Bush that affect global security and call for serious consideration worldwide. These changes were announced in 2002 in three official documents and they constitute a new doctrine, the Bush doctrine, ending the security system and nuclear weapons policies of the Cold War period and creating the basis for the U.S. invasion and occupation of Iraq starting in March 2003. They represent a discontinuous sea change in the international security system that calls for discussion, debate, and analysis. The earlier bipolar world has been replaced by a proposed unipolar world with the U.S. under President Bush seeing itself as the dominant power or sole superpower. The mutual deterrence system that was part of the Cold War has been replaced by U.S. unilateral actions against possible rivals, including ‘‘regime change’’ as seen in Afghanistan and Iraq. Cooperative approaches to national and international security and alliance systems that had existed in the earlier epoch have been replaced by unilateral U.S. policies and actions.

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These current concepts related to U.S. nuclear weapons doctrine call for a wide-ranging debate both nationally and internationally. Unfortunately, this has not happened, possibly due to the concern over the U.S. wars in Afghanistan and Iraq that were ironically examples of these new policies put into action. Both the new policies and their underlying goals should be subjects of intense scrutiny leading to rethinking in Washington and elsewhere. The background to these new nuclear weapons doctrines include the end of the Cold War in 1989; the dissolution of the Soviet Union on Christmas day 1991; the Project for a New American Century (PNAC) that was established in 1997 ‘‘to promote American global leadership;’’ the advent of the new Bush administration in January 2001, which included many of the PNAC individuals in major leadership positions; the September 11, 2001 terrorist attacks on the World Trade Center and the Pentagon; and the ensuing declaration by the Bush administration of a ‘‘War on Terrorism’’ later broadened to a ‘‘Global War on Terror.’’ Following on the adoption of these new policies were the invasion and occupation of Afghanistan and Iraq. The first of these documents is the U.S. Nuclear Posture Review (NPR) that was delivered to the U.S. Congress by the U.S. Department of Defense in January 2002. According to the NPR, ‘‘A combination of offensive and defensive, and nuclear and non-nuclear capabilities is essential to meet the deterrence requirements of the 21st century.’’ It is a wide-ranging analysis of the requirements for deterrence in the 21st century. It states that it does not provide operational guidance on nuclear targeting or planning. Rather, it states that the Department of Defense continues to plan for a broad range of contingencies and unforeseen threats to the U.S. and its allies in order to deter such attacks in the first place. It does, however, refer to the ‘‘ypossible use of nuclear weapons in an Arab-Israeli conflict, in a war between China and Taiwan, or in an attack from North Korea on the South.’’ It also refers to the possible use of nuclear weapons against targets able to withstand non-nuclear attack, in retaliation for attacks by nuclear, biological, or chemical weapons or ‘‘yin the event of surprising military developments.’’ Thus, it calls for possible use of nuclear weapons in various contingencies, including against non-nuclear weapons states and in response to conventional weapons. According to the NPR the U.S. reserves the right to use nuclear weapons, thereby possibly breaking the long-standing taboo against their use that has existed since the first use by the U.S. against Japan in August 1945. According to this statement of U.S. policy they are to be treated like any other weapon with no sharp distinction from non-nuclear weapons.

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The second of these documents is the National Security Strategy of the United States of America (NSS) that was issued by the Office of the National Security Advisor to the President, Condoleeza Rice, in September 2002. It is an unclassified and open public document that is available on the White House website. According to the NSS, there are plans to ensure that no nation could rival U.S. military strength. The emphasis is on defeating rogue states and global terrorists, noting that deterrence will not work against such enemies. It proclaims the doctrine of U.S. preemption, where it states that the U.S. ‘‘ycannot let our enemies strike first’’ and gives arguments for such preemption. (Some scholars and analysts have noted correctly that this is not a doctrine of preemption but rather one of preventive war.) It notes that, ‘‘For centuries, international law recognized that nations need not suffer an attack before they can lawfully take action to defend themselves against forces that present an imminent danger of attack.’’ It further states, ‘‘The U.S. has long maintained the option of preemptive actions to counter a sufficient threat to our national security.’’ It should be noted, however, that the U.S. did not preempt in most of the recent wars it has fought, including the two World Wars, Korea, Vietnam, and the Gulf War. Far from there being historical precedents, this new policy represents a fundamental shift from a U.S. policy of reaction to a new policy of initiation – from wars of necessity to wars of choice. It is too early to say that this policy of preemption in the Iraq War was a success or failure, but the costs in terms of both casualties and dollar spending have been immense, and much larger than expected. Indeed, this war is being seen more and more as a quagmire and likened to the Vietnam War. As to its dollar cost a careful accounting of its costs in January 2006 by Nobel Laureate economist Joseph E. Stiglitz and Linda Bilmes, former Assistant Secretary of Commerce who now teaches public finance and government budgeting at the Kennedy School of Government at Harvard, estimated its cost as much higher than previously reckoned, amounting between $1 trillion and $2 trillion, depending primarily on how much longer it lasts. This study provides an important analysis of the cost of Bush’s preemption strategy in Iraq. The third of these documents is the National Strategy to Combat Weapons of Mass Destruction (NSWMD) that was issued by the White House in December 2002. As in the case of NSS, NSWMD is an unclassified and open public document that is available on the White House website. It notes that weapons of mass destruction (WMD), including nuclear, biological, and chemical weapons in the possession of states hostile to the U.S. or terrorists represents one of the greatest security challenges facing the

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U.S. It states that an effective strategy for countering WMD, including their use and further proliferation, is an integral component of the National Security Strategy of the U.S. It also states that, as in the war on terrorism, the strategy for homeland security, and the new concept of deterrence, this new approach to WMD represents a fundamental change from the past. It affirms that the highest priority is accorded to protection of the U.S. and its allies from the threat of WMD. The three pillars it announces are counter proliferation to combat WMD use, strengthened non-proliferation to combat WMD proliferation, and consequence management to respond to WMD use. It discusses such policies as interdiction of WMD, new methods of deterrence with threats of overwhelming force, and defense mitigation including the destruction of an adversary’s WMD before their use, on a first-strike attack as in the preemptive policy enunciated in NSS, as well as the traditional non-proliferation approaches. It does not exclude the use of nuclear weapons to destroy facilities that could produce nuclear weapons. Following the 9/11 attacks, the U.S. President George W. Bush initiated a ‘‘War on Terror’’ that was later broadened to a ‘‘Global War on Terror’’ or GWOT. Many have noted that there is no clear enemy in this war as terror is in the mind of the beholder and also that there is no clear end to such a war, as the tactic of terror has existed throughout history. The German philosopher Immanuel Kant wrote the essay ‘‘Perpetual Peace’’ in 1795, in which he considered the possibility of such a peace if states were small and democratic, later analyzed by current political scientists as the theory of ‘‘democratic peace.’’ By contrast the ‘‘Global War on Terror’’ is one of ‘‘Perpetual War’’ and thus a fundamental threat to global security that must be overcome by global collective action. We can wonder about the drivers of the current increase of American military expenditures. Many economists, and notably J. K. Galbraith during the Cold War, have denounced the self-maintained character of the increase of the American military expenditures, because of the collusion between the various parties benefiting from this increase. As soon as 1939, Richardson published the first sketches of its founding model of the arms race. He then aspired to warn governments on the risks for the world peace, the arms race process risking to drive the world to an open conflict. Today the United States rearms one-sidedly, but in a world marked by the proliferation of weapons of massive destruction, their large military expenditures may be considered as threatening the world peace. Nevertheless, there are many other threats already at the international level, against which all countries should mobilize and above all the United States.

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The Multiplicity of the Contemporary Threats for the Global Security Our planet, its many nations, and its billions of people, all face a vast and sometimes overwhelming array of threats, an increasing number of which are existential. These threats include: 1. International transborder wars (e.g., Iraq/Kuwait 1990–1991, U.S./Iraq 2003–present); 2. Internal or civil wars (e.g., the current conflict in the Democratic Republic of the Congo, which has led to millions of military, guerilla, and civilian deaths); 3. Genocide and large-scale human rights abuses (e.g., Darfur); 4. National and international terrorism (e.g., Aum Shinrikyo and the Tokyo subway system in 1995, the Islamist attacks on the transit systems of London and Madrid); 5. Paramilitary groups and crime organizations that can facilitate terrorist strikes, (e.g., the IRA, FARC, and right-wing extremist groups in the U.S.); 6. Proliferation of nuclear, radiological, chemical, and biological weapons; 7. Pandemic threats due to infectious diseases (e.g., the 1918–1919 flu pandemic and the current possibility of a H5N1 strain of avian flu pandemic); 8. Other widespread diseases, especially AIDS/HIV, tuberculosis, and malaria; 9. International financial instabilities, such as the 1997–1998 East Asia financial crisis that spread from Thailand to many other nations, including the Philippines, Indonesia, and even to Russia. 10. Protectionism, especially the EU Common Agricultural Policy and U.S. subsidies for cotton and other crops that have had devastating effects on developing nations and their populations; 11. Global climate change, global warming, and other environmental threats; 12. Natural disasters, including earthquakes, floods, hurricanes, tornados, and tsunamis; 13. Poverty, hunger, and malnutrition; 14. Imbalance of energy supply and demand, particularly with the emergence of nations such as China and India as major demanders of energy at the same time that some energy supplies are being depleted or exhausted; 15. Failed and failing states.

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Some of these threats existed when the UN was created in 1945 while others are new. They represent immediate and major threats to the planet or the human species, and thus endanger global security. Furthermore, they are interrelated. Because of globalization, a threat to one nation or region is a threat to all, with all mutually vulnerable. Indeed many of these threats feed on one another in a deadly cycle. A common feature of all these threats is that they cannot be addressed by one nation, no matter how powerful, acting alone. Rather they require international cooperation, with increased reliance on existing but revitalized international institutions, including the UN and its affiliated bodies, and the creation of new international organizations. Many of these problems have regional or global significance, and do not respect national boundaries. They demand coordinated remedial measures at national, regional, and international levels – involving governments, non-governmental organizations (NGOs), other international organizations, and the private sector. For a system of global governance to deal effectively with fundamental threats to security, whether it is the UN or some successor organization, we will need to approach security from a global perspective rather than merely a national one. Our world is now so highly connected and interdependent that it is impossible to confine security to arbitrarily defined national frontiers.

SOME PROPOSALS TO SECURE THE WORLD SYSTEM By contrast to this Bush doctrine, the concept of global security recognizes the need to create a new global system comparable to the creation of a new world system after World War II, one that would encompass not only security but also economics, politics, and other issue areas. This new global system would treat problems of security, both military and non-military, through strengthening existing international institutions or creating new global institutions. These new institutions could be built, in part, on the UN system and its components. They would involve supranational decisionmaking and authority with enforcement capabilities, transparency, and accountability, and with global perspectives and responses. Participation in the global decision-making process would be through close international cooperation. There would be a prohibition against preemption by any one nation, no matter how powerful, in favor of collective action. Such a system

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of global security should be preferred to the current system of the U.S. as a hegemonic global power.

Restructuring the UN System: The Role of International Agencies, NGOs, Multinational Corporations, and Others The association of nations, with the implementation of institutions for a peaceful settlement of conflicts, is an old idea of many philosophers but also economists, notably those writing during the 19th century in Europe. As example, the economist F. Passy particularly contributed to the development of the movement of peace in France, by basing the international League of the peace in 1867 and the Society for the arbitrage between nations in 1870. He received the Peace Nobel prize in 1901, with H. Dunant. Passy notably advocated for the project of a large European custom union and for European disarmament. The economists having proposed the implementation of international authorities of conflict resolution have been numerous before the First World War from the utopian socialists to the liberals. These projects will partially become a reality with the creation of League of Nations in 1920. Some economists, and notably J. M. Keynes, will base high hopes in the conflict resolution through international economic sanctions; these hopes will later be disappointed by the failure of the League of Nations. The international institutions created after World War II shared the same ambition to avoid future international conflicts and the United Nation Organization became the main place for the interstate dialog. Today UN remains the only international institution allowing a collective management of the major threats pressing on the humanity. Its role should therefore be reinforced, notably thanks to a dialog with the representatives of the civil society, in particular the NGOs and other associations. One important example of global insecurity is the threat posed by the avian flu H5N1 strain. This virus has the potential to surpass even the 1918–1919 pandemic, which killed tens of millions of people worldwide. Are the World Health Organization and other international agencies affiliated with the UN as well as various national and multinational institutions are able to deal with this threat? If not, should these agencies be reconceived or should new institutions be created to replace them? I propose that the UN cooperate more closely with major institutions at the global or regional level. Many of these did not exist when the UN was created and are thus not part of the Charter; others play too small a role in

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‘‘business as usual’’ at the UN. Among these institutions are NGOs, particularly the international NGOs that are accredited to the UN and its constituent bodies (especially the Economic and Social Council). These international NGOs are action organizations with global constituencies and reach. For example, without the involvement and active participation of NGOs there would be no Landmines Treaty; nor would many of the various environmental conventions and treaties exist. More could and should be done, however, to involve the NGOs in the operation of the UN and its various affiliates. As one example, my own NGO, Economists for Peace and Security (http://www.epsusa.org/), regularly participates in the Disarmament Week organized every October in New York by the UN Under-Secretary General for Disarmament Affairs. This meeting provides an excellent opportunity for the UN to announce its plans in this area and to receive suggestions on new programs and initiatives by the participating NGOs. All UN agencies might follow this example and establish a regular time and place to meet with those international NGOs that are accredited to the UN. Other major institutions should also be regularly involved in UN programs, including major international corporations, multinational banks and other financial institutions, workers’ associations, and other international organizations so as to deal cooperatively with the common threats that we all face. The last would include the World Bank, the IMF, and the World Trade Organization, all of which operate independently of the UN. Some connections along these lines already exist, but they are informal and haphazard. These organizations should schedule regular forums where these institutions can meet with appropriate UN agencies and officials, both to receive information about their programs and to make suggestions for new initiatives. Attempts toward this kind of collaboration do occur, for instance, at World Economic Forum or World Social Forum meetings but the UN would be the more natural and better body to lead this cooperative approach to solving global problems. In addition to standing institutions, ad hoc groups of organizations and nations can often focus productively on certain issue areas. A current example is the so-called ‘‘Quartet’’ of the UN, the U.S., the EU, and Russia in the Middle East peace process. Another is the EU3 of France, Germany, and Great Britain that has been negotiating with Iran to suspend enrichment activities. Yet another example is the Proliferation Security Initiative (PSI), a practical response to the growing challenge posed by the worldwide spread of WMD, their delivery systems, and related materials. PSI aims to impede

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illicit WMD-related trade to and from states of proliferation concern and terrorist groups. President George W. Bush launched PSI in May 2003. Core participants include Australia, Canada, France, Germany, Italy, Japan, the Netherlands, Norway, Poland, Portugal, Russia, Singapore, Spain, the UK, and the U.S. Under the initiative, countries commit to disrupting the illicit trade in WMD by interdicting vessels, aircraft, or other modes of transport in their territory or territorial waters that are reasonably suspected of carrying suspicious cargo. For example, in October 2003, the U.S., UK, Germany, and Italy, acting under the auspices of the PSI, stopped an illegal cargo of centrifuge parts for uranium enrichment destined for Libya. Other examples of combinations of nations to deal with common problems are the G-8, Asia Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN), the African Union (AU), the Arab League, and similar organizations elsewhere. The UN should be working closely with these regional organizations. Overall, the key to UN reform is its cooperation with other major world players, including NGOs, major international corporations, multinational banks, and other international organizations. The UN could also make greater use of ad hoc groups of nations to deal with specific threats. A 21st century approach would involve people worldwide, through innovative use of the Internet in a form of e-government. The UN system extends well beyond its member states and UN reform should incorporate these other world players, including the citizens of every country whether the nation is a signatory to the UN Charter or not. The goals and objectives of the United Nations remain as important and relevant today as at the time of its establishment. Through 60 years of evolution, the UN structures are more streamlined, it’s working methods more effective, and its various programs better coordinated. However, it remains an organization built for a different era. To meet the challenges and priorities of the present the UN must modify its practices and strengthen its structure.

The Role of Science in Dealing with these Global Threats: 50 Manhattan Projects The idea that the progressive spreading of the scientific progress will lead to the end of all wars has remained a constant until our days. During the 19th century, which was that of industrial and scientific progress, science was presented as being able to solve all the problems, notably in the positivist

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theory of A. Comte. Certain economists then considered that the knowledge of the true ‘‘scientific’’ economic laws and the industrial progress will allow the humanity to become established in a definitive peace, by removing the conflicts motivated by the so-called economic interests, as the wars of pillage or colonial conquests. But science has also contributed to multiply the threats on the humanity: scientific researches have given birth to arms of massive destruction, nuclear, chemical, and bacteriological; the progress of transport and communications accelerate epidemics propagation; the increase in industrial productivity tends to favor the depletion of natural resources, notably energyy But at the same time as it favors new dangers for global security, science is also the only solution to succeed in resolving the problems. Only scientific research can help to fight against the main threats that weaken the current global security. It must be recognized that not only security but also the very survival of our civilization is threatened by dangers as great as the danger of the nuclear war, such as the threats to global security noted above. These dangers keep growing despite huge sums being spent on their containment. Meanwhile, modern basic science has created revolutionary possibilities to deal with these threats and humankind cannot afford to ignore them. Their realization requires the same spirit of responsibility, excellence, and urgency which drove the defense-oriented projects in World War II. Huge sums are being spent worldwide in an effort to contain these dangers by the massive application of existing technologies. These efforts may prevent a part of the potential damage, but on the whole, they are ineffective. The factors destabilizing our civilization prevail and the scale of possible catastrophes is rapidly growing. The solution is generally believed to lie in spending ever more money, when the solution is really, more effective scientific cooperation on a global scale. Currently, a massive release of radioactivity from a nuclear waste disposal site, an earthquake in the middle of a major city, a large-scale outburst of violence, and any one of a formidable array of other quite possible disasters could cause millions of casualties, render a large part of the world uninhabitable, trigger a global economic depression, and even trigger a nuclear war. In addition, each country has become vulnerable to developments in other parts of the world that are outside its control. We know from history and common sense that basic scientific research is pivotal to coping with these threats. Indeed, since ancient times basic science has time and again rescued humanity from major threats and sustained its development, by creating a springboard to entirely new technologies.

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Among 20th century examples are antibiotics, transistors and integrated circuits, synthetic fibers, and the green revolution to name just a few. Frontier research of the last years continues this tradition, discovering new possibilities to cope with many of the present dangers. In the area of disaster reduction, for example, they include neutralization of the time bomb contained in radioactive wastes; the prediction of natural disasters; geoengineering stabilization of megacities; the control of the traffic in chemical explosives; the control of telecommunication networks; and the prediction of social, economic, and political crises. In the area of sustainable development, they include the discovery of new mineral deposits; the creation of new materials and sources of energy; the development of new forms of transportation; and the processing of waste products and their conversion into energy or other useful products. Now is the time to launch a series of ‘‘super projects’’ to explore these kinds of possibilities. Some historical examples include the research that led to the development of radar in England prior to World War II and the research that led to the building of the atomic bomb in the Manhattan Project. We now need some 50 Manhattan Projects, each focused on a specific threat and each involving an interdisciplinary group of outstanding scientists and engineers from many nations who would be provided the resources needed to accomplish their goal, as was the case in the original Manhattan Project. Research of such significance, urgency, and difficulty would require wide international collaboration engaging the top scientists and research facilities of many nations. Such collaboration will make feasible the goals that no country can accomplish alone even if it controls large resources. The UN should play a central role in fostering these research projects, including the creation of these new Manhattan Projects. The U.S. took the initiative of establishing the first Manhattan Project, but given the global nature of today’s challenges and the need for international cooperation in their establishment it should be the UN that takes the initiative in establishing these new Manhattan Projects through bold, innovative, and responsible leadership and new initiatives. By way of summing up, we are already engaged in the Third World War against unprecedented common threats to humanity. The war has already started, but we have not yet recognized it, and the wake-up call may involve a catastrophe on a global scale. Basic research is among the decisive factors in this war. The UN must act as a global catalyst in merging the international resources of basic science in a new type of war effort, not in a shooting war or a cold war, but rather in joint defense of survival and

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sustainable development of our civilization and in support of global and human security. A recent example of the contribution that the scientific community could make is the recently released report, ‘‘Millennium Ecosystem Assessment: The End of Life as we Know It’’ that was commissioned as a four-year effort by the UN involving 21 institutional representatives, and over 1000 scientists from over 95 countries. The report gives 10 key messages with a stark assessment of the fate of the Earth. Among the specific steps that might be taken in an agenda to foster such a system of global security are reducing world stockpiles of nuclear weapons and other WMD, especially the enormous stockpile of chemical weapons in Russia; a ratification of the Comprehensive Test Ban Treaty; taking nuclear weapons off hair-trigger alert and generally alerting WMD; a reaffirmation of the moratorium against nuclear testing; international cooperation to prevent nuclear proliferation; implementation of the 13 steps program for the Non-proliferation Treaty (NPT) with specific timetables for each of these steps, including an abandonment of all plans to develop new nuclear weapons; a sharing of Permissive Action Link (PAL) technology with all nuclear weapons states to reduce the chance of accidental nuclear war; a U.S. renunciation of its policy of preemption and its reaffirmation of the UN Charter; and cooperative efforts against terrorism, especially the acquisition of WMD by terrorist groups.

CONCLUSION Clearly there are serious threats today to global security and human security, and equally clearly, the current UN system is not prepared to deal with these threats. At the same time, these threats can be addressed through global cooperation, and a restructuring of the UN system can create a basis for addressing them. This paper has proposed two aspects of this restructuring. The first is UN cooperation with other major world players, including NGOs, major international corporations, multinational banks, and other international organizations as well as greater use of ad hoc groups of nations to deal with specific threats. The second is the UN taking a major role in fostering scientific breakthroughs that can address these threats. It is vital that the UN take the initiative on today’s issues through a cooperative approach with NGOs and other international organizations as well as fostering scientific programs dealing with the very serious threats that we face. A serious threat to global and human security is the nuclear weapons doctrine of the current Bush administration that must be reconsidered.

THE ECONOMIC REORGANIZATION OF THE MILITARY SECTOR AT THE BEGINNING OF THE TWENTY-FIRST CENTURY Jacques Fontanel and Fanny Coulomb The opposition between the economic and military logics has been expressed since the origins of the economic thought. The dominant liberal theory has presented military expenditure as unproductive and wars and economic conflicts as prejudicial to the good functioning of economic mechanisms. The economists recognizing a positive or at least inescapable role to the military sector in the economic development were fewer but always present, from list to the Marxists, the historical school, and Veblen. Today the renewed success of the American economy, which was regarded as declining at the end of the years 1980, raises the issue of the correlation between war, military expenditures, and economic growth with a new acuity. It challenges the theory of Paul Kennedy who explained at the end of the 1980s that the

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 67–81 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06005-0

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excessive importance given to military strength by the major economic powers has always been a factor of their decline. However, nearly two decades later, the assumption of the decline of United States is contradicted by the facts, with the collapse of the socialist system and the rise of the new economy of information, which have reinforced the American economy and technology. Many analysts during the 1980s considered the Soviet Union as a greater military power than the United States, 20 years later, the situation has radically changed, for the almost exclusive benefit of the United States. The reduction of the military expenditure from 1990 to 2001 has indeed caused strategic imbalances. United States remains a great hegemonic power in the twenty-first century, while maintaining a high level of military expenditure, almost the half of the world total, notably on military R&D. The reorganization of its arms industries has even been considered as a factor of ‘‘creative destruction,’’ with the cessation of obsolescent arms productions and the development of armaments adapted to the new strategic needs, with the development of terrorism and the uncontrolled spread of nuclear weapons. Since 2001, disarmament is no more relevant. The Treaty of Rome and the World Trade Organization (WTO) recognize the inalienable right for governments to manage their defence and their security. After the World War II, the objective of national independence was decisive in the choice of the arms production; afterwards economic reasons have prevailed, such as, imports replacement by national production and increase of arms exports; development of the high technologies with spinoffs useful for civilian purposes; job creation. States of arms-producing countries have always used the military sector to set up their industrial policy. In less than 20 years, the world economic and strategic landscape has radically changed, with the end of the US–Soviet antagonism and the liberalization of world trade and financial flows. If some analysts have then expected the reduction of the military power due to the decrease in international tensions, reality has been very different. The disarmament of the 1990s was only temporary and gave the impulse to a reorganization of the world military industry, allowing the United States to reinforce their military supremacy (Part I). Is militarism essential to capitalism? This may be asked, given the maintenance of numerous international tensions in spite of globalization and the importance of the technological and industrial links between the military and civil sector, in the post-Cold War era (Part II).

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CRISIS AND RENEWAL OF THE MILITARY POWER IN THE GLOBAL ECONOMY The end of the Cold War has led to several changes in the arms industry at the world level. The expected ‘‘peace dividends’’ did not appear, as the crisis on arms markets, due to the decrease in military expenditures, was not yet overcome when the defence budgets picked up again. Since the 2000s, the market logic has been encouraged in Western countries to restructure the arms industries: the development of generic or dual technologies was encouraged, as well as the diversification on civil markets. If the consolidation of the American arms industry has been quickly achieved, thanks to a strategy of rationalization and cost reduction, as well as of integration of military activities, the results have been less convincing in Western Europe, while the countries of ex-Warsaw pact suffered from a dramatic industrial crisis.

Disarmament and Rearmament: The Disappointment of the Peacemaking Globalization The rise in military expenditure during the Cold War induced several studies on their economic consequences, whether neoclassical or Keynesian. Certain studies dealt with the potential economic consequences of world disarmament. Some macroeconomic models have then been used, such as, the World Model of Leontiev and Duchin for the analysis of disarmament of industrialized countries, with a transfer of the savings to developing countries. Many famous economists have advocated for the end of the arms race, notably K. Arrow, J. K. Galbraith, J. Tobin or A. Sen, gathered within association Economists Against Arms Race (ECAAR). The economic analyzes of the arms race had started with the model of L. F. Richardson (1960): he published the first outlines of its model in 1939, in the hope of making governments realize the unstable and self-fuelled nature of this phenomenon. Some economic studies explained that military expenditures were diverting financial means, thus limiting civil investments. The reports of the United Nations at the beginning of the 1980s stressed the importance of the sums engaged in the military sector, while insisting on the considerable opportunity cost that they represented, in particular for

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developing countries (Accordino, 2000). Some economic studies of the 1980s (Kaldor, 1982) had denounced the fact that in industrialized countries, the Military Industrial Complex (MIC) generated too sophisticated and costly technologies (‘‘baroque’’ according to the word of Mary Kaldor), because of its secrecy and of its lack of contact with the markets imperatives. The protection of the military sector would have prevented technological spin-offs on civil production and guaranteed outlets for a few privileged firms. The military secrecy and the very strict administrative rules have created a culture far removed from market’s constraints. The end of the Cold War in 1991 has opened the way to a disarmament process at the world level. Until 2000, the gap between defence expenditures amount in United States and in European countries members of NATO has been reduced, from 2.5 to 1.0 in average on the period 1956–1970 (with a peak after the Vietnam war, from 1968 to 1972), to 1.7–1.0 in 1986–2000, with a peak in 1981 (He´bert, 2002) (Graph 1). The end of the Cold War resulted in substituting for the logic of the ‘‘arms control’’ that of disarmament. However, disarmament is not equivalent to a reduction of the military expenditure. Disarmament may have different forms, such as, the reduction of the military expenditure, the cessation of some arms productions, or the destruction of weapons. The destruction of weapons stocks or the control disarmament agreements leads to additional costs. Moreover, a destruction of weapons stocks neither guarantees the reduction in the strategic capacity, nor that of the military expenditure. Partial disarmament (of chemical weapons for example) modifies the balance of power and often implies a procedure of rearmament. Lastly, the immediate conversion of the military productions into civil ones often proves inadequate, either for technological reasons (sophisticated military technology not adapted to mass production), or for commercial reasons (the market is already strongly encumbered), or finally for economic reasons (uncompetitive cost of the products resulting from conversion). Therefore the reduction of defence budgets in the 1990s did not create the awaited ‘‘dividends of peace,’’ nor did it reduce significantly the threats, because of the remaining stocks of nuclear weapons. On the contrary, disarmament caused major sectoral and regional crises, in particular in the economies of the ex-USSR. Taking into account their unproductive character (in a cosmopolitan or peaceful economy), the military expenditure should exert negative effects on the world growth in the long run. But the experience has shown that the ‘‘peace dividends’’ do not appear easily and that disarmament had negative short-term effects for some countries.

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Economic Reorganization of the Military Sector 1400

Military expenditure in constant (2005)US$m 1200

1000

800

600

400

200

0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Graph 1.

World

UK

Western Europe

USA

France

Russia

Military Expenditure in Million Constant 2005 US dollars. Source: SIPRI Data, www.sipri.org

The concept of ‘‘peace dividends,’’ very popular during the Cold War among economists, has been replaced at the UNO by the one of ‘‘peace investment,’’ thus showing the costs induced by the disarmament process. Less than 10 years after the end of USSR, the world military expenditures have restarted to increase. The arms industry remains important today for industrialized economies, but the firms that are the most successful are those which have diversified their production in the civil sector, and which develop dual technologies. Separation between military activities and civil activities is in fact increasingly fuzzy on the level of the statistics. It is well a ‘‘creeping disarmament,’’ which implies the disappearance of the MIC, which favored the slide of armament prices.

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Success and Failure of Armament Industries Restructuring The disarmament has created an obsolescence of productive capital and the need to undertake heavy investments. A restructuring of military industries may have negative economic effects in the short run, in particular in areas directly concerned with arms production. In the 1990s, the advocates of the direct conversion of military facilities (from the sword to the plow) considered that it should turn industrial activity toward unexploited opportunities in the civil sector. But the reality of conversion has been less encouraging, because of its induced costs, notably for retraining the staff, and because of the high financial barriers to get entry on civil markets. The cut in military expenditure has increased unemployment in armsproducing countries, making it necessary to adapt the economic policy. The American disarmament has succeeded in releasing resources for the civilian sector and in attracting the world capital, notably thanks to the development of information technologies, which had first been developed in the military sector. Since 1991, under the impulse of the government, the American arms industry engaged in big mergers–acquisitions, leading to the emergence of four great entities: Boeing, Lockeed Martin, Northrop Grumman, and Raytheon. These will supply almost all commands of the Department of Defense. The size of the firms but also of the American market makes armament firms able to rapidly obtain economies of scale and greater export competitiveness than foreign companies. In fact, the military production is characterized by increasing fixed costs, in particular on research and development, technology and equipment. But according to Blanc (2000), the American reorganizations were not just made to reach size effects. These operations of integration aimed at increasing the financial profits for managers and shareholders. The new firm’s strategy was to sell not only military products but also commercial services as accompaniment (Table 1). But in other places, and in particular in the countries of the ex-Soviet block, the cut in world military expenditure had a much more destroying impact on the armament industry. Russia in particular underwent heavy economic losses (Fontanel, Coulomb, & Samson, 2001). In 1991, the success of the conversion of the gigantic MIC was presented as a necessary condition for the transition success, notably in several reports of UNO. Fifteen years later, force is to note that this conversion was a global failure (Fontanel & Karlik, 2004). Military industries, at the base of the Soviet industrial development, could not be reconverted satisfactorily into civil productions. Indeed, the cessation of the military production may have

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Economic Reorganization of the Military Sector Table 1.

Regional Distribution of the SIPRI Top 100 Arms-Producing Companies: 1990 and 2003. Share of Total Arms Sales (%)

North America USA Western Europe UK France Other non-OECD Russia

Number of Companies

1990

2003

1990

2003

60.8 60.2 33.1 10.4 12.0 3.0 –

63.2 63.0 29.2 11.4 7.5 4.6 1.5

49 47 40 13 11 6 –

39 38 36 12 9 15 6

Source: Dunne and Surrey (2006, p. 410).

disastrous economic effects in the short run, by involving the closing of factories which ensured the economic survival of important areas, while at the same time conversion in civil productions proves to be impossible, because of the barriers to get entry in civilian sectors. In addition, the cost of the cessation of military productions must integrate the cost of the capital, which cannot be used in new productions. De-industrialization and unemployment were the immediate consequences of the reduction in the military expenditure in Russia. Many effects of inertia, related to the administrative rules inherited the preceding political regime, have prevented a good conversion. Today, most of the firms of the former Soviet military complex (which Russia inherited to 80%) have been privatized by the Russian government, or were transformed into public companies and several are now under the control of regional authorities. Just as in the West, the firms have tried, sometimes successfully, a diversification toward civil productions and dual technologies, in aeronautics and aerospace, as well as the development of military or civil exports. Today Russia is indeed one of the largest arms exporters in the world. Lastly, it is also necessary to take into account the fact that the destruction of the military materials, associated a procedure of international disarmament, is expensive. In Russia, most of the assistance of the Western countries to disarmament was used for the elimination of weapons of mass destruction. The ‘‘spontaneous’’ disarmament of the Soviet Union therefore proved to be an ideological, political, and economic defeat (see, e.g., Earle & Komarov, 2001). The Russian industrial main military enterprises have not

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survived in the transition’s new economic environment. And yet at the beginning of the 1990s, the United Nations reports explained that it was probably in the USSR that conversion should be the most economically interesting, because of the great demand potential, of the weak competition and of the capacity for companies to produce dual goods, for military and civil consumption. Gorbatchev himself had based great hopes on the forces of the MIC to revitalize the economy. However, the Russian economy suffered from obsolete infrastructures, inertia effects, industrial overcapacities, as well as from a very insufficient commercial culture, and an economic crisis; results have therefore been catastrophic. One can even think that the provisional failure of the transition is partially due to the incapacity of the military sector to reconvert itself. It came up against the privileges of the nomenklatura and the idea of Russia’s greatness. Experience shows that in the short run there exist few dual applications for military production, even if later on, the spillovers may prove interesting. Compared to the American firms, it is with delay that the European arms firms have been engaged in a reorganization and concentration (Dunne & Surry, 2006). That is explained by the difficulty of reforming a European industry, which was compartmentalized around national markets, preventing the reduction of unit costs and the widening of range of products. In addition, the programs of industrial cooperation in order to set up an integrated European arms industry have been set up only gradually. The first joint ventures have appeared thanks to multilateral programs during the 1980s; their success will be however limited, because of rigidities and additional costs. The difficulties are all the more large for the reorganization of the European defence industry, as the processes of privatizations have been carried out in disorder, because of strategic divergences between European countries. During the decade 1990s there was a multiplication of joint companies created for marketing and customer service. However, the European industrial structure became too complex, generating duplication, making it necessary to rationalize the productive and commercial structures. This will be started at the end of the years 1990s, in a context of a crisis of the world armament markets, with the restriction of defence budgets and the increased competition. After the reform of the defence policy engaged in Spain, France, and Italy at the end of the years 1990s, it will make it possible to engage the first great operations of fusion-acquisitions on a European scale, initially in the aerospace one and the electronics of defence, therefore radically modifying the structure of the European industry of armament. Nowadays some great European firms have emerged on aerospace and the defence electronics

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markets; in other sectors, and in particular the land and naval armament, reorganizations remain incomplete. The industrial groups resulting from the reorganizations of the last 1990s have gradually changed their strategies, by multiplying the subsidiaries, joint ventures and alliances, while diversifying in civil productions. These are primarily the sectors of aerospace and defence electronics that were concerned with this process of diversification, so as to face the fall of defence budgets, notably of capital expenditure. Thus in France, the importance of the public defence contracts has tended to decrease since the 1990s. Those amounted to 6 MMh in 2001, against 9.2 MMh in 1995. 72% of these markets contracted by the DGA in 2001. The groups thus wish to limit their dependence to official orders. This evolution complicates obviously the statistical analysis of the armament sector, in particular on the level of the appreciation of the manpower really employed in defence.

THE REVIVAL OF THE MILITARY POWER IN RELATION TO THE NEW THREATS The worldwide liberalization of economic activities has not led to the pacification of international relations and thus does not validate the classical paradigm of peace thanks to free trade. The existence of zones hostiles to the development model of the most industrialized countries leads to a persistence of instability. The technological progress gives birth to new weapons for which the United States holds supremacy. The market logic, which has governed the reorganization of the armament industry, therefore seems to have reinforced both the military and economic power of this hegemonic country. The New Wars of Globalization In the liberal view embraced by the United States, the opening of the economic frontiers should favor the world peace and therefore disarmament. But the State intervention has not disappeared in modern economies, notably in the United States. During the Clinton’s mandate, the national security has been presented as depending on the economic power, with nations competing on world markets, in a geo-economical rather than geopolitical perspective. Paul Krugman criticized its idea (a country is not a company). But the end of the Cold War has reinforced the idea of an

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economic war justifying a strong industrial and trade policy in the United States, no more justified by military requirements. The use of economic intelligence and counter-intelligence show this change, with the development of the Advocacy Center, of the National Industrial Security Program (NISP), of the Defense Technical Information Center (DTIC) and of the Central Information Reference and Control System (CIRC). One can even wonder whether the war is not essential to the capitalist system. At the beginning of the 1960s, a report (Anonymous, 1987) has stated that the disappearance of wars would create economic and sociological problems in United States. The proposals for a transformation of the arms production into benevolence public works were considered as unrealistic, given the extent of the adjustments involved. The idea of conversion was presented as politically unacceptable, given the acquired interests and because there was no valid substitutes for the war. Indeed, the report underlined the importance of the military expenditures’ wasting in the stabilization and control of the national economies. War also permits the citizens’ subordination to the State and the control of social dissensions and antisocial tendencies (Barnett, 2003). New institutions should be created in a situation of lasting peace, so has to maintain citizens’ adhesion to the political authority. In the same perspective, Jacques Attali has presented war as the expression of an extreme industrial competition; the history of capitalism implies the emergence of a brutal phase, which, if it does not give place to a military war, led with the development of alienation symbolic system. Nowadays, the latter could be found in the modern ideology of the globalization (Binnendijk, 2002). In a world of scarcity, the military expenditures, largely unproductive, may be considered as a wasting, notably in the absence of conflicts or major threats. However, high economic and social inequalities may fuel international conflicts; and yet the globalization process has not solved the problem of poverty and underdevelopment. As Kenneth Arrow has recalled, the preceding age of the globalization peaked at the end of the nineteenth century and was brutally stopped by the World War I, in spite of the rise of world trade and financial flows. That belies the idea according to which humanity would ineluctably progress toward a pacification of international relations. F. Fukuyama had developed this argument after the end of the Cold War, in his theory of the end of history (Fukuyama, 1993). Observing the political changes of the late 1980s and the spread of democracy liberalism, he considered that the probability of wars should decrease. But it appears today that asymmetrical wars could multiply in the future (Mu¨nkler, 2003), economic globalization

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having increased the marginalization of certain zones, even if other developing economies benefit from an accelerated catch-up growth. The globalization process also makes most industrialized countries more vulnerable to enemy attacks, given the development of communications and mass transports (in particular air), the population concentration in urban zones, etc. While the Cold War arms races opposed comparable actors, the new arms races will be asymmetrical, confronting countries with high-tech weapons to less developed countries. Several examples, such as, certain African conflicts or the attacks of September 11, have proved that the technological superiority was not a guarantee of security or of victory, whereas industrialized countries wish to limit the human loss of life. Besides, these new wars can exist only thanks to important economic resources, given by the globalization of trade and finance, that makes the access to illegal financial resources easier: the traffic of drug, the prostitution, the counterfeit, are important sources of income for the ‘‘lords of war.’’ Moreover, the cost of these new wars is much lower than that of Cold War conflicts. The American–Soviet arms race, revived by R. Reagan in the 1980s, had impoverished the Soviet economy, leading to its collapse. The current asymmetrical conflicts do not require the same level of financial resources. Recent terrorist acts have shown that military inferiority could be offset by the use of commando-suicides. The terrorist methods have the advantage of not having to count on the implication and the support of the civil population, unlike the guerrillas. According to a report of the SIPRI in 2003, out of 19 conflicts listed in 2003, only 2 were interstate conflicts: the one between the United States and Iraq and the one between India and Pakistan. Most of the others were ‘‘new conflicts,’’ that is conflicts not limited to an interstate confrontation but which involve new actors such as, militia and new lords of war, the civil population being often taken as target, or actor of the conflict. These conflicts may be difficult to identify in time and space and require international operations (notably with UNO) that associate human rights specialists and technicians to rebuild the state apparatus, beside the soldiers associated with the peacekeeping operations. It appears however, that economic misery and social inequalities, combined with political oppression, are factors of conflict. The ‘‘debt crisis,’’ which out-broke in the 1980s, remains important for some developing countries and their dependence toward the International Monetary Fund or the World Bank limits their sovereignty and the chances of democracy. The economic argument of peace through development thus seems particularly significant in the African case.

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The Conversion to Market Rules and the Reinforcement of the Military Power The arms industry has been changed with globalization, in spite of the privileges and political support of the MIC. It has been internationalized, even if arms markets remain mainly national and if the governments keep on supporting arms exports. The United States has used the conversion process of the arms industry to reduce by a half the regular suppliers of Pentagon and by instituting commercial standards for the military purchases. The dissolution of Cocom, replaced by the arrangement of Wassenaar to keep some restrictions against the rogue countries, has permitted exports of products usable for weapons, in particular the materials of telecommunication and computers. Thus, dual technologies have been used for civilian ends. Indeed, military and civil technologies of satellites are very close and commercial ones replace old satellites. Globalization has therefore permitted the success of the conversion and the maintenance of American economic and military hegemony, even if this one may pose problem in the long run. The concept of globalization expresses the integration of the productive and commercial activities in global market system. It applies to the creation of value, from the export to the total integration of production. All reorganization has a cost, like any process of investment, it supposes economic risks. From a cultural point of view, the military sector is expressed mainly in the field of the high technology, but the ‘‘priority defence’’ that it exerts is likely to delay or modify technological progress. It privileges certain technologies, which then influence. Three assumptions are generally retained for the study of the economic effectiveness of the military R&D. Initially, eviction effect supposes that appropriations for military R&D are done to the detriment of the civil sector (men, equipment, innovations). Then, the technology transfers between the military and the civil sector suppose the passage from a technological and strategic priority (often kept secret) to an economic priority. Lastly, the demand–pull effect makes an additional request for R&D that supports the forces of innovation. Today, the art of warfare remains linked with technological progress, but the political considerations become preponderant. The new-generation weapons are based on information technologies, in the forms of metasystems, thus qualifying the complete overlap of the weapons systems and chains of command. The installation of computer viruses likely to make inoffensive the enemy weapons may give a considerable power to a State. United States keeps its lead in this field, thanks to its advance in information

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technology. A limited number of firms control the production of these new materials, thus reinforcing the influence of the MIC. Europe being connected with American networks, its dependence toward the American army is reinforced. The law of the strongest prevails here and will favor the global supremacy of the American industry on world markets. For Ruttan (2006), the military sector can be more likely than the private sector to reveal major innovations boosting economic growth, in particular through rise in productivity. The demand for defence would have largely accelerated the development of new technologies in the United States in the past. Ruttan more particularly studies the sectors of aeronautics, of nuclear and electrical energy, of data processing, of Internet and space. The technological maturity is necessary so that the innovation leads to productivity gains and, according to him, have been more quickly reached, thanks to the purchases of the military sector; only the threat of a major war could make emerge a new technological revolution sufficient to durably increase productivity rates. But only the existence of an external threat could lead once again to the mobilization of the scientific, technical, and financial resources necessary to make appear these major technologies, as during the Cold War. In peacetime, the military sector does not have sufficient incentive to carry out such an effort, nor does other parts of the public sector. As for the private sector, Ruttan considers that it will never be able to make emerge a new major technology, insofar as the induced profits can be too diffused to be weak and because of the slowness of the cycle of innovation, which often lasts several decades. In the same order of idea, R. Bellais criticizes the reforms of the defence policies in Western countries; the liberalization and the market logic may discourage long-term R&D, which is thus central for industrial innovations. To conclude on this point, it is important to recall that the issue of the technological innovation is not the only one to take into account when studying the link between military expenditure and economic growth. The question of the relation between the defence budget of defence and economic growth is also important. For example, the advantages resulting from the maintenance of a high level of military expenditure, in terms of domination on the international economy, should be taken into account (trade agreements, markets liberalization, diplomatic pressure, etc.). The long-term economic consequences of an excessive militarization should also be considered. As the American defence budget increases the public deficit exerts an inflationary effect, and it undoubtedly influences the dollar parity and the flows of foreign direct investments. The link between military expenditure and economic growth is thus multiple and difficult to apprehend.

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CONCLUSION The link between economic growth and the rise of military expenditures in not so evident today as it has been in the past, given the new threats such as, terrorism and the new types of wars, such as, in Afghanistan and Iraq or civilian wars in Africa. More sophisticated military and economic strategies, less dangerous and more effective, may replace in the future current armed conflicts and require expenditures other than military, such as, the rise on plane tickets or insurance prices. The grievances and historical dissents do remain vivid in international relations. But with the extension of NATO, the risks of conflicts between the great powers have decreased. The rise in American military expenditure, along with forces redeployment and new strategies, reinforces United States’ hegemony in front of its allies or of economies unbalanced by their fast economic development (China) or by their major economic crisis (Russia). Nevertheless the importance of the American armament, turned a priori toward the zero defect of national defence, is likely to favor conflicts, as it obliges the adversaries to innovate and find new techniques to erode the American power (Aydinli & Rosenau, 2005).

REFERENCES Accordino, J. J. (2000). Captives of the Cold War economy: The struggle for defense conversion in American Communities. Westport: Praeger. Anonymous. (1987). Report from Iron Mountain on the possibility and desirability of peace. New York: Dial Press, Inc. Aydinli, E., & Rosenau, J. N. (Eds). (2005). Globalization, security and the nation state: Paradigms in transition. New York: State University of New York Press. Barnett, R. W. (2003). Asymmetrical warfare. Washington, DC: Brassey’s, Inc. Binnendijk, H. (Ed.) (2002). Transforming America’s military. Washington, DC: National Defense University Press. Blanc, G. (2000). De´penses militaires, restructuration de l’industrie d’armement et privatisation de la de´fense: Analyse compare´e France-Etats-Unis 1994/1999. Are`s, No. 46, Volume XVIII, No. 2. Dunne, J. P., & Surry, E. (2006). Arms production, SIPRI yearbook, 2006 (pp. 387–418). Oxford: Oxford University Press. Earle, J. S., & Komarov, I. (2001). Measuring defense conversion in Russian industry. Defense and Peace Economics, 12(2), 103–144. Fontanel, J., Coulomb, F., & Samson, I. (2001). Military conversion and transition in Russia. Pax Economica, (6).

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Fontanel, J., & Karlik, A. (2004). The industry of armament of Russia: Collapse or revival? In: J. Fontanel (Ed.), Guerres et conflits e´conomiques (p. 165). PUG, Grenoble: Fragments de Cours. Fukuyama, F. (1993). The end of history and the last man. London: Penguin. He´bert, J.-P. (2002). Le rapport des de´penses militaires Etats-Unis/Europe se re´duit en longue pe´riode. Le De´bat Strate´gique (60), 1–2. Kaldor, M. (1982). The baroque arsenal. London: Deutsch Edition. Mu¨nkler, H. (2003). The wars of the 21st century. IRRC, 85(849), 7–22,10. Richardson, L. F. (1960). Arms and insecurity: A mathematical study of the causes and origins of war. Chicago: The Boxwood Press, Pittsburgh and Quadrangle Books, Inc. Ruttan, V. W. (2006). Is war necessary for economic growth? Military procurement and technology development. Oxford: Oxford University Press.

THE EVOLUTION AND FUTURE OF EUROPEAN DEFENCE FIRMS Keith Hartley, Renaud Bellais and Jean-Paul He´bert INTRODUCTION The European defence industry has changed considerably since the late 1980s. The end of the Cold War required the industry to undertake major restructuring, especially when governments, expecting to reap a ‘‘peace dividend,’’ drastically cut procurement spending. In the early 2000s this restructuring was also influenced by the new context of international security, even though defence budgets have started to increase again since 1998. The European defence industry could not expect to escape from a radical transformation, beyond the specific crisis engendered by the end of the Cold War. Even though its restructuring started later than the American one (launched as soon as in 1993), it is in many respects much more radical and, due to the specificities of its own organisation (especially domestic markets which are no longer compatible with the scale of defence programmes), it goes far beyond. This transformation is in keeping with the general evolution of both international relations and economic dynamics in the field of defence. By its achievements as well as its problems, the evolution of the European defence industry underlines the specific features of this industry; it can help understand both the transformations of the defence industry outside Europe and the possible future transformations that could take place in Europe.

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 83–104 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06006-2

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This chapter is organised as follows. Section European Firms under Transformation focuses on the transformations of the European defence industry since 1990. Section The Inescapable Economics of Defence Systems develops an analytical framework to explain such transformations from an economic point of view. Section Defence Industrial Policy: The Way Forward explores how the creation of the EDEM (European defence equipment market) and the integration of national industrial bases at the European level can help overcome the existing or forthcoming challenges. We conclude on the future of European defence firms.

EUROPEAN FIRMS UNDER TRANSFORMATION After the end of the Cold War, it took a while before the European defence industry entered into a restructuring phase. Nevertheless, a true and deep transformation has occurred, especially since the second-half of the 1990s, with three main features: the withdrawal of nation-states from the capital of firms; the consolidation of the defence industrial base in each country (at least at the prime contractor level) and first steps towards Europeanisation.

Privatisation of State-Owned or Controlled Firms It could be quite surprising for someone looking at the European defence industry today, but two decades ago this industry was mainly state-owned or controlled – even without referring to East European countries. Indeed, the major firms in the early 1980s in the main arms-producing countries in Europe, the UK and France, were state-owned or with a strong share of their capital controlled by the state. A true revolution has been occurred since the 1980s with the withdrawal of states from the capital of many firms. The privatisation trend started early in the UK. From the 1980s many formerly state-owned industries were privatised; and British Aerospace (now BAE Systems) was the first large industry to be auctioned off in 1981. RollsRoyce, nationalised in 1971, was privatised again in 1987. Further UK privatisations involved the Royal Ordnance Factories, Short Bros (Bombardier) and DERA (QinetiQ). The privatisation trend was truly generalised in the second-half of the 1990s throughout Europe. It especially concerned the dismantling of state-owned

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holding groups and the transformation of arsenals, like GIAT in France or Santa Barbara in Spain, into ‘‘regular’’ firms. This evolution constituted the first-step before privatisation, as demonstrated by the evolution of the French naval shipyards: separated from the naval programmes direction of the DGA in 1997, DCN became a separate entity in 2000 and a private company in 2003 and its capital was opened to Thales in March 2007. The evolution of the French defence industry is very impressive in this respect. As soon as the late 1980s it appeared clear that the French firms were below the critical size, the successive French governments expected (and were expected) to launch a reorganisation of the industrial base. Decision-makers particularly wanted to create ‘‘national champions,’’ which would then be able to lead the consolidation process at the European level. After improving the management of state-owned firms in order to make them viable before privatisation and after some mergers and acquisitions at a lesser level,1 President Chirac agreed in 1997 a reorganisation plan based on two major poles (He´bert, 2006):  Defence electronics led by Thomson-CSF (October 1997) with Dassault Electronique, Alcatel’s defence and space activities and Aerospatiale’s satellite activities (embedded in a separate, space-specialised Alcatel Thomson-CSF joint venture2);  Aeronautics and space (July 1998) thanks to the merger between Matra Hautes Technologies and Aerospatiale (creating Aerospatiale Matra), receiving also as a ‘‘wedding present’’ the French state’s shares in Dassault Aviation (with the hope of a further consolidation). While they used to have a symbiotic relationship, these numerous changes resulted in the disconnection between the French state and the domestic industry. The state usually owned fully some defence firms (DCN, SNECMA, y) and at least a controlling stake (Aerospatiale, ThomsonCSF, y), but today it no longer has a predominant position as showed in Table 1. This withdrawal is bound to continue, as demonstrated in the recent debates about the ownership of EADS. Privatisation reflects a more general trend: the links between the state and defence industry have strongly reduced with generalised privatisation, the disappearance of the state holding firms (like IRI in Italy), the exit of the historical firms (Vickers, Racal Electronics, Ferranti, Matra), the predominance of private criteria of management and the restructuring at the European and international level (see below).

86 Table 1.

KEITH HARTLEY ET AL. Shareholding of the French State in the Main French Defence Firms.

31 December 2006

Share (%)

EADS Thales Safran DCN GIAT

15 21 31 75 100

Source: Firms’ annual reports.

Consolidation of the Industrial Bases Another issue was the more and more obvious inadequacies between the size of firms and their environment: industrial and technological trends were leading to rising costs while domestic markets were shrinking. Simultaneously the American defence industry engaged in mega-mergers at the beginning of 1990s, creating giant groups that quadrupled their size in less than a decade (see Table 2). European firms were forced to consolidate to stay competitive, especially in export markets where American groups were increasingly aggressive. The structural changes since the 1990s then led to larger firms and increased industrial consolidation. Even if the European firms did not reach (yet) the scale of the American ones, their size and weight on their relative domestic market have strongly increased. This trend is very apparent in national defence markets, which are typically characterised by domestic monopoly, duopoly or by oligopoly in major air, land and sea systems (Table 3). The annual study of the largest arms-producing companies in the world published by SIPRI helps to catch the magnitude of the transformations undergone by the Europe defence industry over the last 15 years:  In 1990, 41 European firms belonged to the SIPRI top 100. Fourteen were British, ten French, eight German, three Swedish, three Italian, two Swiss and one Spanish.  In 2005, there are only 32 European firms in the top 100: this reduction is partly explained by a more global database (including now Russian and Korean firms). But it also corresponds to a wave of consolidation. Thus, there are ten firms from the UK, six from France, seven from Germany, three from Italy, two from Spain, one from Sweden, Norway, Switzerland and one qualified as ‘‘European.’’3

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Table 2.

Top Five US Defence Firms (US$ m Turnover).

Boeing Northrop Grumman Lockheed Raytheon General Dynamics

1990

2005

5,100 4,700 7,500 5,500 8,300

28,050 27,590 26,460 19,800 16,570

 5.5  5.9  3.5  3.6  2.0

Source: SIPRI Yearbooks, 1992 and 2007 editions.

Table 3. Name

Ten Largest European Defence Firms.

Previously

Country

Rankinga 1990 2005

BAE Systems Finmeccanica EADS Thales DCNS Rolls-Royce Safran Dassault Aviation Saab Rheinmetall

British Aerospace IRI MBB & Ae´rospatiale Thomson-CSF DCN Snecma

UK 3 Italy 22 Europe 15/21 France 8 France 16 UK 30 France 37 France 24 Sweden 86 Germany 59

4 7 8 10 13 14 20 21 23 28

Defence Turnoverb Change (%) 1990

2005

7,520 2,670 6,880 5,250 3,830 1,830 1,490 2,260 450 750

23,230 9,800 9,580 8,940 3,520 3,470 2,630 2,210 2,110 1,740

þ209 þ267 þ39 þ70 8 þ90 þ77 2 þ369 þ132

Source: SIPRI Yearbooks, 1992 and 2007 editions. a The 100 largest arms-producing firms in the world, SIPRI. b Defence turnover in US$ m, at current prices and exchange rates.

The consolidation resulted in smaller groups, but more focused on defence: the average employment of European defence firms fell from 71,000 in 1990 to 40,000 in 2005. The consequence is, as illustrated in Table 4, a larger dependency on defence contracts. One should note that within the top 10, a size gap between the top American and European firms remain. In 2005, American firms were almost twice as large as the European firms (US$ 21.2bn vs. 12.9bn). This suggests that if the European defence industry is to remain internationally competitive, there is scope for more mergers and re-structuring in Europe (Dunne & Surrey, 2006; Mantin & Tishler, 2004; Markusen & Serfati, 2000).4 The creation of larger defence firms and increased industrial consolidation has two policy implications. First, the trade-off between monopoly and

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KEITH HARTLEY ET AL. Table 4.

Features of the European Defence Firms in the SIPRI Top 100. UK

Share of defence in the total turnover 1990 40% 2005 52% Turnover per employee 1990 2005

101,575 207,081

France

Germany

54% 64%

36% 29%

153,703 266,708

198,982 309,913

Source: SIPRI Yearbooks 1992 and 2005.

competition where the standard neo-classical model predicts that monopoly is associated with higher prices, abnormal profits, inefficiency and a poor record on innovation. Here, the definition of a monopoly is dependent on the definition of the market. Procurement agencies and governments5 are often subject to monopoly if they are unwilling to allow foreign firms to bid for national defence contracts. Second, larger defence firms should be seen as a major producer groups in the ‘‘military–industrial–political’’ complex. Such firms possess bargaining power by which they will seek to influence government policy in their favour (e.g., in the award of procurement contracts and the continuation rather than cancellation of projects). Small numbers of large defence firms can be modelled using game theory where there will be strategic behaviour and interaction between firms in procurement competitions and between producer groups and governments as buyers of arms. Compared with the competitive model, game theory predicts that with small numbers the pursuit of self-interest might not result in a socially desirable outcome. In such situations, major producer groups and procurement agencies will be involved in games of bluff, chicken and ‘‘tit for tat.’’ The behaviour of both principal (buyer) and agent (contractor) will be affected by asymmetric information, which allows contractors opportunities for both inefficiency and rents (Laffont & Tirole, 1993).

Europeanisation of Firms The Europeanisation of the defence industry is the third trend that has occurred since the late 1980s. It should not surprise observers, since

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Evolution and Future of European Defence Firms

European firms have developed many links with each other through collaborative programmes in the 1970s and, even more, in the 1980s. Even though such programmes were initiated by the national governments, and sometimes against the will of the concerned firms, they have established structural links in specific fields that have facilitated the gathering of resources and eventually their consolidation at the European level. Indeed, in the early 1980s many joint ventures were created in specific sectors, as shown in Table 5. They prefigured the consolidation to come at the European level at the end of the decade. Europeanisation was also favoured by the increasing incompatibility between domestic markets and the economic and industrial dynamics of the defence sector (see next section). Bitzinger (1999, p. 305) remarks ‘‘the end of the cold war has done much to challenge this once-sacrosanct notion about autarky in arms production.’’ In fact, the Europeanisation of the defence industry began even before the post-Cold War restructuring. It involved the internationalisation of European firms, and was favoured quite early in the 1980s when it appeared that it was very difficult for European firms to acquire American firms.6 Thales illustrates such trends. As early as 1983, it had progressively absorbed a large share of European firms in defence electronics in the Netherlands (Philips), Germany (Deutsche System Technik), Italy (Elettronica) and, above all, several acquisitions7 in the UK, starting with Ferranti Thomson Sonar in 1990 and culminating with the takeover of Racal in 2000. As a result Thomson-CSF calls itself a ‘‘multi-domestic group.’’ Using such qualification is interesting, since it underlines the limits that Thales faced when trying to deepen the integration between its own units throughout Europe. Because of political and defence reasons, it appears that units within Thales (for instance, radar activities in the Netherlands and

Table 5.

Examples of Joint Ventures between European Defence Firms.

Founders Matra Ae´rospatiale Thomson-CSF Matra BAE Systems

GEC DASA GEC British Aerospace Finmeccanica

Joint Venture

Sector

Year

Matra Marconi Space Eurocopter Thomson Marconi Sonar Matra BAe Dynamics Alenia Marconi Systems

Satellites Helicopters Sonar systems Missiles Defence electronics

1989 1991 1996 1996 1999

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KEITH HARTLEY ET AL.

France) are not as integrated as would be the case for civilian activities. Masson (2006, p. 1) underlines ‘‘the first European industrial consolidations led to the creation of groups which internal organisation reflected identically the existing national logics.’’ Thales and other firms experiencing Europeanisation have faced difficulties in moving from consolidation to integration (i.e., from capitalistic consolidation to industrial rationalisation). Sko¨ns and Gill (1996, p. 414) had already put it into context: ‘‘In Western Europe (y) the leading firms have acquired other arms-producing firms but without simultaneous rationalisation of production.’’ A true consolidation becomes possible when such a project results from a strong political will, as demonstrated with the creation of EADS.8 Nevertheless, one should not be surprised, since Ae´rospatiale and DaimlerChrysler Aerospace shared a long history of co-operation – realising more than 50% of their respective turnover with each other. This third trend is indeed the weakest one. Even though some states have pushed for a deeper consolidation at the European level in the late 1990s, it was quite limited and recent decisions (especially in the naval sector) underline that Europeanisation might have reached its limits.

THE INESCAPABLE ECONOMICS OF DEFENCE SYSTEMS These transformations of the European defence industry during the past two decades are intimately linked to the very specific features of such industry not only in Europe, but also elsewhere. Arms industries are often regarded as economically strategic industries characterised by monopoly/oligopoly structures, decreasing costs, R&D-intensity and associated spin-offs. The possibility of monopoly rents provides a role for government in capturing some of these rents. The Importance of R&D as a Fixed Cost The first underlying trend is the importance of R&D spending in defence procurement. For major weapons systems, R&D is costly and these costs have risen steadily in real terms since the 1970s. For example, the ratio of development costs to unit production costs are some 250 for armoured fighting vehicles, a ratio of 100 for combat aircraft and 120 for helicopters. Typical unit production costs for main battle tanks are some d4 million per copy compared with unit production costs of d70 million for combat aircraft

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and d24 million for an attack helicopter (2006 prices: Pugh, 2007). Usually, these costs have increased at a rate of 4% per annum for a complete range of air, land and sea systems. Furthermore, for defence systems such as combat aircraft, development periods are lengthy and can take over 15 years (e.g., Eurofighter Typhoon; F-22 Raptor). The heavy investment in R&D is explained by the fact that new threats will create demands for new weapons systems to be developed by existing or new entry defence firms. The growing importance of electronics in modern weapons systems can be illustrated with examples from the aerospace industry. In a 1960s combat aircraft, avionics represented about 25% of unit flyaway costs; for a 1980s combat aircraft the corresponding figure was some 33%; for a 2005 generation aircraft the share was 35–40% of unit flyaway costs and forecasts suggest that for future unmanned combat air vehicles (UCAVs), electronics systems might be about 50% of unit costs (Hartley, Braddon, & Dowdall, 2004). Rising development costs mean smaller numbers being purchased leading to rising costs per aircraft as fixed R&D costs are spread over smaller numbers. But costlier new weapons are ‘‘more capable’’ (e.g., one squadron of F-22A aircraft will replace two squadrons of F-15s and will also lead to savings in annual operating and support costs (GAO, 2006)). Such trends in defence R&D constitute a major explanation for many transformations within the defence industry worldwide, for both the management of programmes and consolidation of the defence industrial base. They imply increasingly complex systems, leading to a redefinition of firms’ competencies and the supply chain. They also change the scale of programmes: the domestic market is often not large enough to support new programmes, as shown with the A400M associated with seven European launching nations or the common aircraft carrier programme between the UK and France. Therefore, firms need to combine their resources and cross national borders to achieve the relevant size of orders to reach break-even point. Production: The Importance of Quantity, Scale and Learning Economies As defence budgets have decreased or, at best, stagnated while unit prices of systems were increasing (see above), the scale of production has become a major issue. Large-scale production allows economies of scale and learning so giving rise to decreasing unit costs. Conceptually, scale relates to the output per time-period for a single product, whereas learning is based on cumulative output per product.9

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While the concepts are clear, there are empirical difficulties in distinguishing between scale and learning. Studies suggest that the median unit production cost saving by increasing scale from the minimum efficient scale to the ideal level was 10–20%: tanks and warships showed unit cost reductions of 10% or less; combat aircraft gave unit cost reductions of 20%; conventional munitions 20–30% and missiles some 25–40% (Hartley, 2006). Traditionally, learning was associated with aircraft production and learning curve slopes of 75–80%; but it also applies to other defence industries such as aero-engines, avionics, electronics, missiles, main battle tanks and warships with slopes traditionally ranging from 75 to 96% (Sandler & Hartley, 1995, p. 125). While labour learning remains important, it has been affected by modern manufacturing methods, new materials and business practices. Examples of new methods include computer-aided design and manufacturing; capital-intensive production including numerically controlled laser alignment systems; lean methods; supply chain changes; major assemblies arrive for final assembly already ‘‘pre-packed’’ with all components and avionics, which do not have to be installed during final assembly (Rand, 2002, p. 10). For European aerospace industries, typical labour learning curves are now 85–90% compared with the traditional 80% curve. Moreover, European aerospace firms are now achieving continuous learning on military and civil aircraft projects compared with the 1950s/1960s experience of ‘‘flat’’ learning curves at some 100 units [when comparable the US experience showed continuous learning: Hartley (2006)]. Nonetheless, there remain substantial differences in the scale of output between the US and the European Union (EU) defence firms in air, land and sea systems with the American firms having a scale advantage. For example, on the Joint Strike Fighter (Lockheed Martin F-35), the initial planned order was for 3002 units comprising 2852 aircraft for the US forces and a UK requirement for 150 aircraft. Decreasing unit costs from scale and learning result in smaller numbers of larger firms and increased industry consolidation.

Imperfect Markets on Both the Supply and Demand Sides Typically, for major weapons systems, national arms markets are dominated by monopoly, duopoly and oligopolies on the supply side. The major prime contractors are also large firms in an absolute sense. Furthermore, the demand side is imperfect with national governments as major or monopsony buyers able to use their buying power to determine the

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size, structure, conduct and performance of national defence industries, with procurement decisions based on a variety of economic and non-economic factors (e.g., preference for national champions for strategic and jobs, technology and export reasons). Today the EU lacks a single EDEM. In 2004, about 80% of EU defence equipment procurements – by value – were exempted from the EU public procurement rules on national security grounds (Article 296). A further new potential barrier to an EDEM arose with the UK 2005 defence industrial strategy, which identified key defence industrial and technology capabilities to be retained in the UK (DIS, 2005; Hartley, 2007).

Forms of Organisation The major defence firms have developed different forms of organisation to respond to new and changing market environments. Multi-product firms have replaced the traditional single-product specialists whereby defence firms used to specialise in one product, such as combat aircraft, naval aircraft, large aircraft or main battle tanks. The modern arms company has to cope with limited and uncertain defence budgets together with new and costly technologies requiring substantial R&D resources. Firms will choose a form of organisation, which will adjust to these market developments, build on their comparative advantage while economising on transaction costs and exploiting any economies of scope. Amongst the major prime contractors, two types of organisation have emerged. First, defence specialists supplying a range of air, land and sea systems, including defence electronics and a capability of supporting these systems during their ‘‘in-service’’ life (e.g., via military outsourcing). BAE Systems and Finmeccanica (like Lockheed Martin and Northrop Grumman in the US) are examples of such defence specialists, with defence systems accounting for some 75% or more of their sales. Second, an alternative organisation ‘‘model’’ is based around aerospace firms specialising in military and civil aircraft and helicopters, space systems and defence electronics. Boeing and EADS are examples of such aerospace specialists, each with a substantial business in large civil jet airliners with arms accounting for around 50% or less of their sales. These defence–civil firms are not dependent on winning large arms contracts and their civil business supports their industrial capability for re-entering defence markets in the future.

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DEFENCE INDUSTRIAL POLICY: THE WAY FORWARD? As underlined in the two preceding sections, there is a growing contradiction between the challenges of restructuring the European defence industry and the economic trends from which firms (and nation-states) cannot escape. Therefore, how to overcome these constraints? The aim is to go beyond the current limits of both market size and the industrial base in Europe. Defence industrial policy involves procurement choices between the extremes of support for a national industrial base or importing foreign arms (either with or without offsets) or the ‘‘intermediate’’ solutions of international collaboration and licensed/co-production. Each option involves varying degrees of work-sharing and technology for the buying nation with corresponding alternative prices (Hartley, 1995). Economic theory offers some guidelines for defence industrial policy in the EU (and in any military alliance). There are two key policy guidelines, namely, gains from trade and scale and learning economies. Advantages and Limits of Co-Operative Programmes Within Europe, collaboration has been the most distinctive of its defence industrial policies. There are several examples of such Europe-wide programmes since the 1960s, with major programmes in aerospace systems such as the three-nation Tornado, the four-nation Eurofighter Typhoon and the seven-nation A400M.10 They have been favoured for a while, because collaborative programmes retain a national approach to defence equipment procurement embracing both demand and supply. In theory, perfect international collaboration leads to savings in development and unit production costs. Unfortunately, actual collaboration involves departures from the ‘‘ideal’’ case with work-sharing based on political, equity and bargaining criteria ( juste retour) rather than efficiency criteria, resulting in inefficiencies in both development and production and longer development times. Collaboration fails to exploit gains from trade; but it does achieve economies of scale and learning although these are not fully realised due to each nation’s desire for a final assembly line. A UK study provided evidence on the inefficiencies of collaboration. It estimated that total development costs on collaborative projects were some 140% to almost 200% higher than comparable national programmes

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depending on the number of partner nations; but the UK’s cost share on collaborative programmes was about one third of total development costs. On production, it was found that collaboration achieved scale and learning economies in the region of half of those on national projects with collaboration causing an average of 11 months delay (NAO, 2001). A comparison of cost escalation and delays for the Eurofighter Typhoon and other major UK weapons projects is shown in Table 6. Other projects show considerable cost escalation and delays compared with Typhoon. Such cost escalation and delays reflect the transaction costs of international contracting including the management of collaborative programs, the cooperative industrial arrangements and changed order quantities as well as budget constraints and delayed approvals by national partners (NAO, 2001). Therefore, collaborative programmes can be a solution for overcoming national barriers, but it is not the most efficient. Suppressing first national barriers and then pushing for the integration of national defence bases into a unified European base represent the very condition for preserving the industrial competencies of the European defence industry at an affordable cost.

Table 6.

Examples of Cost Escalation and Delays: UK and US Experiences.

Project

A400M airlifter (seven-nation collaboration) Astute nuclear-powered submarine Nimrod MR4 aircraft Type 45 destroyer Eurofighter Typhoon (four-nation collaboration) US sample of 26 weapons projects: R&D costs US Joint Strike Fighter US Expeditionary Fighting Vehicle

Initial Cost Estimate 2005 Cost Estimate Delay ($ bn) ($ bn) (Months) 4.8

4.6

15

4.5 4.9 9.6 29.2

6.1 6.7 10.3 33.3

43 89 18 54

120.4

164.9

26

189.8 8.1

206.3 11.1

18 NA

Notes: (i) For the UK, the initial cost estimate is approved cost at main gate. All UK costs in 2004/2005 prices; US costs in 2006 prices. (ii) Typhoon costs for 2005 were not reported by NAO: the estimates were derived from data in NAO (2005). Source: NAO (2005), GAO (2006).

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Creating a Single Defence Market in Europe Current European defence industrial policy is focused on creating a single market for defence equipment (EDEM) and an integrated industrial base based on initiatives pursued by both the European Commission and the European Defence Agency. Indeed most EU defence markets are protected with preferential purchasing and support for national champions (e.g., Article 296 of EU Treaty). Table 7 underlines the (very) limited openness of domestic markets, especially for the large arms-producing countries. Free trade between member states of a military alliance would lead to gains from specialisation with trade based on comparative advantage.11 This requires abolition of tariff barriers, subsidies and preferential purchasing by member states, allowing free entry and competition for national defence contracts. Firms from member states would be allowed to bid for defence contracts in each nation-state. Additional cost savings are available where arms industries are decreasing cost industries (e.g., aerospace). Greater output reduces unit R&D costs and leads to economies of scale, learning and scope: such economies are not achieved in small-scale EU national defence markets but are available in a single arms market embracing all member states of a military alliance. Estimates suggest that competition effects might lead to unit cost savings of 10–25% with scale and learning economies probably contributing a 15–25% reduction in unit costs (Hartley, 2006). In 2005 the EU member states agreed to a voluntary code of conduct for defence procurement to encourage competition in the EU defence equipment market where defence contracts were exempt from the normal EU internal market rules (EDA, 2005). The code of conduct aims at opening defence markets of member states and promoting competition, including transparency and accountability procedures. With this new system, EDA will publish procurement opportunities and contract details through an Electronic Bulletin Board. Under the Code of Conduct, member states are committed to purchasing defence equipment from each other on the basis of best value, instead of automatically contracting with a national supplier. The Code covers defence equipment purchases, which governments choose to exempt from the EU public procurement rules under Article 296 and do not usually involve any crossborder competition. Member states requiring an exemption from the Code of Conduct must provide an explanation to the EDA. However, the Code of Conduct is not legally-binding; so it is unlikely to achieve much impact. There are also concerns that efforts to create a

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Evolution and Future of European Defence Firms Table 7. Country

Austria Belgium Cyprus Czech Republic Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden UK Total

Procurement, Imports and Employment.

Defence Procurement Imports of Arms Import in Industry Employment (h m, 2005) (h m, 2005) Procurement (%) (2000, 2003) 184 223 48 213

26 0 0 772

14 0 0 (362)

3 6 0 15

20 539 5,618 3,445 1,400 106 94 2,119 14 37 24 9 1,215 633 223 95 39 2,166 1,217 6,699

12 94 4 265 1,366 15 5 275 9 11 0 22 158 118 498 0 3 345 128 115

60 17 o1 8 98 14 5 13 64 30 0 (244) 13 19 (223) 0 8 16 11 2

10 10 240 80 15 2 0 26 0 0 0 0 10 50 5 7 0 20 25 200

26,380

4,241

16

724

Notes: (i) For imports, Euros estimated at exchange rate of h1=$1.2155 (June 2005). Also, SIPRI data originally in 1990 US$ prices and converted to 2005 prices using USA CPI. (ii) Figures are rounded. (iii) Figures in brackets show where imports exceed procurement spending suggesting data discrepancies either with import or procurement data. Imports are for major conventional weapons only (SIPRI data). (iv) Employment data from BICC: the series was discontinued after 2005 so the latest data are for 2003. Where BICC did not provide any data, the country entry was recorded as zero (0). Source: EDA, 2007 (procurement data); SIPRI Yearbook, 2006 (import data); BICC Conversion Survey, 2005 (employment data).

common EDEM will be affected by state support, subsidies and state ownership, security of supply, intra-community trade, export policies and different military requirements. Furthermore, EDA is assessing the impact of offsets on competition and defence industry restructuring. There is a

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concern that offsets distort competition, promote inefficiency in defence procurement and affect transparency. Policies to introduce an efficient defence industrial policy will, like all policies, involve gainers and losers:  Potential gainers include those industries and firms that are privatelyowned and have already been exposed to competition and competitively determined fixed price contracts.  Possible losers will be state-owned firms that operated in protected markets receiving subsidies and cost-plus contracts. Changes to establish a more efficient industrial policy will involve adjustment costs and will take time. There will be some unemployment and under-employment of resources, reflected in job losses, plant closures, exits from the industry and local unemployment. Potential losers will oppose change and will lobby for ‘‘fair and managed’’ competition with work allocated on a juste retour basis and protection for alliance defence industries (e.g., Fortress Europe). With such pressures from producer groups, the ideal of an efficient defence industrial policy will soon be transformed into cartels, collusive tendering, a lack of rivalry and inefficient alliance defence industries. The construction of the EDEM is not very easy and the institutions set up to manage it can be easily perverted to defend vested interests rather than promoting efficient economic mechanisms and a budgetary-sound approach for defence efforts at the European level.

Consolidating the European Defence Industrial Base As previously explained, both the Europeanisation of firms and domestic consolidation of domestic industrial bases can be considered as the first steps towards consolidation at the European level. Indeed, national markets in Europe can less and less be considered as the relevant market size when considering current technology and production costs for major defence systems. Even an enlarged market resulting from the suppression of barriers within the EU and the creation of EDEM could not be enough; it is necessary to create centres of excellence at the European level (Bellais & Foucault, 2005). Such integration process has been successfully realised in only a few sectors.

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The helicopter industry provides an early example. Ae´rospatiale and DaimlerChrysler Aerospace had a long-term partnership in helicopter business. As soon as 1990, both groups expected to merge their activities and they eventually achieved such consolidation in 1992 with the creation of Eurocopter. Nevertheless this new company remained a multi-domestic firm until the creation of EADS, which provided the means to overcome national resistance against the specialisation of Eurocopter sites in France and Germany. The creation of EADS also provided a major opportunity to consolidate satellites business throughout Europe. Matra Marconi Space (jointly owned by Ae´rospatial-Matra and GEC) and DASA merged to form Astrium in March 2000.12 The capitalistic consolidation was achieved in May 2003, when EADS acquired BAE Systems’ 25% share in Astrium (resulting from the takeover of GEC by British Aerospace) and became the sole owner. This complete control allowed EADS to reorganise Astrium’s activities on a European basis. Astrium represents one of the most integrated defence firms in Europe. Even though Astrium needs to keep a systems integration business in each of its home countries by governments’ request, it succeeded in specialising its sites in 2003 for lower levels of activity and creating centres of excellence throughout Europe (i.e., more specialised sites)13 aimed at reducing duplication and redundancies in Europe: optical missions in France, radar missions in Germany and telecom capacities in the UK (Graph 1). Nevertheless, one may recognise that such consolidation coupled with integration is the exception rather than the rule. Most firms that try to Europeanise their activities, even though they have successfully realised cross-border consolidation, come up against difficulties to push forward to an industrial rationalisation because of their states’ opposition. MBDA provides the best example of such a situation. MBDA was born in April 2001 by the merger of Ae´rospatiale Matra Missiles, Matra BAe Dynamics and Alenia Marconi Systems. If the merger created a unique firm, its industrial integration is still to be achieved. In fact, MBDA has to keep management, R&D and production departments in each of its home countries (France, the UK, Italy and Germany) because of national government requirements (Graph 2). Even though consolidation is well-engaged, integration is still unachieved in many sectors. Political barriers to a true Europeanisation of the defence industrial base remain high. This is a challenging situation for the European firms, since many of them have neither reached the critical size in their

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Poynton Microwave systems Portsmouth Telecom ( defence and commercial) payloads Navigation payloads Telecom, navigation and radar RF equipment

Stevenage (Prime UK) Mechanical bus Telecom ground segments Structures Cryo-generators Antennas Filters

Friedrichshafen (Prime Germany) Radar missions SAR radar instruments On-board electric power Heat systems Power electronics

Vélizy Payload electronics Telecom plate -form electronics Hybrid circuits and multichip modules

Madrid Carbon structures Antennas Plate-form and payload basic electronics

Graph 1.

Ottobrunn Navigation missions Plate-form general electronics Solar cells

Toulouse (Prime France) Optical missions On-board avionics Passive optic and microwave systems Ground segments

Restructuring of the Space Sector: Specialisation of ASTRIUM Sites. Source: ASTRIUM data.

respective sector yet, nor can they benefit from the full potential of their European mergers and acquisitions.

CONCLUSION Defence firms have a long history of change and uncertainty. New technology has resulted in revolutions in defence systems and armed forces. Examples include the emergence in the twentieth century of manned aircraft, missiles and nuclear weapons. Continued technical change and the emergence of new threats (e.g., international terrorism) means that the future defence firm will be different from today’s firm. Not all existing firms will survive and adjust to new technologies. Future aerospace firms will shift from manned combat aircraft to unmanned combat air vehicles, missiles and space systems and the electronics industry

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Stevenage

Lostock UK 2 900

Production

R&D

Bristol Software & Systems

A 1 100

London (Strand)

Ulm R&D Schrobenhausen R&D/Production/ Integration

Management FR 5 100

Unterschleißheim Management/R&D

Paris region Management/R&D

La Spezia

Compiègne

R&D/Integration

Electronics

Rome Management/R&D

Centre region R&D/Production/Integration

Graph 2.

IT 1 500

Fusaro Production/Integration

Restructuring of the Missile Sector: The Creation of MBDA. Source: Courtesy of MBDA.

is likely to become more important providing the next generation of new entrants, systems integrators and prime contractors. New forms of industrial organisation will also emerge characterised by buying rather than making, using international supply chains in a global economy leading to more international defence firms (Hartley & Sandler, 2003). Costly, defence specific systems will create further challenges for governments and the defence industrial base. Examples include aircraft carriers, main battle tanks, manned strategic bomber aircraft and nuclearpowered submarines. Increasingly, these are purchased in small numbers with long gaps in development between new generations of equipment. Where such systems require highly specific human and physical capital (e.g., nuclear-powered submarines), there will be problems and costs in maintaining such assets during gaps in development. The absence of competition for these weapons means that their prime contractors will have to be treated as regulated firms requiring procurement agencies to review their regulatory policies for non-competitive contracts (cf., regulation of natural monopolies).

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Continued industry re-structuring amongst both prime contractors and suppliers means that national markets will be dominated by larger firms and monopolies. Competition remains an efficient ‘‘policing’’ mechanism, but it will require a government’s willingness to ‘‘open-up’’ its national defence market to allow foreign firms to bid for arms contracts with possible adverse impacts on the domestic defence industrial base. For the EU, there are likely to be conflicts between its efforts to open-up national defence markets and the desire to create and maintain a European defence industrial and technological base. This notion remains vague (e.g., compared to the US model). Even if the defence industrial base can be defined, choices will be needed about its geographical distribution (e.g., the desire for fair shares), the likely monopoly of some costly and highly specialised industrial capabilities (e.g., aircraft carriers; missiles; space systems; nuclear-powered submarines) and the possibility of duopoly– oligopoly in other sectors of the European defence industrial and technological base (e.g., helicopters; manned combat aircraft; transport aircraft; main battle tanks).

NOTES 1. For instance, the creation of GIAT Industrie helped to rationalise land system industry by merging state arsenals and small firms like Me´canique Creusot Loire, Manurhin or Luchaire. SNECMA also absorbed small French aerospace firms like Labinal, and then the engine manufacturer Turbome´ca, or Hurel-Dubois (He´bert, 2006). 2. Later Alcatel bought back Thales’ 49% share in the joint space business, which became Alcatel Space in 2001. 3. EADS is incorporated in the Netherlands, but results from the merger in July 2000 of the ‘‘national champions’’ from Germany (DaimlerChrysler Aerospace), France (Ae´rospatiale Matra) and Spain (CASA). 4. These numbers can change substantially over the short term (e.g., annual changes). 5. See the Buy American Act or Article 296 of the European Union. 6. Thomson-CSF tried to take over the missile division of the LTV Corporation, but it abandoned such attempt in July 1992 because of the opposition of the US Federal Committee on foreign investment on national security grounds. Similarly, Matra failed to enter the American market in spite of the 1992 acquisition of Fairchild, whose sales to the Pentagon were strangely divided by four by 1996 – leading Matra to resell it. 7. Thomson-CSF made numerous acquisitions in the UK in the 1990s like LinkMiles, MEL, Hugues Rediffusion Simulation, Redifon, Pilkington Optronics, Avimo, Short Missilesy

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8. Ae´rospatiale Matra (France), DaimlerChrysler Aerospace (Germany) and CASA (Spain) sealed their merger in July 2000, but the creation of such European group has only been possible because Lionel Jospin and Gerhard Schroeder, the then Prime Ministers of France and Germany respectively, pushed for such a cross-border merger. 9. For example, scale might be based on an annual output of 100,000 units of a tank; learning applies to cumulative output so that if a tank has been produced at an annual rate of 100,000 units for 10 years, its cumulative output is 1 million. Evidence reported here is based on interview studies. Scale curves were based on unit cost reductions in moving from minimum efficient scale to ideal scale where there would be no further reductions in unit production costs. 10. JSF is an international co-operative program consisting of the US and eight foreign partners (the UK, Italy, the Netherlands, Turkey, Denmark, Norway, Canada and Australia). The partners have made various financial contributions to the development phase in return for an involvement in the program. However, the aircraft is a US design with Lockheed Martin as prime contractor for the program. Problems have arisen over the work allocated to the foreign partners, especially access to advanced technology (technology transfer). 11. The opening of defence markets within the EU aims at reducing barriers to competition in Europe; but states should maintain restrictions for foreign competitors when their home countries do not provide symmetrical conditions for European firms on their domestic market. Otherwise such asymmetrical opening would result in an unfair competition at the detriment of European firms, and eventually the disappearance of the European defence industrial base. 12. It was initially planned that Alenia Spazio would join this new company, but this project was abandoned. 13. This reshuffle of satellites business took place in a broader programme called SARA that concerned all EADS space businesses.

REFERENCES Bellais, R., & Foucault, M. (2005). Europe de l’armement: La porte s’entrouvre pour une nouvelle restructuration. De´fense et Se´curite´ Internationale, 1, 72–76. Bitzinger, R. (1999). Globalization in the post-cold war defense industry: Challenges and opportunities. In: A. Markusen & S. Costiga (Eds), Arming the future: A defense industry for the 21st century (pp. 305–333). New York: Council on Foreign Relations Press. DIS. (2005, December). Defence industrial strategy. Ministry of Defence. London: The Stationery Office, Cmnd 6697. Dunne, P., & Surrey, E. (2006). Arms production, SIPRI yearbook 2006. Oxford: Oxford University Press. EDA. (2005, November). EU governments agree voluntary code for cross-border competition in defence equipment markets. Brussels: European Defence Agency. EDA. (2007, May). A strategy for the European defence technological and industrial base. Brussels: European Defence Agency. GAO. (2006, March). Tactical aircraft. Recapitalization goals are not supported by knowledgebased F-22A and JSF business cases. Washington: US Government Accountability Office.

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Hartley, K. (1995). Industrial policies in the defense sector. In: K. Hartley & T. Sandler (Eds), Handbook of defense economics (Vol. 1, pp. 459–489). North Holland: Amsterdam. Hartley, K. (2006). Defence industrial policy in a military alliance. Journal of Peace Research, 43, 473–489. Hartley, K. (2007). The economics of the UK defence industrial strategy. Security Challenges, 3, 19–30. Hartley, K., Braddon, D., & Dowdall, P. (2004). The UK defence electronics industry: Adjusting to change. Defence and Peace Economics, 15, 565–586. Hartley, K., & Sandler, T. (2003). The future of the defence firm. Kyklos, 56, 361–380. He´bert, J. P. (2006). Le de´bat strate´gique sur l’armement 1992–2005. Cahiers d’e´tudes strate´giques (pp. 38–39). Paris: CIRPES. Laffont, J., & Tirole, J. (1993). The theory of incentives in procurement and regulation. Cambridge: MIT Press. Mantin, B., & Tishler, A. (2004). The structure of the defence industry and the security needs of the country: A differentiated products model. Defence and Peace Economics, 15, 397–419. Markusen, A., & Serfati, C. (2000). Remaking the military industrial relationship: A FrenchAmerican comparison. Defence and Peace Economics, 11, 271–299. Masson, H. (2006, May). Quel marche´ de de´fense europe´en? Ou l’heure des choix pour les E´tats membres de l’Union europe´enne producteurs d’armement, questions d’Europe no. 28. Paris: Fondation Robert Schuman. NAO. (2001, March). Maximising the benefits of defence equipment co-operation. London: National Audit Office, HC 300. NAO. (2005, November). Ministry of defence: Major projects report 2005. National Audit Office, London: The Stationery Office. Pugh, P. (2007). Defence equipment costs. Clapham: P.G. Pugh. Rand. (2002). Final assembly and checkout alternatives for the joint strike fighter. Santa Monica: Rand Corporation. Sandler, T., & Hartley, K. (1995). The economics of defense. Cambridge: Cambridge University Press. SIPRI. (1992). SIPRI yearbook 1992: World armaments and disarmament. Oxford: Oxford University Press. SIPRI. (2007). SIPRI yearbook 2007: Armaments, disarmament and international security. Oxford: Oxford University Press. Sko¨ns, E. & Gill, B. (1996) Arms production. In: SIPRI yearbook 1996: Armaments, disarmament and international security. Oxford: Oxford University Press.

DEFENSE-INDUSTRIAL ESTABLISHMENT OF RUSSIA Alexander Karlik, Igor Maximtsev, Jean-Paul He´bert and Paul-Marie Clouet Existence of the defense industry is closely connected with the existing and potential military threat, i.e., its development depends on the volume and development of the defense industry of the potential enemies, neutral states, and allies. The dynamics of military expenditures of other states is one of the factors determining that of the national defense industry. Nowadays, Russia does not have the obvious enemies, the reasons for a considerable increase of military expenditures being such factors as expansion of the NATO, threat at the southern borders, terrorism, as well as the necessity to provide internal security and compensation for obsolescence and physical depreciation of the defense technology. Besides, it is necessary to develop new forms of military strategy implying new means of pressure and new armaments. It is interesting to present the development of DIEs as a reaction for external threats, the commercial dependency of the Russian exports arms policy, and the openness of Russian aeronautic industry to the Western countries’ companies.

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 105–123 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06007-4

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THE DEVELOPMENT OF DIES AS THE REACTION FOR THE EXTERNAL THREATS At the same time, new military and political factors have emerged, which determine the strategy of the Russian defense industry, rates of its development, and change of the structure. On February 8, of the current year, the chief of Pentagon, R. Gates spoke at a session of the Committee for the Armed Forces of the Chamber of Representatives of the Congress, declaring that USA should be ready to possible military conflicts with other countries including Russia and China: ‘‘We need the whole spectrum of war facilities for army involving conflicts, since we do not know what could happen in such places as Russia, China, North Korea, Iran and other.’’1 As a result, the USA military policy is encircling Russia with antimissile defense systems. They are supposed to install a powerful radar in the Czech Republic and shaft-basing missiles in Poland. A superpowerful floating radar is to be transferred from Hawaii islands to Aleut islands, etc. Thus, the whole territory of Russia will be surrounded with radar-missile complexes. These activities will produce an increased attention to elaboration and manufacturing of constituents of the antimissile defense system and by-pass systems, possible withdrawal from the Treaty on conventional weapons in Europe and the Treaty on medium-range strategic missiles etc., which may change the direction and paces of development of the defense industry. Russian Definition of Defense-Industrial Establishment First we should explain the meaning of the terms ‘‘defense industry,’’ ‘‘military-industrial establishment,’’ ‘‘defense-industrial establishment,’’ (DIE) and determine the composition of the industrial establishment connected with the defense of the state. These terms are based on the concept of a defense enterprise. In the USA, it means a firm where a part of the goods produced or services rendered is paid by the USA Ministry of Defense. A number of companies are identified as defense enterprises if the only buyer of their products is Pentagon.2 In Soviet economy, enterprises were referred to as defense enterprises depending on the subordination: enterprises belonging to the Ministry supervised by the War-Industrial Commission were considered to be defense ones. Most defense enterprises manufactured both war and civil products. Defense enterprises produced all civil airplanes, vessels, and communication equipment. Almost 80% of the equipment applied in other sectors of the

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economy was produced in this block. In 1990 defense enterprises manufactured more than one fourth of consumer goods (except products of food industry).3 The USSR DIE produced 100% of video recorders, 100% of TV sets, etc. From among 5.4 million people working for the DIE, only 2.7 million people were involved directly in the production of armaments and defense technology, and some enterprises working for defense were located beyond the defense complex (production of special steels, chemistry etc.), the number of subcontracts being rather large. For example, manufacturing of the tank T-80 involves 800 plants spread on the territory of the USSR.4 One may say that one working place directly in the DIE created 0.66 working places in other branches of the economy. Many enterprises possessed mobilization capacities requiring workers to maintain and keeping them in perfect working order. Thus, more than 10 million people took part in the defense activities. According to the Act of the Russian Federation ‘‘On conversion of the defense industry,’’ the defense enterprise shall mean ‘‘organization regardless of the legal form of organization and form of ownership carrying out scientific and (or) production activity to provide the federal state needs in the sphere of maintenance of the defense capacity and security of the Russian Federation.’’5 A number of works devoted to the problems of creation, development, and reforming of the DIE (defense industry, military-industrial, defense establishments) do not practically define these concepts taking them as they are, sometimes identifying them.6 In our opinion, the term ‘‘defense-industrial establishment’’ is most close to the essence of the phenomenon because:  Practically all the countries base the military doctrine on the principle of sufficient defense capacity, though many countries spread their defense activities to the regions located far beyond their borders;  The focus is on the state and prospects of the material-technical base of maintenance and development of the defense capacity of the stateindustrial production;  It gives an impression of the complex character of the phenomenon as a multielement social-economic mesosystem, which is directly connected with the macro (the state) and micro (legal entities) systems. On the basis of the functions of the establishment, restrictions connected with its size, rates of development, and priorities it is possible to make a definition of the DIE as a territorial and production aggregate of industrial enterprises and other objects of material production and nonproduction sphere, which interacts on the research, elaboration, production, realization,

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repair and maintenance of the armaments, material, and other property intended for provision of the defense capacity of the state. More precisely this concept is explained in the reference book of the information agency TS-DIE, where the DIE of Russia means ‘‘an aggregate of enterprises and organizations, which7:  Take part in fulfillment of the current state defense order and/or militarytechnical cooperation with other countries;  Have mobilization tasks, i.e., are potentially able to produce or elaborate certain types of armaments and/or war technology (a&wt);  Have a license (licenses) for production or elaboration of a&wt;  Fall within the competence of specific federal authorities having the right to control the production and development of a&wt.’’ The number of enterprises of the DIE may vary, subject to the criterion. Thus, according to certain estimations, the number of enterprises participating in fulfillment of the state defense order is 4,000–6,000, those having mobilization tasks (often nominal) are several times more.

Increase of Russian Military Expenditures Efficiency of the DIE mainly depends on military expenditures (defense budget) of the country. World war expenditures were $861 billion and $956 billion in 2002–2003 respectively.8 According to Stockholm International Peace Research, the aggregate costs of armaments and defense from 2004 to 2005 in the world were $1.035 trillion and $1.119 trillion, respectively. There is an idea according to which increase of the defense costs promotes military production, increases employment of population, and provides overall involvement of the production capacities, which results in economic development. As an example, in the USA about 6.5 million people have jobs and earnings thanks to Pentagon orders. Together with the family members this makes almost 20 million people. Nevertheless, increase of war industry in the long run may lead to reverse consequences. As a rule, military industry is more capital consuming and less labor intensive, than civil industry. This is why the number of working places created at military enterprises is usually smaller than those created by investing the same funds in manufacturing of civil products and especially services. Thus, the number of working places created by each $10 billion in military industry is 40,000 smaller than that in civil industries. One billion dollars spent by Pentagon provides creation of about 48,000 working places, the same funds spent in

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the sphere of public health – 76,000, and in the system of education – 100,000.9 Unproductive character of the main part of production in the DIE means that the wages of the workers of defense enterprises (which in the USSR was 1.5–2 times higher than in the country on average and in France is 13–17% higher than in other branches of industry)10 could only buy 50–60% of mass consumption products, food and services, which means that the increase of the volume of the defense industry leads to disproportion between the money supply and that of material wealth, devaluation of the national currency, and inflation. Nevertheless, in the short period increase of military industry may produce a positive effect on the economy, creating new working places, reducing import, improving the trade balance of exporting countries, and war technologies stimulating modernization of the civil sector of the economy. Development of certain branches of the DIE makes it possible to create a market of civil products. Thus, for example, 1 ruble invested in the space industry gives 29 rubles in other spheres.11 Besides, military might provides security of the state and gives it means of political pressure which are also used in commercial and financial areas.12 The assessment of the role and importance as well as perspectives of the DIE development can be made on the basis of the state military expenditure analysis; however the comparison of expenditures caused a lot of argument several years ago. At the beginning of the 1980s, the center for strategic research of the Stockholm International Peace Research Institute (SIPRI) considered that the USSR military expenditure was three times lower than that of the USA; on the opposite, the USA Center for defense research (USACDA) supposed that the USSR military expenditure was three times higher than that of the USA. At present, the USA military expenditure constitutes 47% of the world military expenditure, which equals the expenditure of Russia and other European countries taken together.13 Military expenditure of Russia went down significantly after the beginning of the transfer to market economy, even though they have been steadily growing since 1999 (1999 – 116.8 billion rubles, 2002 – 282 billion rubles, and 2005 – 528 billion rubles). Currently, the Russian military expenditure (if converted by the official exchange rate) is approximately $25 billion. Considering the difference in the purchasing power, the Russian military expenditure constitutes at the most 20% of the American military expenditure (according to SIPRI, $439.3 billion for 2007). SIPRI puts Russia approximately at the 11th place with $ 84.2 billion. One can state that the Russian share of military expenditure is steadily declining in

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relation to GDP. In the Russian military budget for 2004, 41.8% was spent on salaries of the servicemen; 3.7% was spent on capital construction; 8% on repairs of arms and military equipment; 12.4% on research and designand-testing.14 According to the RF Defense Minister S. Ivanov, the Defense Ministry plans to achieve the optimal proportion by 2011: 50% of the expenses for maintenance and 50% for development.15 The USSR DIE was considered a major branch of national economy, where 20 million people were involved. Shock therapy and first of all sharp reduction of budget allocations, seriously damaged the base and the power of the DIE. The enterprises started implementing diversification policy and changing the manufacturing structure.

Russian Defense-Industrial Establishment Nowadays Nowadays DIE does not produce only weapons, that is why one should distinguish its general economic situation and specific weapon production situation. The share of civil production in 2003 was 41.3%.16 During the period of 2006–2008 the share of civil-purpose produce will grow from 47.1% to 49.2%.17 By the end of 2003, there were 1279 facilities in the DIE Enterprise Register (design offices, scientific-research institutes, plants). Much more 6000 enterprises were drawing into production of defense products.18 Later the list was specified and at the beginning of March, 2005, 1,043 strategic enterprises and strategic joint stock companies (JSC) were part of the DIE.19 In the early 2006, in the composite register of the DIE there were 175 unitary enterprises and 428 public corporations with the state authorized capital.20 A big part of the DIE products is meant for covering state requirements and that is why its manufacture is financed from the federal budget through defense orders. In 2005, 528 billion rubles were allocated from the federal budget. The defense order for 2005 constituted nearly 14% of the federal budget and over 40% of all defense expenditures of the country.21 The Russian DIE provides nearly 25% of machine-building manufacture and over 40% of the industry export.22 Approximately 25–30% of the total investments are channeled to the DIE industries. Tendencies of condition of the DIE enterprises’ industrial park correspond to the general industrial tendencies. Deterioration of working plant capacities is about 80%. The share of equipment, which was in use for less than 5 years, is less than 5% (as compared to the average of 5.7% for the Russian industry). At the same time, the equipment has been used for about 30 years, while in the EC

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countries the service life of similar equipment is 7–8 years.23 More so, to provide the successful technological process of weapons manufacture, a share of equipment less than 10 years old should exceed 70%, while the actual indicator is 28% (15.3% average in the industry), which is a result of low renewal level of the branch’s industrial park. The workload level of the plant capacity in the DIE is 30–40% and at some enterprises is less than the average for machine-building (51%).24 For example, the workload of the Russian shipyards is not more than 30%.25 DIE enterprises directly involves 860,000 people and the majority of them are concentrated in aircraft construction, space industry, and production of weapons.26 Decline of production under conditions of sufficient lag (nearly twice) in salaries as compared to the average salary in the country has significantly impaired the staff quality of the DIE. Results of the survey conducted in 2001 showed that only 40% of the workers meet the requirements under the market-economy conditions.27 The Russian DIE enterprises are somewhat dependent on the foreign supply of component parts, which is connected with the disintegration of the single DIE of the USSR. Russia inherited about 80% of the USSR defense potential but managed to maintain, at its own expense, only 17% of the amount of the military products manufactured in the USSR. Even though the manufacture of some component parts for the DIE was organized in the RF, dependence on the CIS supply is still present, in particular, from Byelorussia, the Ukraine and Kazakhstan.28 Currently, the DIE of Russia is restoring its lost cooperation and technological connections by participating (or buying) in the CIS defense enterprises’ capital. For example, Kirgizia gave the state shareholding of the Bishkek defense enterprise, which used to be part of the USSR DIE, to the Russian public corporation ‘‘SK PROM’’ on account of debt. Similarly, Armenia gave on account of debt, some defense enterprises, in particular the close corporation ‘‘Yerevan Scientific Research Institute of Automated Control Systems’’ and the close corporation ‘‘Mars.’’29 The Russian DIE has excessive capacities for manufacturing military products but their level is not adequate for manufacturing modern products. The DIE is suffering from lack of investments and thus from poor renewal of the fixed capital, as well as from deterioration of industrial park and impairment of technological structure. As was mentioned above, the DIE has low occupancy level and small salaries under conditions of high demands to the workforce qualification. Financial conditions of a number of enterprises and organizations are rather complicated. The main reason for that is the fact that the state remains a

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debtor of the DIE. Therefore, the enterprises face a dilemma: to suspend manufacture for an uncertain period of time and then to boost fulfillment of their obligations or to attract extra budgetary assets, but only large enterprises are able to do that. Since the production volume within the framework of the State Defense Order is small, the DIE enterprises are oriented mainly toward manufacturing products for export- and civil-purpose products for domestic market. The main directions of state policy concerning the DIE stipulate stabilizing economic and financial situation at the enterprises, international cooperation in priority fields of high technology, and its structural reorganization and conversion. Within the framework of implementing this policy, special attention is paid to establishment of branch integrated competitive structures. The program of the DIE restructuring developed in 1997 stipulated the establishment of integrated structures (holdings, complexes, and industrial amalgamations) and denationalization on founding amalgamations (integrated structures) for most enterprises of the industry, which were earlier attributed to the category of ‘‘strategic enterprises not subject to privatization,’’ followed by their transformation into JSC (with 100% state ownership of the shares) with subsequent transfer of the shares under administration to the established amalgamation. Withdrawal of some JSC from the DIE was also touched upon, in particular, the companies where there is no participation of the state or if the state share may be transferred to the administration of local funds for managing state property. The RF Government adopted a decision to privatize 638 JSC and 1080 unitary state federal enterprises in 2004. Beside that a new list of enterprises and organizations of the DIE not subject to privatization was drawn. In 2001 ‘‘The Fundamentals of the RF Policy for Developing the DefenseIndustrial Establishment till 2010 and for Further Perspective’’ and ‘‘The State Program for Arming till 2010’’ were developed with the aim of determining scenarios of general strategy for long-term Russian economic development. They determined in particular, stages of the DIE reform, and its targets and goals. The documents cover diversification of production, establishment of big, stable, and competitive companies by means of integration within the branch, and enhancement of high-technological core of the DIE. The highest level of integration was reached at OAK, which is made up of public corporation ‘‘Sukhoy’’, public corporation ‘‘MIG’’ and others. As the last stage of the defense enterprises integration, a major united aircraft company was established. It was comprised of the public corporation ‘‘Sukhoi,’’ public corporation ‘‘MIG,’’ and others; not less than 75% of the company’s authorized capital will belong to the state. The corporation will

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have a divisional structure with four main divisions: ‘‘Military aviation,’’ ‘‘Civil Aviation,’’ ‘‘Military-transport aviation,’’ and ‘‘Joints and components.’’30 Simultaneously, the foundation of the submarine and shipbuilding holding takes place, as Minister of Defense of the Russian Federation claimed.31 Public corporation ‘‘Sukhoy’’ became the most successful Russian defense company for the year 2004, ranking 34th among the biggest world militaryindustrial establishment companies. The top 100 list of the most successful companies of the world military-industrial establishment also includes airdefense concern ‘‘Almaz-Antey’’ (the 50th position), corporation ‘‘Irkut’’ (the 66th position), corporation ‘‘Aerospace Equipment’’ (the 85th position), Russian Aircraft Corporation ‘‘MIG’’ (the 88th position), Federal State Unitary Enterprise ‘‘Admiralty Shipyard,’’ and Ufa motor-works production company (the 96th position).32 In 2005 ‘‘Almaz-Antey’’ concern was the 30th in the list. In terms of international scale, Russian defense industry is not too big, compared to the biggest military enterprises for 2004 such as ‘‘LockheedMartin’’: $ 34.05 billion; ‘‘Boeing’’: $ 30.46 billion; ‘‘Northrop-Grumman’’: $ 22.12 billion; ‘‘BAE Systems’’: $ 20.34 billion; ‘‘Raytheon’’: $ 18.77 billion. There are six main trends in the development of the Russian DIE:  Transformation of the most state-owned defense companies into JSC and selling of state-owned shares of some JSC;  Reduction of the number of defense companies not subject to privatization;  Transformation of strategically important defense companies into stateowned companies;  Assistance provided to defense companies in creating big competitive alliances (aircraft, aerospace industry, production of explosives, etc.);  Bringing certain defense companies under the jurisdiction of local authorities;  Civil production development and entering international market.

‘‘COMMERCIAL PRAGMATISM’’33 IN RUSSIAN ARMS EXPORTS POLICY. DEPENDENCY TOWARD ARMS EXPORT Data on Russian arms exports are however difficult to assess, whether they come from Russian or international sources, such as SIPRI, CRS. Russian

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research centers themselves are heavily reliant on open sources and official declarations, and make their own estimations. According to SIPRI and CRS, Russia has become the first arms exporter, before USA, in 2004 and 2005. Center for Applied Special Technology (CAST) considers Russia as the 3rd or 4th arms exporter. Russia does not publish official data on arms export, and official declaration often contradicts them: Russian daily Kommersant pointed out that Russian arms export had increased from 5 billion to 6 billion dollars according to various official declarations between November 2005 and February 2006, without any serious explanation.34 However, since 1999 Russian arms exports have steadily increased from around $2 billion to $ 6.4 billion in 2006, and in 2007 it is planned at $7.5 billion. Russian arms sales tend to stabilize around $6 billion annual deliveries. Russian enterprises are still highly dependent on export markets, over 70% of the defense establishment revenues are export-driven,35 as national procurement is still too low to represent an alternative source of revenue. This reliance on export sales means that Russian authorities are often confronted to a strong lobby by Russian firms, lead by Rosoboronexport, in favor of export deals, which can put Russia in an awkward position regarding its international obligations. Iranian contract for Tor-M1 antiaircraft system was signed in December 2005, as the EU was engaging in tough negotiations with Teheran on its nuclear enrichment program, and Russia had to face strong criticism for the timing and the legitimacy of this sale.36 Russian arms export successes can be explained by the rationalization of the administrative processes. The Russian Federal State under President Putin has identified and used arms export as a major tool of foreign policy, along with energy (gas, oil, and nuclear energy). The main instrument of the Russian Military-Cooperation policy is the state unitary enterprise Rosoboronexport, which has recently obtained a complete monopoly over all end-product military exports,37 and therefore has gained considerable influence over Russian arms export policy and Russian DIE.

Selling to ‘‘Anti-American States’’ On the one hand, Russia benefits from the USA foreign policy: Russian main clients are countries that are not able or willing to buy American and European equipments because of their anti-American stance or of western embargoes. Russian weapons find therefore large captive markets without

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any serious competition from western firms: China, Iran, Venezuela, Syria, and Indonesia. Such a comfortable position is however not lasting as the two main markets; India and China are becoming saturated, particularly of combat aircraft, which were the bulk of Russian arms export in recent years. India is increasingly turning to international competition for its arms procurement: a $5 billion tender for 126 combat aircraft sees the Russian MiG-35 facing tough competition from American and European fighters F-16, F-18, Eurofighter, Rafale, and Gripen.38 China has enough combat aircraft, and is now asking for technology transfers and production licenses, which Russia is not willing to offer so far.39 However, new contracts can be signed for electronic equipments (radars, underwater warfare systems, C4I) and strategic transport assets. Furthermore, Russian firms can still expect lucrative contracts in order to upgrade already sold equipments and weapons, as long as the USA and EU maintain their arms embargo against China. On the other hand, USA is becoming increasingly upset by Russian arms exports to ‘‘unfriendly’’ states, such as Syria, Venezuela, and Iran. Washington and Tel-Aviv criticized sales of antiaircraft missile systems to Syria and Iran.40 Recent contracts with Venezuela including 100,000 AK103 assault rifles Kalachnikov, around 50 helicopters MiG, and 24 heavy combat aircraft Su-30 highly irritated the USA. The State Department decreed in August 2006 an embargo against two important Russian firms, Sukhoi Group and Rosoboronexport. This embargo – which was lifted in November against Sukhoi but remains so far in force against Rosoboronexport,41 and was extended to KBP machine-building design bureau and KBP instrument design bureau, has been officially justified by Russian arms sales to Iran but is more likely linked to the Venezuelan contracts. Although officially minimized by Russian authorities, consequences of the USA embargo could have been important: Sukhoi feared that it may have hampered its procurement of western equipment for its new SuperJet-100 regional jet, designed in cooperation with western firms such as Thales and Snecma.42

Successful Combination of Debt Reduction, Energy and Arms Deals Another specificity of Russian arms export policy is the successful combination of debt reduction, energy deals, and arms export. The $7.5

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billion Algerian contracts signed in March 2006 included the $4billion Algerian debt cancellation, a deal on gas exploration and production between Gazprom and the Algerian gas and oil state company Sonatrach, whose revenues perceived by the Algerian State are to be transferred directly to Rosoboronexport and the Russian aeronautics monopoly Obyedibionnaya Aviastroitel Kompaniya (OAK), in order to pay the procurement of around 70 combat and training aircraft,43 antiaircraft missile systems, battle tanks, and the upgrading of Algerian armed forces. Russia is now considering similar deals with Libya. Furthermore, Russia returned to Soviet practices and offered a $1 billion credit line to Indonesia, insisting it should be used for arms purchases. Russia has also adapted its catalog. Warships, submarines, and antiaircraft system counterbalanced the fall in aircraft sales in 2005: naval systems amounted for 45% of total deliveries, whereas aviation accounted for 38.8%, and the remainder to air-defense systems and land forces equipment.44 Although initially more interested in direct arms sales, more lucrative, Rosoboronexport increasingly signs contracts for upgrading and after-sale services. For instance, Venezuelan contracts included local production of Kalachnikov assault rifles, establishment of a repairing and training center for Latin American helicopter customers, and training of Venezuelan helicopter technicians and pilots in Russia. Beside China and India, Russian exporters aggressively prospect new markets in Latin America, South-East Asia, and in the Middle-East. New customers such as Venezuela have sufficient financial resources from oil and gas export in order to pay cash for Russian weapons.

Coping with a Tough International Competition Russian arms exporters face however important challenges. Integration with western standards is still problematic, even if Russian armaments can prove to be superior to their western equivalent, as it is the case with antiaircraft missile systems: Greece and Russia recently settled a dispute on adaptation of Russian-made Tor-M1 short-range antiaircraft systems to the Greek radar and command system.45 Russia has to cope with other new competitors for technology lowintensive products:46 Russian authorities regularly criticize East-European countries for producing Soviet-designed armaments without patent. In less-developed countries, notable in Africa, Russian armaments face

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competition from Ukrainian, Belarusian, and other countries’ upgrade solutions or low-cost products. China is another potentially dangerous newcomer on African markets for small weapons, trucks, and military vehicles.47 Russian arms exports have benefited for a long time from their two main markets, China and India. China signed large contracts for serial combat aircraft, ships, and submarines; these contracts did not provided large benefits but essential workload for Russian factories. But China has not signed new contracts since 2005. India has preferred to pay the design of upgraded more modern versions, thus providing workload and R&D funding for Russian design bureaus. But Russia and India struggle to renew their military-industrial cooperation: the Multi-Mission Transport Aircraft program is hardly launched, India still waiting for a secured Russian financing engagement; India would prefer a 5th generation aircraft based on MiG project rather than Sukhoi heavy fighter already chosen by the Russian air force.48 The future of Russian arms exports relies on the ability of Russian firms to conduct joint development program with reliable partners, primarily India and European firms. Russia will thus be able to share the costs of R&D, develop new technologies or acquire them, and keep its place as a major arms exporter. But such cooperation and place on the world market implies a huge effort of modernization and consolidation of the Russian arms industry, so that Russian firms can also be considered as reliable partners by European and foreign counterparts.

RUSSIAN AERONAUTIC INDUSTRY TURNS TO THE WEST Equilibriums in European aviation industry – either civilian or military – are undertaking profound changes. These changes are particularly visible in British group BAE Systems’ decision to sell its Airbus in order to strengthen its implantation on the North American market. But changes in the Russian aeronautical industry are nonetheless important for the future. These changes take root on restored Russian positions on the export markets, after years of uncertainty and even confusion which followed the implosion of the USSR and profoundly affected the whole ex-Soviet industry. Changes can be observed in a radical process of concentration and deploy themselves in the development of links with the West.

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Restoration of the Russian Aviation Industry on the External Markets In recent years, several significant contracts have shown the renewal of Russian capacities on the export markets: At the end of 2005, Indonesia began negotiations to buy bomber-fighters Sukhoi. At the same time, China announced its will to buy 34 transport and refueling Ilyuchin aircraft (Il-76 and Il-78) estimated at $1.5 billion and the Chinese Popular Army is negotiating with Rosoboronexport for the production under license of Su-30MK3 aircraft, meanwhile Sukhoi announced the opening of a representation office in Beijing. In March 2006, Algeria signed a large deal of military equipment, estimated at $7.5 billion, including among other things 40 MiG-29 combat aircraft, 28 Su-30 fighter aircraft, and 26 Yak-130 training aircraft. India, which is a historic client of Russian aviation industry (notably MiG-21 and MiG-29 fighters), has launched a modernization program of its air force, a tender of 126 aircraft, for which MiG-29 is competing against Rafale and American fighter aircraft. In March 2007, the Venezuelan army has actively put in duty its first Mi26T heavy helicopter, from a contract signed of 15 helicopters with Rostvertol. A second deal is being negotiated for 18 additional helicopters, along with a repair and training center. Rosoboronexport has inaugurated recently a new office in Brussels in order to facilitate its relationship with European authorities. It is therefore clear that Russian equipments and firms make a powerful comeback in the world market.49

A Radical Concentration Process This comeback is not only the product of marketing endeavor, but also the result of a radical concentration process. The current move is indeed a merger of the aviation industry into the holding OAK,50 which will aggregate the main nonintegrated aircraft makers. Mergers have already occurred: private firm Irkut has taken over Beriev and Tupolev design bureaus, and gained control over aircraft maker MiG. On the other side, Sukhoi group has merged local aviation factories KnAAPO (Su-27 and Su-30 aircraft) and NAPO (Su-34). Ilyuchin now comprises Antonov and Tchkalov. And if Tupolev still stay autonomous, a rapprochement with Ilyuchin should not prove very difficult. And OAK is the focus of merger of theses four groups, but it should be noted that the state would keep a majority holding in OAK.

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However, it should be emphasized that if the concentration process has restored the competitiveness of the military aviation industry it is not the same case in the civilian field. Civilian aircraft production still faces major difficulties cumulated for 12 years: during this period, civilian aircraft makers have seen their sales plummet. Currently all their hope relies on medium haul aircraft programs Russian Regional Jet (RRJ, newly called SuperJet100 by Sukhoi), Antonov’s An-148, and Tupolev’s Tu-334. The RRJ is particularly promoted and Sukhoi has entered into several alliances in order to make the program succeed. Boeing is involved in the marketing, but it is Europe which is playing a significant role: Italian Finmeccanica has bought 25% of the civilian branch of Sukhoi group (Sukhoi Civil Aircraft). RRJ’s engines will be produced by Snecma (Safran group) and Russian NPO Saturn. Other European groups are also involved, such as Thales (exThomson-CSF) for the avionics and Messier-Dowty for the undercarriage. These links with European firms is one element of an overall policy aiming at European integration.

Development of Links with Western Countries The number of continental links between European and Russian firms is growing: for instance, EADS plans to set up a joint venture specialized in the conversion of single-aisled Airbus A320s into cargo versions. In the framework of a partnership with Irkut, EADS has already announced in summer 2005 the creation of a joint venture (70% Irkut, 30% EADS), named EADS Irkut Seaplane SAS, in order to market the Be-200 firefighting seaplane. During the first quarter of 2006, Sukhoi design bureau and Thales Training & Simulation signed a letter of intent regarding the design and production of training simulators and equipments for the RJ. Meanwhile, Sukhoi Civil Aircraft and Thales opened a new software design center for this aircraft. In 2007, French aviation equipment maker Liebherr Aerospace is to set up a joint venture with Russian firm Gidromash based in Ninny Novgorod (25/75%), designed to build front undercarriage for the Airbus A-350 in a new factory in Jerjinsk in 2008.51 In 2007, links between Russia and EADS were further strengthened, after Russian state-owned bank Vneshtorgbank (VTB) bought 5.02% of EADS floating capital during the summer of 2006. This new Russian shareholder at that time brought concern among European leaders, because one adviser to President Putin, Sergey Prikhodko, had previously stated the intention of Russia to have a seat at EADS board of directors. EADS directors politely

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declined the oder: ‘‘It would not be in the interest [of EADS] to enlarge the group of key shareholders.’’ Since, the relationship cooled, and 2007 first quarter saw a strengthening of the relation between the two partners: Russian airline Aeroflot signed a deal for 22 A-350XWB estimated at more than $3.5 billion. Meanwhile, EADS signed four cooperation deals with OAK: the Russian aircraft maker will be Airbus’s first partner on a risksharing basis, with 5% of the A-350 development (h500 million). EADS and OAK will set up a joint subsidiary based in Dresden, with a factory in Lukhovitsy near Moscow for the conversion of 1-320 into freighter version. They will also launch a joint study for a future military-transport aircraft. EADS is expected to swap its 10%52 Irkut share into OAK shares, and EADS share detained by VTB could be transferred to OAK.53 Europe, from the Atlantic to Ural More generally, alliances and rapprochement attempts are not limited to the aviation sector: Russian steelmaker Severstal tried to take a majority share in Arcelor’s capital, AFK Sistema tried to buy a minority stake in the first German communication group Deutsche Telekom, and Russian billionaire Oleg Derispaka (Bazovy Element) who allied with Canadian Magna group is attempting to buy out American car-maker Chrysler, sold by DaimlerChrysler. This European inclination goes beyond simple tactics of investment allowed by the gas rent: a real strategic trend is currently deployed. Armament industries and particularly European aviation industry undergo a profound transformation. British BAE Systems look on the other side of the Atlantic Ocean, and try to get a strong foothold on the American market, mainly through the buyout of United Defense in 2005 and Armor Holding in 2007.54 At the same time, Russia observes a partition of the world market: its main clients are a set made by China-India-Iran, little permeable to OTAN supply, but these three main markets are becoming saturated. On the other hand, Russia is absent or almost on western markets. All these takeover, joint ventures, and cooperation deals can be seen as an attempt to displace the economical and therefore political center of gravity of the Russian aviation production system, and to displace toward the East the Western system. At a time when the controversy on the American missile shield toughens and when a new missile (S-400) is deployed around Moscow and Russian main cities, this option is a major choice for the future.

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NOTES 1. Vesti.Ru. http://www.vesti.ru/comments.html?id ¼ 55672 2. Impacts of Defense Spending Cuts of Industry Sectors? Occupational Groups and Localities. Adjusting to Draw-Down, Report of the Defense Conversion Commission, LMI Report DC201R2 (February 1993), Annex F to p. 4–1. 3. Kokoshin, A. (1994). Defense Industry Conversion in Russian Federation? In: T. P. Jonson & S. E. Miller (Eds), Russian security after the Cold War, seen views from Moscow (p. 45). Washington: Brasseys. 4. Central Eurasia (htreafter FBIS, Central Eurasia), March 1, 1993, p. 2. 5. Federalny zakon R. F. ‘‘O konversii oboronnoy promishlennosti v Rossiyskoy Federacii’’. 6. Rassadin V. N. Oboronno-promislenniy complex. Genezis I conversia. M. MAKS Press, 2002. 7. Informacionnoe agentstvo TS-VPK Rossii: strukturnie pokazateli, 2000. 8. Globalizacia 2004 G.www.opec.ru 9. Melman C. Konversia I razorujenie: demilitarizovannie o,shestva Per. s angl. – Mir, 1990. Fontanel J. Investicii v mir//Kurier UNESKO. 1993.decaber; Fomin E. P. Economicheskie problemi konversii oboronno-promishlennogo complexa. – SPb.: SPbUEF, 1996. 10. Bratuhin A. G, Kulichikov V. N., & Kalachanov V. D. (1995). Conversia aerocosmicheskogo complexa Rossii.-M: Mashinostroenie. 11. Odin vlojenniy v cosmichesku promishlennost rubl daet 29 v drugih otrasliah: Glava Roscosmosa. –IA Volga-Inform (06.07.2006). 12. Rodionov A. A., Titov K. A. (1994). Conversia: problemi, perspektivi, socialni aspekt. – Samara. 13. Rashodi na oboronu segodnia ejegodni otchet SIPRI. www.rambler.ru/db/ news/msg.html?mid ¼ 3528829&s ¼ 6 14. Gorshkov N. A. Proekt voennogo budjeta USA na 2005 finansovi god. Nezavisivoe voennoe obozrenie No. 5 (414) fevrala 11, 2005 G. 15. RIA ‘‘Novosti’’, (01.09.2005). 16. Dolia grajdanskoy produkcii na predpriatiah rossiskogo oboronno-promishlennogo complexa previshet 40%. ‘‘Interfax’’, (25.02.2004). www.ia.vpk.ru. 17. TS VPK. ANN (16.09.2005). 18. V reestr predpriani, P. K. vklucheni 1279 oboronnih KB, NII, zavodov. ‘‘Interfax’’ (13.11.2003). www.ia.vpk; Arhipov C. Bronepoezd pod parami. Razvitie oboronnogo complexa-neobhodimoe uslovie udboenia VVP Nasha obschereginalnaya gazets (16.07.2003). www.ia.vpk.ru. 19. Ukaz Prezidenta RF G. No. 1009. 20. IA VPK ‘‘ARM-TASS’’ (06.02.2006). 21. www.avias.com/news/2004/06/17/79938.html 22. Novosti FGUP MMPP ‘‘SALUT’’. www.salut.ru/news_avia 23. Dmitriev I. Pesn ob oboronnih holdingah. ‘‘Versia v Pitere’’ (27.05.2004). www.ia.vpk.ru 24. Gorin E.A. Reformirovanie promishlennosti:osnovi teorii i practika – SPb: Sudostroenie, 2001. 25. IA TS VPK RIA Novosti, (23.01.2006).

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26. Hartman Iens. Rossia proyavliaet bolshuiu aktivnost na mirovom rinke voorujeni. InoSMI.Ru (02.02.2004). 27. In 2001 GG., the average age of DIE workers became 58 years (1996–1947) . There is opinion that the share of workers in age more than 50 years must not be more than 20%. In other case there is a threat for economical security. 28. Mejreginalniy fond informacionnih tehnologi. Novosti VPK I voennogo sotrudnicestva. Obzor po materialam SMI. No. 40 (2–8.10.2004, roGa). www.mfit.ru/defensive/obzor/ob08-10-04-2.html. 29. Kirgizia otdast Rossii gospaket akciy oboronnogo zavoda v schet dolga. ‘‘AKS’’ (05.11.2003). www.ia.vpk.ru; B. Aleshin. Rossia ne budet peresmatrivat perechen armianskih predpriatiy? Peredannih v scyet pogashenia gosdolga. ‘‘RosBusinessConsulting’’ (30.01.2004). www.ia.vpk.ru 30. IA ‘‘TS VPK’’. ‘‘ITAR – TASSYUral’’ (07.02.2006). 31. IA ‘‘TS VPK’’. IA ‘‘Afx2S-Realny sector’’ (07.06.2006). 32. Finansovie izvestia, 29.06.2004 http://www.finiz.ru/cfin/tmpl-art_news/id_art858813. 33. The Russian arms export policy, as described by Alexander Denisov, viceDirector of the Federal Service for Military-Technical Cooperation (FSVTS). 34. Konstantin Lantratov. 1 billion in 4 days. Kommersant, February 23, 2006. http://kommersant.com/p651264/1_Billion_in_4_Days/. 35. Makienko Konstantin. (2005). Rating of Russia’s Largest Defense Companies, Moscow Defense Brief, no. 6, first semester 2006. According to this rating, 10 out of 20 of the largest Russian defense companies see their revenues depend on more than 70% on export sales, and 15 on more than 60%. 36. Amnesty Says Russia Broke Arms Embargo. The Moscow Times, May 10, 2007. 37. Alexandra Gritskova, Konstantin Lantratov, Ivan Safronov. Sergey Chemezov played in monopoly. Kommersant, 5.12.2006. http://www.kommersant.ru/ doc.html?docId ¼ 730496 38. Konstantin Lantratov. MiG gotovitsa k perehvatu contrakta. Kommersant, 09.02.2005. See also: Makienko Konstantin. Russia-India Military-Technical Cooperation: Current Issues and Perspectives, Moscow Defense Brief, no. 7, First semester 2007. 39. Alexandra Gritskova, Konstantin Lantratov, Gennady Sysoev. China lays down Russian arms. Kommersant, May 7, 2007. http://kommersant.com/p763776/ military-technical_cooperation_China/ 40. Pavel Felgenhauer. (2005). Mysterious missiles to Syria. The Moscow Times, Tuesday, January 18. Page 11. La Russie poursuivra la coope´ration technicomilitaire avec l’Iran (expert). RIA Novosti, janvier 13, 2006. 41. Viktor Litovkin. State Department sanctions may backfire on America. RIA Novosti, January 11, 2007. http://en.rian.ru/analysis/20070110/58835799.html 42. Alexandra Gritskova, Konstantin Lantratov. Sukhoi SuperJet100 nedoschitalsa complektushih. Kommersant, 04.10.2006. http://www.kommersant.ru/ doc.html?docId ¼ 709936 43. See below page 12. 44. Dmitri Vasiliev. Russian arms trade with foreign states in 2005. Moscow: Moscow Defense Brief, no. 5, 2nd semester 2006.

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45. Athe`nes obtient 44 M EUR de compensations sur un contrat de missiles russes. AFP, juin 15, 2005. 46. Viktor Litovkin. (2007). Russia to crack down on weapons piracy. RIA Novosti, March 21. 47. Interview of a Russian official of the Federal Service for Military-Technical Cooperation in Moscow, September 2006. 48. Nabi Abdullaev, Vivek Raghuvanshi. (2007). Moscow to pursue airlifter project with New Delhi. Defense News, January 29. 49. TTU, 7 mars 2007. 50. United Aircraft-building Corporation (UABC). 51. Air & Cosmos, February 23, 2007. 52. Bought for $55 million in December 2005. 53. Les Echos, March 23/24, 2007. 54. Bought, respectively, for $4.2 and $4.1 billion.

THE DETERMINANTS OF MILITARY EXPENDITURES Jacques Fontanel and Ivan Samson INTRODUCTION The increase in the military expenditure of the United States was committed since 2000, after several years of reduction. As well as the tax cuts, the military expenditure contributes largely to the current rise of the American public deficit. Considerable appropriations were granted to armament industries, such as for example the launching of the programme of fighters F-35, for an amount of 220 billion dollars (for 3,000 apparatuses). The American rearmament since 2000 again reversed the tendency, digging the technological ‘‘gap’’ between the American industry and rest of the world. With the Afghanistan and Iraq wars included, the USA military expenditures represent 50% of the world expenditures. What are the main explaining factors of the constant increase in the American military expenditures? The peaks observed before 1991 were clearly connected with the reactivation of Cold War. Could the current rise also be explained by a process of interaction with ‘‘enemies’’? What is the share of internal determinants in the process of resource allocation to the military budget? The methods of economic analysis may bring some explanations. The models of arms race in particular could be revisited from the current point of view, for a better understanding of the current level of the American military expenditures.

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THE EXPLANATION BY ARMS RACE Arms race can be defined as a dynamic process of interaction and competitive increase in quantity and/or quality of armaments by two or several states (or coalition of states) resulting from conflict objectives or mutual fears between nations. However several criticisms of these approaches arise from the insufficient taking into account of the internal determinants of the military expenditures. In particular, econometric tests generally did not make it possible to validate the thesis of the determination of defence budget levels by the mutual stimulation of states. The national self-stimulation is often more important. Several analyzes of the Marxist thought explain why military expenditures are certainly unproductive but nevertheless essential with the correct operation of capitalism, insofar as they make it possible to fight against underemployment and production overcapacities. The point is the state intervention to support average profit rate in the whole economy. Other analyzes went in the same direction, in particular those of Galbraith. In fact, the economic importance of the military sector in certain capitalist economies seems indisputable today, shown by the share of military R&D in the development of advanced technologies. In the 1960s, arms race models enabled the come back of the influence of economic variables in the strategic decisions of national security. The model of Richardson (1960), based on three equations respectively representing the political, strategic and economic factor, constitutes the basic model. It describes the processes of armament of two rival countries as a process of action and reaction, where economic variables play a stabilizing effect. It introduces the military expenditures of the enemy or enemies, the economic burden (fatigability effect) and the ‘‘objections’’ (explaining historical phenomena). Richardson estimates that the arms race of the First World War was pushed by nationalist ambitions of annexation or recovery of territories, and not only by the response to the increases in armaments of the adversary. This is why he supplements his model with the coefficient of ‘‘objection’’ (grievances). This theoretically interesting model did not explain anything of the last trends in world military expenditures. It was not able to analyze the crisis of the Soviet Union because the fatigability threshold is not easy to determine. The curves define the sets of the ‘‘best possible choices’’ for a nation, given the level of the military expenditures of the adversary, are not significant in reality for several reasons: the difficulty in defining the military expenditure, their various structures, the nuclearization or not of the armies,

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the existence or not of the conscription, etc. The theories developed by Brito and Intriligator (1995) on the basis of mathematical optimization under constraints, or the theories of the duopoly and the game theory are no longer in use today. These models of arms race tend to separate the economic considerations of profit from strategic considerations, forgetting to specify the structural characteristics of the studied economies. They made the implicit assumption of the similarity of rival states. However the ‘‘requests for military expenditures’’ are different according to the types of political regimes. The fatigability effect of the planned USSR was certainly not the same one as that of the American market economy. The cost of the new wars is much lower than that of the conflicts of the Cold War. The American–Soviet arms race, started again by R. Reagan at the beginning of the 1980s, has exhausted the economy of the USSR and involved the collapse of the Soviet world. The current asymmetrical conflicts do not require the same level of financial resources. They give a ‘‘sedentary’’ justification to the increase in the military expenditures. They refute internal factors like the existence of a military-industrialist complex and growth promoters of military expenditures. They do not integrate alliances, common policy decisions of regional security, etc. Today, there is no longer arms race. If there is one, it is the USA against the whole world. This is very asymmetrical and it is not always very easy to understand. In the current international economic context, marked by globalization and the formation of powerful regional economic blocks around the main economic powers, certain countries could be tempted to conquer by force the access to the wealth that was so far impossible to reach because of the wild international competition and barriers of entry for the industries generating the highest added value. To take into account these predation strategies requires putting the question of economic determinants of the conflicts again at the centre of the analyzes of armament strategies, whereas it was isolated in the Cold War models. The question arises for Iraq. Is there something like an attempt of oil predation or regulation, among other considerations? May be history will provide some answers in 20 yearsy. Whereas arms races opposed actors historically comparable, it is probable that the arms races of the next century will be of very different nature, between countries with high-technology weapons and basic technologies. They will be then asymmetrical arms races. However, the technological superiority is not a guarantee of security or victory in the event of war, in a context where the democracies of the industrialized countries aim at minimizing the number of their losses in the combat.

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NEW THREATS The phenomenon of terrorism forces to reconsider the military models of expenditures. In particular, the rationality of the actors, which is presupposed to several economic models, is questionable. One may wonder whether there it is not a strong limitation in the analyzes of terrorism by methods exclusively borrowed from the economic ‘‘pure’’ science. The asymmetry of information (e.g. about the level of armament of the adversary) must be taken into account. Vis-a`-vis the terrorist threat, it is no longer the observation of the military expenditures of the adversary that determines their level in a country, but rather the perception of a threat. The quantification of this threat is problematic: the identification of ‘‘rogue states’’ by the United States gives an indication. Since the attacks of September 11, 2001, the presidency spoke explicitly about ‘‘war against terrorism’’ and planned to increase the military expenditures, undoubtedly up to the levels reached at the time of the former episodes of diplomatic tensions (Korea and Vietnam wars, as well as ‘‘Star Wars’’). However, all the components of the military expenditures are not affected in the same manner by the evolution of the geopolitical context. Thus, the expenditures for military R&D are less sensitive to the geopolitical evolutions but remain nevertheless upwards oriented. According to estimates of 2004 in dollars, the item of expenditure of RDT&E (research, development, test and evaluation) showed the strongest increase since 1980 and this trend is expected to continue at least until 2010. Economic globalization made the countries especially the most industrialized more vulnerable to the attacks, because of the globalization of the communications, the rise of transport (in particular air travels), the concentration of population and resources in urban areas, etc. Terrorist methods benefit from the advantage of not having to take into account the support of large civil populations, which was the problem that guerrillas faced. Terrorist war achieves its goal by attacking the civil populations of the target countries, while using the opportunities provided by their logistics and infrastructure.

THE MEMBERSHIP TO AN ALLIANCE The analysis of the American military expenditures must also take into account the membership of the country to strategic alliances and in particular that of NATO. Indeed, because of the variety of foreign policy

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instruments (diplomatic operations, interventions in regional conflicts, economic and military aid and membership to an alliance) the only consideration of the reaction of military expenditures of a state to those of a rival state is insufficient. The membership to an alliance is one of the explanatory variables of the level of military expenditures of a country. Alliances represent the decentralized production of public ownership generating new externalities. Many economists were interested in the analysis of alliances like public goods, and relation between interstate alliances and pacification of the relations between the member states. These approaches are based on the contribution of Olson and Zeckhauser (1966) and use the concepts developed by the game theory. It appears today that the main obstacles to the optimal operation of an alliance remain identical to those that have been identified in the above model. Thus, because of the free-rider problem the higher is the number of members who could benefit from the collective action, the lower are the chances that the good is provided in an optimal way. In addition, asymmetries within the group (regarding the size of the countries or of their level of richness) can lead to ‘‘the exploitation of the large one by the small one’’, for example if the small countries choose ‘‘free-rider’’ behaviour. Current studies on alliances generally show that the dysfunctions of collective action (increased difficulties in the event of military crises, decrease in defence budgets because of increased confidence in member states) can be corrected by institutional arrangements and the installation of a system of selective incentives. Today however the perverse effects are still dominating. Washington financed the alliance initially, but, by this way, the United States controlled the main instruments of the international security. Today, there is a temptation to stop this cooperation, but NATO is financially and militarily a good alliance for the United States (Fontanel & Coulomb, 2007).

THE EXISTENCE OF A NATIONAL ARMAMENT INDUSTRY Moreover, the studies on the defence industry basis (or military-industrialist basis) developed since the 1960s tend to show that there is a phenomenon of growth of the costs of military production that involves a rise in defence budgets. Spinney (1996) showed that from 1953 to 1992, the average cost of a military aircraft in the United States increased faster than the total military expenditures of this country. The increasing sophistication of the

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armaments, as well as the particular characteristics of the contracts in the armament industry, explain this phenomenon. Kaldor (1981) highlighted this trend as ‘‘the baroque arsenal’’. The importance of defence industries in the national economy is one of the determinants of the level of military expenditures of a country. Admittedly, many hopes of obtaining the ‘‘dividends of peace’’ appeared in 1991 with the collapse of the Soviet Union, which seemed to open the way to a durable international disarmament. Specific military knowledge has few civil applications. The concept of ‘‘dividends of peace’’, very popular during the Cold War, was replaced by that ‘‘of investment of peace’’ revealing the costs associated with the discontinuance of defence business. The crisis of the armament markets at the beginning of the 1990’s imposed the deep restructuring of the American armament industries initiated by authorities, leading to the birth of four major firms. The American defence industry represents today half of world armaments exports for a value of 14.2 billion in 2003 (and a sales turnover of 120 billion dollars in 2001). It seems today that the defence companies use more and more subcontracting and the membership to industry networks or alliances, the consortium for Joint Strike Fighter being illustrative of this trend. Moreover, defence companies realize a significant part of their sales turnover in the civil sector, which enables them to limit the risks associated with budget restrictions in the field of defence. That may undoubtedly ease the transfers between military and civil sectors for human and physical capital, technologies or products.

IMPORTANCE OF THE MILITARY R&D The issue of the impact of military expenditures on economic growth is one of the stakes of the debate between the partisans and the opponents of a cut in military expenditures. The question of the impact of the military R&D on the growth of the manufacturing productivity is polemical. Indeed, the technologies originally developed for defence, such as computers or satellite communications, seem to have generated an important share of the American growth during the 1990s. The econometric studies that were developed in these last years however do not show in a decisive way any link between the growth of the American manufacturing productivity and development of these new technologies. The analysis of Saal (2001) shows that sophisticated econometric methods may highlight the positive effect of the federal R&D expenditures on the global manufacturing productivity since the 1970s. In 2002, 54.4% of

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national R&D expenditures were devoted to military R&D in the United States (e.g. against 24.2% in France). The financial volume of the American military R&D rose to 53 billion dollars in 2003 (against 44 billion in 2000). In addition, 10%–15% of the American military expenditures are used for financing fundamental research, contributing to R&D increases in the advanced technologies. Thus, the use of the military expenditures for ‘‘industry policy’’ purposes can be regarded as one of the explanatory factors of their level in the United States. In the same way, the increasing use of information services for economic purposes may benefit from the level the military expenditures, especially in the United States where the apparatus of economic intelligence is particularly developed.

THE STATE BUDGET GROWTH The level of the defence budget of a country is depending on several internal variables. One may consider that the optimization of the social well-being by the allocation of resources to defence is not guaranteed by the procedure of collective choice because of the divergence of interests between the various groups or individuals composing the society. The ‘‘Public Choice’’ theory developed in the 1970s makes it possible to explain why, in certain cases, the policy conducted by the government does not use all the potentialities for increasing the social well-being. The state is the sum of particular interests of groups or individuals and its intervention is the result of the pressures of specific lobbies, each one seeking to maximize its own utility. The models of public choice try for example to show a relation between political cycles and the signature of contracts with defence industries. They denounce the bureaucratic growth, which leads to dysfunctions such as the undervaluation of the costs of projects. Large latitude is often left for the decision makers to interpret the national preference as regards defence policy. Various lobbies (defence industries, political parties, state bureaucracies, consumer lobbies, international agencies, etc.) try to influence the defence policy in the way which is favourable for them. More largely, the analysis of the determinants of the American military expenditures leads to raise the question of the determination of the request for defence. How is the perception of threat determined? Which are the variables that help a government identifying the ‘‘request for defence’’ specified in the models of military expenditures? The military expenditures of a country during one year depend on those of the previous year: it is the

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phenomenon of ‘‘budgetary inertia’’ used in certain models of military expenditures called ‘‘bureaucratic models’’. The analysis of the defence budget of the United States must thus take into account this reality. The Charter of the United Nations states demilitarization implies respect for the sovereign equality of its member states, prohibition of the use of force or the threat of its use against the territorial integrity of states, recognition of the inviolability of frontiers, renunciation of any action against independence and national unity, non-intervention in the internal affairs of other states and not giving assistance to terrorism. However, states still have a significant role in economic governance. The emerging powers of international markets, which reduce the state’s exclusive control of territory, do not neglect the national government, but they modify their functions, with much less sovereign entities and much more components, giving it a legitimacy role, of the international body. Because people are less mobile than money, goods or ideas, the territorial control, with the monopoly of the means of violence, is still dominated by states. States guarantee national security to citizens from external conflicts. Conflicts find expression in economic, political and cultural domination. In an increasingly interdependent world, geopolitical considerations involve a definition of security that is both economic and military. Underdevelopment is a threat to world peace. And despite the internationalization of financial markets and increasing importance of international trade, it is not true that national economies are completely dominated by a global economy governed by world market forces. The world economic system is not ungovernable, because international organizations define rules and laws, which are more and more independent of the agreement of the states, but United States.

REFERENCES Brito, D., & Intriligator, M. (1995). Arms races and proliferation. In: K. Hartley & T. Sandler (Eds), Handbook of defense economics. Elsevier. Fontanel, J., & Coulomb, F. (2007). Les budgets de l’OTAN et ses missions. In: Quel avenir pour l’OTAN sous le direction de Pierre Pascallon, Collection de´fense. Paris: L’Harmattan. Kaldor, M. (1981). The Baroque arsenal. New York: Hill and Wang. Olson, M., & Zeckhauser, R. (1966). An economic theory of alliances. Review of Economics and Statistics, 48(3), 266–279. Richardson, L. F. (1960). Arms and insecurity. Pittsburg: Boxwood Press. Saal, D. (2001). The impact of procurement-driven technological change on US manufacturing productivity growth. Defence and Peace Economics, 12(6), 537–568. Spinney, F. (1996). Defense time bomb: F22/JSF case study. Hypothetical escape options. Challenge, 20(July–August), 9–12.

ANALYZING DEPENDENCIES IN GEO-ECONOMICS AND GEO-POLITICS$ Michael D. Ward and Peter D. Hoff ABSTRACT Using data over the period from 1950 to 2000, we estimate a model of bilateral international trade to explore the linkages between (a) alliances, (b) joint memberships in international institutions, (c) mutual cooperation and (d) conflict, (e) mutual economic freedom, and (f) democracy and bilateral trade. We incorporate exporter and importer effects as well as reciprocity into a gravity model and cross-validate it against annual out-of-sample data. The resulting, empirical findings show the importance of second and third-order dependencies in bilateral trade data. Military alliances, membership in IGOs, international cooperation, and mutual economic freedom are shown to be strongly associated with bilateral trade. Conversely, conflict and the level of democracy do not demonstrate strong, discernable linkages to bilateral trade. $

This paper was originally presented at an International Conference on Advanced Political Network Modeling organized by John T. Scholz and Paul W. Thurner at the Mannheimer Zentrum Fu¨r Europa¨ische Sozialforschung, June 28–29, 2007. An earlier version was prepared for a meeting on the Economics of International Security, Universite´ Pierre-Mende`s-France, Grenoble, France, March 16–17, 2007. War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 133–160 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06009-8

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INTRODUCTION There is a long-standing interest in whether international commerce is related to international conflict. Perhaps one of the most influential modern works in this vein was Albert Hirshman’s 1945 study of the explicit use of trade by an imperialistic Germany during the third Reich (Hirschman, 1945/1980). Economic activities are seen not only as a substitute for but also a complement to military conquest. There is now a substantial literature in international relations on how international conflict could distort international trade. One such trade distorting channel is the level of cooperation or conflict between two trading states. Another is the existence of a formal alliance relationship between two trading partners. In general, however, the effect of political factors on bilateral trade flows is poorly understood. The work of Pollins (1989a, 1989b) is representative of the first of these two issues and Gowa and Mansfield (1993) is representative of the second. The argument put forward by Pollins is that importers take into account not only the price and quantity of goods and services in their purchase decisions but also the place of origin of the products and the political relationship between the importing and exporting countries (Pollins, 1989b).1 They do so essentially to minimize the risks of disruption in supply. In a market where the suppliers are from both friendly and hostile nations, the risk factor might tilt trade in favor of the friendly nation by an appreciable amount. As Pollins (1989b, p. 471) puts it: ‘‘international conflict and cooperation determine [the] location of the demand curvey and by extension affect the quantity of goods imported.’’ Hence, the level of trade between two countries will decline as their relations become more conflictual and will increase as they become more cooperative. Pollins empirically tests this hypothesis by incorporating a measure of net cooperation between two countries into a simple gross imports equation for six importing countries and finds that relative cooperativeness or hostility does affect trade flows between trading partners. He concludes that trade does follow the flag. A different political relationship between trading partners is explored by Gowa and Mansfield (1993). Gowa and Mansfield argue that the existence of a formal alliance between the importing and exporting nations will lead to fewer trade barriers and thus to an increase in trade. Moreover, they argue that this effect is distinct from the normal cooperation and conflict between two nations in that a considerable degree of low-level conflict is often present among members of an alliance and substantial cooperation does

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exist among states that are not allied. The basis for their argument is that trade produces security externalities in the form of increased efficiency with which domestic resources can be employed. The increased efficiency allows a state to make more resources available for military uses (Hirschman, 1945/ 1980). Thus, trade produces security externalities by enhancing the potential military power of the trading partners. Gowa and Mansfield argue that, given the anarchic nature of the international system and the lack of a supranational authority, states are forced to consider the potential military power of both allies and adversaries in their security calculations. Given the security externalities of international trade, trading with an ally produces a positive externality as the increase in efficiency, with which resources are allocated in both states, increases the resources available for their military forces. Similarly, trade with an adversary produces a negative externality. These externalities thus lead to a divergence between the private and social costs to trade. As a result, a socially sub-optimal level of trade could take place and government intervention in trade can be welfare-enhancing. Trade with an ally, on the other hand, generates a positive externality. Therefore, we would expect governments to intervene in trade to correct the security externalities associated with it. Successful intervention, however, requires that the importing country be able to effect its terms of trade. While a tariff in such a case will distort the resource allocation in the exporting country, a tariff in the absence of market power will impose costs primarily upon the importing country. Only in the presence of some market power will an importing state be able to successfully correct the negative externality at the exporting country’s expense. Thus, Gowa and Mansfield argue that tariff barriers should be lower among allies than among adversaries. They empirically test this hypothesis by augmenting a general gravity equation of imports with variables to capture alliance effects. From their analysis of seven countries over an 80 year period from 1905 to 1985, they conclude that ‘‘alliances exert a direct, statistically significant, and large effect on bilateral trade flows’’ (Gowa & Mansfield, 1993, p. 416).2 A third trade distorting channel is the influence of domestic and international institutions apart from alliance relationships. Following the pioneering works of Oliver Williamson (1985) and Douglass North (1990), scholars have focused on a wide variety of international as well as domestic institutions that affect the bilateral level of commerce. Typically, these institutions are those that are thought to provide accountable, stable, corruption free, and effective governance, especially in so far as they provide an enforceable legal framework. Recent work by de

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Groot et alia summarizes the general findings of this line of scholarly research: We find that institutional quality has a significant, positive and substantial impact on bilateral trade flows. The same goes for similar quality of governance. y Generally good governance lowers the transaction costs for trade between high-income countries, while trade between low-income countries suffers from high insecurity and transaction costs. (de Groot, Linders, Rietveld, & Subramanian, 2004, p. 119)

Economic freedom is likely to be associated with good (or, at least, better) governance, at least in the long run. However, there is no direct link between the accountability of government and the extent of economic freedom, and there are numerous important exceptions to this insight. For example, some economically free societies have constrained political freedoms. Singapore is perhaps the best example. It has neither tariffs nor waiting lines for export licenses, low personal and corporate taxes, almost no inflation, a high level of foreign investment, no wage or price constraint mechanisms, a high degree of institutional protection for intellectual property, and a low level of corruption. Singapore scores in the lowest quantile of contemporary polities on measures of democracy. Though Singapore is thought to be a functioning democracy on formal grounds, the four-decade long dominance of the People’s Action Party overshadows any effective political dialog. We now turn to the description of our model of trade to explore the link between these various trade distorting factors and their influence on international commerce.

THE GRAVITY MODEL OF INTERNATIONAL COMMERCE Gravity models have a long legacy. They are prominent in the analysis of a wide-range of transactions. In addition to widespread use in transportation studies and demography, for over four decades, the gravity model has been frequently used to describe international trade.3 The basic idea behind a gravity model is that the flow of goods and services between two locale is proportional to the combined ‘‘mass’’ of the two locale. Such an approach is one way of specifying a frictionless model of ‘‘free trade.’’ Models of trade in differentiated products may also lead to a gravity model specification (Helpman, 1984; Bergstrand, 1985). Deardorff (1998) illustrated that under certain conditions a model of transportation costs will result in a gravity model specification, even under the basic assumptions of the Heckscher-Ohlin

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model (Schott, 2003). The gravity model specification represents the state-of-the-art in international trade models, perhaps since is derivable from first principles (Anderson, 1979), easy to assess statistically, and can be modified to include a large variety of additional influences which may perturb international commerce (Feenstra, Rose, & Markusen, 2001).4 A gravity model can typically explain about one-half the variation in bilateral international commerce and is often considered a benchmark for free trade. However, few political economists believe that international commerce occurs within a free-trade system, minus the friction and lubrication created by individuals, firms, and institutions. As a result, many scholars have introduced into the gravity model a variety of factors thought to increase or decrease the bilateral flow of goods and services. A standard linear form of the gravity model typically employed in statistical studies of bilateral trade is log-linear and has the general form: ln Y i; j ¼ ln b0 þ b1 ln Gi þ b2 ln Gj þ b3 lnðDi; j Þ þ b4 ln Z i; j þ i; j where ei,j is distributed normally. Confidence intervals and p-values for the regression parameters have typically been obtained assuming the error terms across sets of countries (i, j, and k) are independent. In particular: Eði;j j;i Þ ¼ Eði;j i;k Þ ¼ Eði;j k;j Þ ¼ Eði;j k;i Þ ¼ 0 These assumptions essentially suggest that residual trade imports of the US from Canada will be uncorrelated with the unexplained imports of Canada from the US. Similarly, residuals from US’Canadian trade will be uncorrelated with residuals from US’Japan trade. In the same way all Canadian export will be seen to be uncorrelated as will Canada’s exports and imports to other specific partners. Singly each of these assumptions is questionable, but taken together they are especially dubious. There is good reason to expect that a wide range of countries will import certain goods from specific, large exporters. It is also to be expected that many countries will export to specific, large importers. We also expect that if a country has certain trade agreements with another then they will have both large residual exports to and imports from that country. Thus, there should be a large amount of covariation that is attributable to the sender, the receiver, and the dyad that the standard formulation ignores. What happens if these covariances are not ignorable? To address these issues, we assume that the errors {ei, j, i6¼j} have a distribution that is exchangable under identical permutations of the indices

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i,j of the importers and exporters. The further assumption of normality implies the residuals can be represented in terms of a decomposable linear random effects model. We decompose these effects into importer ri, exporter sj and dyadic gi,j components: i; j ¼ ri þ sj þ gi;j " # #!   " 2 sr srs ri 0 N ; ssr s2s si 0 " # " #!   s2 rs2g gi; j 0 g N ; gj; i rs2g s2g 0

(1)

This defines the following moments for the ei,j’s which we estimate rather than ignore: Eð2i; j Þ ¼ s2r þ s2s þ s2g Eði; j j; i Þ ¼ rs2g þ 2srs Eði; j i;k Þ ¼ s2r Eði; j k; j Þ ¼ s2s Eði; j k; i Þ ¼ srs where s2r represents dependence among dyadic observations having a common importer, s2s represents dependence among measurements having a common exporter, and r represents correlation of measurements within a dyad, that is, reciprocity. These dependencies are important. Herein, we employ a regression framework for analyzing these dependencies in dyadic data on international commerce. This approach specifies random effects for the originator and recipient of a relation or action and models the correlation of actions within each dyad pair. The driving insight is based on the social relations model (Warner, Kenny, & Stoto, 1979; Wong, 1982; Gill & Swartz, 2001) and also incorporates recent advances in techniques for decomposition of variances. This approach also incorporates latent variables (Hoff, Raftery, & Handcock, 2002; Hoff, 2005). Dyadic data in international relations are filled with dependencies. The social relations model is a method to decompose variance in such data into sender and receiver effects as well as permit within-dyad correlations via the analysis of variance (ANOVA) protocol (Warner et al., 1979; Wong, 1982). The development of the social relations model is presented first by Kenny (1981), but the canonical citation

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is from the mid-1980s (Malloy & Kenny, 1986). A widely cited volume was penned on this topic in the mid-1990s (Kenny, 1994), and recently a book devoted to data analytic approaches to the SRM was published (Kenny, Kashy, & Cook, 2006). It grew out of interest by psychologists to separate the independent and interactive effects of groups versus individuals. The basic insight provides a way of conceptualizing and acquiring unbiased estimates of actor, partner, and relationship effects and their interrelationships. The idea of further decomposing the variance in the context of dyadic data was developed (Gill & Swartz, 2001; Li & Loken, 2002) to permit the statistical analysis of normally distributed dyadic data using additive effects. These ideas have been extended to a generalized linear model that incorporates third-order dependence via a bi-linear effect (Hoff, 2005) similar in spirit to that first introduced by Gabriel (1998). When analysis moves away from the policies of individual states overtime to embrace other complicated sets of relationships, higher-order dependencies are likely to become rife in the data, as we have argued above. But what does ‘‘higher-order dependencies’’ mean? Second-order dependence refers to what is often described as reciprocity in the context of directed relationships. The prevalence of reciprocity – a second-order dependence among observations – in directional network data in the study of international relations challenges the basic assumption of observational independence. To discuss fully third-order dependence, some formalism is helpful. We define yij as some measure of the relationship between actors i and j. Third-order dependence includes (a) transitivity, (b) balance, and (c) clusterability (Wasserman & Faust, 1994). Transitivity follows the familiar logic of ‘‘a friend of a friend is a friend.’’ In particular, for directed binary data, triad ijk is transitive if whenever yij ¼ 1 and yjk ¼ 1, we also observe that yik ¼ 1. A triad ijk is said to be balanced if all pairs of actors relate to one another in an identical fashion, specifically: yij  yjk  ykiW0. The idea is that if the relationship between i and j is ‘‘positive’’ then both will relate to another unit k identically. If yij is positive, then to observe balance, yjk and yki are either both positive or both negative. Clusterability is a relaxation of the concept of balance. A triad is clusterable if it is balanced or the relations are all negative. The idea is that a clusterable triad can be divided into groups where the measurements are positive within groups and negative between groups. The notion that ‘‘a friend of a friend is a friend’’ captures the concept of transitivity in directed binary network data setting and is illustrated in Fig. 1. Consider a triad of countries {ijk}. This triad is composed of three dyads {ij}, {jk}, and {ki}. In a network context, there are six possible links if

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j k (a) Transitive Dyads i

+

+

k

j − (b) Unbalanced Dyads

i

+

k

+

+ (c) Balanced Dyads

j

i

−

k

Fig. 1.

−

j + (d) Balanced Dyads

Transitivity and Balance in Triads.

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the data are directional and three if data are non-directional. If we know that country i considers j as an ally and country j is allied with k, then the probability that k will also be allied with i is likely to be higher than for another country outside of this network, since these countries are at least indirectly connected in the alliance network by virtue of their separate linkages to country j. In other words, knowing something about the relationship between countries in the first two dyads in a triad often tells us something about the relations in the third dyad. Treating dyads {ij}, { jk}, and {ki} as independent from each other, as the way we routinely do in empirical analyses of international relations data, usually ignores important patterns in these data. As we think about third-order dependencies, knowing the relation between i and j as well as between j and k may reveal something about the relationship between i and k, even when we do not directly observe it. Hoff et al. (2002) note: In some social network data, the probability of a relational tie between two individuals may increase as the characteristics of the individuals become more similar. A subset of individuals in the population with a large number of social ties between them may be indicative of group of individuals who have nearby positions in this space of characteristics, or ‘‘social space.’’ Note if some of the characteristics are unobserved, then a probability measure over these unobserved characteristics induces a model in which the presence of two individuals is dependent on the presence of other ties.

In other words, the ‘‘social space’’ summarizing these unobserved characteristics is another ‘‘image’’ of the third-order dependence in these dyadic data. We describe how to estimate and map these latent positions such that positions in a latent space represents these dependencies. Stated differently, once the higher-order dependencies are taken into account, the dyadic data can be analyzed by techniques such as regression that assume the data are independent of one another. Conditional on the inclusion of a latent dimension that captures the dependence of the observation on one another, the dyadic data can be treated as independent, and the coefficients can be estimated by well-known techniques. If the data are truly independent, estimations under these two scenarios will be equivalent, indeed identical. However, if there is clustering or dependence of the observations on one another in the manner specified above, they will diverge substantially. Our hypothesis is that evidence for the Kantian peace argument is based on a faulty assumption of the independence of international events and that once these dependencies are incorporated into the model, a different picture will emerge. The latent

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variables capture this dependence and allow us to more precisely estimate the effects of the independent variables upon the probability of conflict.

ESTIMATION DETAILS We estimate the following equation using annual data: Y i;j ¼

6 X l¼1

bd;l X i;j;l þ

3 X m¼1

br;m Z i;m þ

3 X

bs;m Z j;m þ p0i pj þ b0 þ ri þ sj þ gi;j

m¼1

(2) where variables are as given in Table A1 and coefficients b, random effects ai and bj, and latent positions pi are to be estimated. The first term in Eq. (2) contains the dyadic covariates, respectively the level of alliance, the number of shared memberships in intergovernmental organization, a measure of cooperation in militarized interstate disputes, separate measures of the extent of cooperation and conflict, and the great circle distance between the capital cities of each country. The second and third term respectively portray the country level covariates for the importer and exporter: namely, the gross domestic product, the level of democracy, and the extent of economic freedoms in each country.

RESULTS As illustrated in Table 1, our results indicate that the basic gravity model variables behave as expected. Fig. 2 illustrates this fit for 1999–2000.5 The correlation between the actual bilateral trade and the trade predicted by the model is 0.88, a figure substantially higher than most estimates found in the literature.6 The model estimated herein has an explained variance ratio of about three-quarters compared to about one-half for most previously published studies. As predicted by the gravity formulation, larger economic outputs enhance bilateral trade, on both the importer and exporter sides of the transaction. Countries at greater distance from one another have lower levels of international commerce with one another, other things being equal. Thus, the basic gravity model continues to function as predicted in the presence of sender and receiver effects and the estimation of dyadic dependencies of second and third order in the data.

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Analyzing Dependencies in Geo-Economics and Geo-Politics Table 1.

Bayesian Estimates for Eqs. (1) and (2) using Data from 1999. Posterior

Alliance (bd,1) Joint IGOs (bd,2) Cooperation in MID (bd,3) Cooperation (bd,4) Conflict (bd,5) Distance (bd,6) Importer GDP (ba,1) Importer democracy (ba,2) Importer economic freedom (ba,2) Exporter GDP (bb,1) Exporter democracy (bb,2) Exporter economic freedom (ba,2) Common exporter dependence (s2a ) Covariance, sender–receiver (sa,b) Common importer dependence (s2b ) Error variance (dyadic) (s2 ) Reciprocity of (dyadic) trade (r) Variance of latent dimension 1 (s2p;1 )

2.5%

Mean

97.5%

0.15 0.26 0.34 0.12 0.01 0.57 0.42 0.07 0.48 0.46 0.09 0.51

0.25 0.39 0.01 0.15 0.03 0.53 0.47 0.03 0.36 0.51 0.03 0.39 0.15 0.17 0.22 0.70 0.47 0.49

0.35 0.52 0.32 0.17 0.06 0.50 0.51 0.14 0.25 0.57 0.15 0.25

0.13

0.46

Variance of latent dimension 2 (s2p;2 )

0.19

Variance of latent dimension 3 (s2p;3 )

0.21

0.22

0.49

Note: Separate, estimated random effects for senders and recipients of trade are not reported here. Mean estimates represent the posterior mean of the estimated parameter. Quantile-based, empirical confidence intervals (5%) are also presented. These are based on the last 95,000 observations. There are 116 countries in the observed data for 1999. The mean, posterior log likelihood is 92,500.86.

Turning to the political economy variables, bilateral alliances and joint membership in IGOs are associatedly strongly with bilateral trade, a result consistent with some earlier findings Gowa and Mansfield (1993). It is evident that neither joint participation in militarized interstate disputes nor international conflict are strongly tied to bilateral trade. However, international cooperation is associated with high levels of bilateral commerce. Countries with high levels of cooperation do experience more trade with one another, even though countries with high levels of conflict do not necessarily have lowered bilateral trade. To a certain extent, this disentangles the merger of conflict and cooperation into a single component in some prior research (Pollins, 1989b) and illustrates that these two aspects

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Predicted Log Imports, 1999

10 8 6 4 2 0

0

2

4

6

8

10

12

10

12

Actual Log Imports, 1999 (a) 1999, R 2 = 0.77

Predicted Log Imports, 2000

10 8 6 4 2 0

0

2

4

6

8

Actual Log Imports, 2000 (b) 2000, R 2 = 0.77

Fig. 2. Actual versus Predicted Logged Imports for 1999 and 2000 Illustrate the Substantial Fit of the Estimated Model. The Model for 2000 Includes Variables Reflecting Importer and Exporter Membership in the WTO.

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of politics work separately and differently in affecting international commerce. Neither the importer nor exporter’s democracy level appears to be tied to bilateral trade, once the full parameters of the bilinear, latent space model are taken into account. This result stands in sharp contrast to many extant studies. However, importer and exporter measures of economic freedom are negative and strongly associated with the flow of international commerce, indicating that mutual economic freedom may be an enormous boon to bilateral trade.7 To our knowledge no previous empirical study has explored this aspect of two-sided markets in trade models. Further, while it is not surprising that mutual economic freedom is associated with high levels of bilateral trade, it is somewhat surprising to find that mutual democracy does not bear any direct relationship to bilateral commerce.8 There are, of course, a number of free economies that are not paragons of democracy (e.g., any number of countries in Asia-Pacific) and, at least during the Cold War era, non-democratic states in the Soviet Bloc tended to have very high bilateral trade with other communist countries. Our finding does contrast with the work of deGroot et al. (2004) that combined political governance and economic freedom into a single, potent variable. Our research disentangles these two variables and suggests the primacy of economic freedom over political freedom. Ward and Hoff (2004) propose out-of-sample forecasting to evaluate the predictive strength of the model and show that use of p-levels to gauge the salience of estimations can be misleading.9 See also Ward and Hoff (2007) for over-time analyses of these models. Often including statistically significant variables results in over-fitting, which may also reduce the outof-sample accuracy of estimated gravity models. However strong the insample empirical fit of such models, one issue often ignored is an assessment of their out-of-sample characteristics. In order to begin to address this issue we use the above estimates in combination with updated covariates to estimate the bilateral trade flows in the year 2000.10 Trade tends to be correlated from year to year, but not perfectly. The R2 between bilateral imports in 1999 and 2000 for the intersecting sample of 144 countries is a fairly robust 0.771.11 Most trade models have predictive fit of about two-thirds of this amount. The predictive fit of the model estimated herein is quite substantial: 0.766, only slightly smaller than the squared serial correlation between trade in 1999 and 2000. This suggests that the estimated model is not simply a presentation of ‘‘over-fitting,’’ but that its out-of-sample characteristics are nearly as good as its in-sample properties. The larger model more closely captures Yt, and fortunately also captures patterns that are also in Ytþ1.

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A map of the estimated latent positions is informative. The latent positions are three dimensional vectors which have both direction and magnitude. Countries with similar patterns of bilateral commerce and an affinity for bilateral trade will have vectors that are close to one another (i.e., that point toward similar places on a superimposed sphere). Part of Fig. 3 shows the latent positions of a few countries for the year 1999. The latent positions are organized around a circle such that countries at similar positions on the circle have higher than expected trade with one another, compared to the basic gravity model, such as Canada and the United States or Russia and Slovenia. On the other hand, countries that are opposite of one another on this circle have lower than expected trade. For example, Russia and Qatar (both net exporters of petroleum) have very little trade. Similarly, Canadian or US trade with Chad is virtually non-existent, as shown by these estimated latent positions. Beyond the estimates for 1999, we also separately estimated each of the yearly cross-sections between 1980 and 2000. These results show the same basic patterns in each year. The estimated coefficient associated with shared military alliances grows from approximately 0 in 1980 to 0.32 in 2000 (0.04

0.34) suggesting that in most years, a greater number of

shared IGO memberships is associated with higher levels of international commerce. Pairs of countries that share memberships in international organizations show a similar pattern, especially in recent years. The coefficient for cooperation and conflict in a militarized interstate dispute varies quite a bit from year to year (0.21

0.43) largely as a result

of the discrete nature of disputes. Conflict as measured by event data (starting in 1990) has an associated coefficient that is almost zero, indicating that there is no strong association between conflict and trade at the bilateral level (0.04 0.05), whereas the associated, yearly coefficients for cooperation are positive in each year and suggest a modest association between yearly bilateral flows of cooperative actions and goods and services (0.11 0.12). The coefficient for the political regime of the exporter (0.1 0.14) and the importer are roughly the same and do not vary greatly from one year to the next; both suggest that countries with more democratic regimes are likely to exhibit higher levels of bilateral commerce. The main mover in the gravity model, the GDP of the sender and receiver, also shows positive and generally increasing association with bilateral commerce in each cross-section.12

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Fig. 3. Latent Positions Reflect the Latent Similarity of Countries’ Bilateral Imports. The Size of the Country Acronym is Proportional to the Magnitude of the Positional Vector.

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Part of Fig. 3 uses multidimensional scaling to present the latent positions in two dimensions, preserving the best representation of all three dimensions, for all the countries in 1999. There are two major groups of clustered countries, one representing industrialized countries (OECD member countries are shown in red on the left) with the United States at its centroid. The cluster on the right mainly comprised industrializing societies in Africa, and Central and Latin America (African countries are shown in yellow and brown represents Latin and Central American polities). The top portion of the graph includes mainly countries of the former Soviet Union and Eastern Europe (shown in violet), plausibly in transition between the industrializing and the industrialized clusters. The bottom part of the graph of latent positions contains many countries in the Middle East (shown in green along with North African polities; other polities are shown in gray and are mainly Asian polities). These latent positions are conditional on the estimated effects of the gravity model as specified and illustrate considerable patterning still extant in the bilateral trade data. In particular, over and above the integrated specification of the gravity model with economic and political, institutional contexts, rich, industrialized countries tend to cluster together in terms of their bilateral trade patterns. At the same time, trade patterns of the industrializing world are also more clustered than one would expect on the basis of the explanatory power of the gravity model and domestic as well as international institutions that affect trade flows. Finally, the model indicates strong sender and receiver effects, strong importer and exporter fixed effects, and dyadic reciprocity. In particular, the total impact of the common exporter dependence, the sender–receiver covariance, and the common importer dependence is substantial. The estimated importance of the latent positions also far outweighs the size of the error variance. Gravity models in international political economy which do not explicitly model these effects are likely to be missing important, larger patterns of trade.

CONCLUSION Beyond the estimation of a model of international trade with an estimation strategy that is sensitive to the inherent dependencies in bilateral trade data, what are the implications of this study? We find strong evidence of a clustering of international trade patterns that is far stronger than can be easily explained by a combination of macroeconomic and institutional explanations. These are much stronger than can be explained without

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reference to a geo-economics and a geo-politics. Ideally, the locations of countries illustrated in Fig. 3 should be entirely random if there were no remaining, latent structure. The strong patterning of trade seems to support the notion that a freer flow of goods and services from developing countries into industrialized ones could help one-half a billion inhabitants of the industrializing world escape endemic poverty by liberating as much as $200 billion for consumption in these countries (Cline, 2004). Our analysis emphasizes the stickiness of barriers to North-South international commerce. In short, trade is a global network with considerable structure. Garlaschelli and Loffredo (2004) suggest that connections in the ‘‘world trade web’’ are largely determined by (power law distributed) GDP. Our own efforts show that a variety of other factors also help to explain the extant linkages as well as the absence of others. Latent positions are not simply a surrogate for GDP. We also illustrate the importance of a wide-range of institutions in helping to promote higher levels of international commerce. Economic institutions in both exporting and importing countries are separately important in promoting commerce. Increasing levels of economic freedom in exporters, as well as in importers, would appear to produce independent benefits in terms of the volume of bilateral commerce. At the same time, the liberalization of political domestic processes typically assumed to comprise democratization is undoubtedly a desirable outcome, but it does not appear – absent concomitant economic liberalization – that such changes will do much directly to promote greater levels of international commerce. Elections doubtless were important as a step toward the creation of credible and liberated domestic markets in Russia, for example, but their impact on Russian international commerce was neither immediately nor directly apparent. Integration into the international community of nations seems to help a nation’s commerce, according to our findings. Alliances and joint memberships in international organizations each promote international commerce. The relationship, however, between the nexus of international conflict and cooperation, and trade is perhaps even more complicated. Except at the extremes, it appears that the benefits of trade far outweigh the costs associated with commerce between countries in conflict. Neither the existence of conflict itself, nor of cooperation in militarized conflicts (such as the cooperation of the US and UK in Iraq) appear to affect bilateral trade much one way or the other. Conversely, bilateral cooperation appears to promote higher levels of bilateral commerce. This suggests that efforts to stop conflict will be less important in the realm of international commerce than efforts to promote and enhance cooperation. Pollins’ finding about the importance of conflict and cooperation in determining bilateral trade is

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amended by these findings (Pollins, 1989b). In particular, it would appear that cooperation does affect bilateral trade as he suggested, but that conflict has little bearing on it. One reason might be that governments actively solicit ways to foster bilateral trade very broadly, but these diplomatic activities are more effective among countries with cooperative relations. On the other hand, in the presence of conflictual arrangements, these same activities do not turn completely around and aim at discouraging trade. Indeed, we believe that individual economic agents will look for economic activities even during conflict. So conflict is unlikely to separately depress bilateral commercial activity – except at the margin – even though cooperation is likely to stimulate it. Fig. 4 illustrates Africa’s absence from the world trading community, using a diffusion-based cartogram. In this display, Europe, America, and Asia all seem bigger than life, in comparison to most mental world maps. However, Africa, which looms large in the foreground of traditional maps, as it does in Fig. 5 will portray data on HIV/AIDS in each country, based on data from UNAID.

Fig. 4. This Cartogram Illustrates Total World Trade in 2002 for Each Country. What is Clearest from this Cartogram is the Absence of African trade in the World Economy. This was Produced Using Diffusion-Based Cartograms (Gastner & Newman, 2004). Note: Countries are ‘‘stretched’’ to equalize their area based on the density of the attribute examined, herein total exports – primarily taken from the online edition of the World Bank’s Development Indicators 2004 representing data for 2002, with data for some countries culled from adjacent years or from the online edition of the CIA World Factbook.

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Fig. 5.

151

This Cartogram Illustrates the Number of Individuals Living with HIV/ AIDS for Each Country, using Data from 2003.

Some have made strong suggestions that increasing free trade of agricultural goods from the developing world to the industrial world may produce benefits in the developing world of $30 billion dollars annually (Elliott & Kapstein, 2004). These gains may be hard to achieve in part because of the stickiness of international trade away from free trade. Aggregate trade flows only reflect microeconomic decisions of a multitude of firms and individuals, as well as governments. However, domestic economic institutions as well as international political and economic institutions play a large role in shaping international commerce, even beyond the macroeconomic and institutional forces typically considered. This study underscores the co-dependent nature of contemporary international commerce and offers a practical way to take these dependencies into account. It underscores the highly dependent, contingent, and interrelated aspects of geo-economics and geo-politics that are often overlooked in standard analyses.

NOTES 1. For earlier work on this issue, see Polachek (1980). 2. There is also a rich literature examining the impact of trade on conflict and cooperation. In a recent study, Barbieri and Schneider (1999) summarize no fewer

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than 17 studies of the influence of trade on conflict. A more recent summary of this literature can also be found in Mansfield and Pollins (2003). Unfortunately there is no consensus, though most studies affirm the early findings that trade promotes cooperation and reduces conflict. 3. The earliest suggestions of this approach are found in Tinbergen (1962), the work of Poyhonen (1963a, 1963b) and Linneman (1966). 4. Some studies that employ various types of gravity specifications include Anderson (1979), Pollins (1989a, 1989b), Deardorff and Stern (1990), Maskus and Ramazani (1993), Oguledo and MacPhee (1994), Deardorff (1998), Deardorff and Stern (1998), Bliss and Russett (1998), Barbieri and Schneider (1999), Anderson and Marcouiller (2002), Anderson and van Wincoop (2003), Goenner (2003); Rose (2004), Plu¨mper and Krempel (2003), and Goenner (2004). 5. We examined these models in 1950, 1955, 1960, 1965, 1970, 1975, 1980, 1985, and 1990–2000. Basically, the results are consistent across these time frames. 6. For example, de Groot et al. (2004) estimate a simple specification of the 2 gravity model, reporting R ¼ 0:53. Mansfield, Milner, and Rosendorf (2000) explain about one-half the variation in bilateral trade with their model that incorporates a gravity model with institutional factors such as democracy, 2 alliances, conflict, and preferential trade agreements (average R B0.54). Perhaps ironically, while using a gravity model of bilateral trade as a control and introducing several political variables to gauge the institutional framework as well as international conflict and cooperation, Morrow, Siverson, and Tabares (1998, 1999) explain slightly less than one-half (0.45) the variation in bilateral trade. 7. High scores on the economic freedom measures indicate the absence of economic freedom. 8. These two variables are modestly correlated with one another; the Pearson correlation coefficient is 0.44. 9. The model in Ward and Hoff (2004) does not include economic freedom, and is not estimated with the same algorithm used herein. 10. In doing so we lose one observation: Peru. 11. This is similar to the figures for the other years in this study, i.e., W0.75. 12. The sparkline of estimated coefficients over the period from 1980 to 2000 is (0.1

0.14).

ACKNOWLEDGMENT This research was supported by Office of Naval Research grant N00014-02-1-1011 and the National Science Foundation, grant numbers: SES-0417559 and SES-0631531. We thank Xun Cao, Mohan P. Rao, Douglas Lemke, and Thomas Richardson for comments, guidance and encouragement.

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APPENDIX A. NOTATION Table A1. Summary Notation.

Symbol Yi,j Xi,j,1 Xi,j,2 Xi,j,3 Xi,j,4 Xi,j,5 Xi,j,6 Zi,1 Zi,2 Zi,3 Zi,4 Pi,,k gi,j I i,j K ri si

Brief Description Logged imports to i from j Logged alliance level between i and j Logged shared memberships in international organizations Logged conflict – cooperation in militarized interstate disputes Logged scaled cooperation between i and j Logged scaled conflict between i and j Logged distance in 1,000 km between i and j Gross Domestic Product of i Level of Democracy of i Economic Freedom Index for country i Membership in World Treaty Organization or GATT for country i Latent positions in k dimensions Dyadic error country index dyad index dimensionality of latent space importer random effect for i exporter random effect for i

APPENDIX B. SOFTWARE AND DATA DOCUMENTATION Algorithm We re-parameterize the bilinear model given above as yi;j ¼ b0d xd;i;j þ si þ ri þ ri;j þ p0i pj si ¼ b0s xs;i þ ai ri ¼ b0r xr;i þ bi

ðB:1Þ

separating regressors (xdij) that are specific to a dyad from those specific to an exporter (xs,i) or an importer (xr,j). Bayesian estimation of model

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parameters is accomplished with conjugate priors and a Markov chain Monte Carlo algorithm, sampling values of the parameters P from their 2 posterior distributions. We employ a Markov chain in {b , b , b , d s r ab, P, sp , P samples g} (where P is the K  n matrix of latent vectors) that eventually P P from the desired target posterior distribution p(bd, bs, br, ab, P, s2p , g|Y). There is no analytic solution and there are a large number (W300) of quantities to estimate. The full conditionals for the regression terms (bd, s, r, bs, br, P) are multivariate normal, and the covariance terms are modeled as inverse-Wishart conditional distributions. Details on the full conditionals are found in Hoff (2005). Software to estimate this model is available at www.stat.washington.edu/hoff/Code/GBME/gbme.r The algorithm iterates three steps: (1) Resampling of linear effects: P P (a) sample b d, s, r |bs, bP r, ab P P, g, y, P; (b) sample PS, bP r|s, r, ab, a˜, y, P; (c) sample ab, a˜ from their full conditional distributions. (2) Resampling of bilinear effects: P P (a) for eachPi, sample pi|{pj: j6¼i}, y, b, s, r, p, g and (b) sample p from its full conditional distribution. (3) Resampling of dyad-specific parameters: update {yi,j, yj,i} using a Metropolis–Hastings step as follows: " propose :

" accept :

yni;j ynj;i

yni;j ynj;i

#

" N

b0 xi;j þ ai þ bj þ p0i pj b0 xj;i þ aj þ bi þ p0j pi

# with probability

# ;

X

!

g

pð yi ;j jyni;j Þpð yj ;i jynj;i Þ pð yi ;j jyni;j Þpð yj ;i jyj;i Þ

^1

Software All analyses were performed with R (R Development Core Team, 2004).

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Country Level Data GDP (Zi,1) Data on the annual Gross Domestic Product were taken from Kristian Skrede Gleditsch’s ‘‘Expanded Trade and GDP Data, version 4.1’’ (2002). These data in 1999 US dollars are available at weber.ucsd.edu/Bkgledits/ exptradegdp.html Democracy and Autocracy (Zi,2) We use the annualized polity score (called Polity2), which ranges from 10 for highly authoritarian states to þ10 for highly democratic societies, to gauge the domestic institutions in each country. These data are available from http://www.cidcm.umd.edu/inscr/polity/, with registration. Some of these data were updated with information on so-called ‘‘micro-states’’ from the separate database maintained at the University of California at San Diego by Kristian Skrede Gleditsch (2003) Modified Polity P4 and P4D Data, Version 1.0., available at http://privatewww.essex.ac.uk/Bksg/data.html Economic Freedom (Zi,3) Data on the index of economic freedom come from the 2004 Index of Economic Freedom as available electronically at URL cf.heritage.org. These data (Miles, Feulner, O’Grady, Eiras, & Schavey, 2004) summarize ten facets of each national economy: trade policy, fiscal burden, government intervention, monetary policy, foreign investment, banking and finance, wages and prices, property rights, regulation, and the extent of the informal market. Lower index numbers represent greater economic freedom. Membership in the WTO or GATT (Zi,4) Data on the formal membership in the World Treaty Organization or the General Agreement on Trade and Tariffs is taken from the Pevehouse and Nordstrom data, archived at http://cow2.la.psu.edu/ and described below.

Bilateral Data Trade Trade data were taken from Kristian Skrede Gleditsch’s ‘‘Expanded Trade and GDP Data, version 4.1’’ (2002). These data are available at http:// privatewww.essex.ac.uk/Bksg/data.html/exptradegdp. The trade data are given in millions of current year US dollars.

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Alliance Data (Xij,2) Alliance was measured using the data collected by Douglas Gibler and Meredith Sarkees and maintained at http://cow2.la.psu.edu/. These data are described in Gibler and Sarkees (2004). International Organizations (Xi,j,2) We used the IGO data on international governmental organizations with at least three independent states as members (Version 2.1) maintained by Jon Pevehouse and Timothy Nordstrom and described in Jon Pevehouse, Timothy Nordstrom, and Kevin Warnke, ‘‘Intergovernmental Organizations, 1815–2000: A New Correlates of War Data Set, 2003.’’ These data are at http://cow2.la.psu.edu/. We also extract from these data the information about membership in the General Agreement on Trade and Tariffs as well as its successor, the World Trade Organization (WTO). This variable is labeled Xi,j,7 in dyadic form. When we use this variable in the model, we recalculate the count of IGO to exclude the GATT and WTO numbers. Militarized Interstate Disputes (Xi,j,3) We employed the Militarized Interstate Disputes database (version 3.02) which is maintained by Faten Ghosn and Scott Bennett, and described in Codebook for the Dyadic Militarized Interstate Incident Data, Version 3.0, 2003. These data and the documentation are available at http://cow2. la.psu.edu/. Our measure of international interactions is coded 1 for each militarized interstate dispute in which country i is on the opposite side of the dispute from country j; similarly, if i and j are on the same side in an interstate dispute, this is coded as þ1 for each contemporaneous occurrence. This variable is then scaled to be positive. Scaled Conflict (Xi,j,4) and Cooperation (Xi,j,5) These data were taken from 3.7 Million International Dyadic Events over the period from 1990–2001, coded automatically by the VRA Reader from Reuters news reports. Events among countries were extracted from the IDEA database after considerable, gracious guidance from Doug Bond of VRA. We used base codes to scale the event categories appropriate for national entities. Neutral events were excluded from the aggregate weights. Visit www.vranet.com for more information about the IDEA database; King and Lowe (2003) describe these data in considerable detail, though their aggregations are not identical to those developed herein. The data are at gk-ing.harvard.edu/data.shtml.

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Distance (Xi,j,6) Distance was calculated using the Haversine formula with data on latitude and longitude of capital cities taken from the world cities database maintained as part of the maps package in the R statistical programming package. These are available from cran.r-project.org. Distance was calculated in 1000s of kilometers. Countries Analyzed We used all the data available to us for 1999, which resulted in a set of 145 countries: Albania, Algeria, Angola, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belgium, Benin, Burkina Faso, Belarus, Bangladesh, Bolivia, Botswana, Brazil, Bulgaria, Cambodia, Canada, Cameroon, Cote d’Ivoire, Chad, Chile, China, Colombia, Congo, Costa Rica, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominican Republic, Congo, Ecuador, Egypt, Equatorial Guinea, Estonia, Finland, Fiji, France, Gabon, Gambia, Ghana, Guinea-Bissau, Greece, Georgia, Guatemala, Guinea, Guyana, Haiti, Honduras, Hungary, India, Indonesia, Ireland, Iran, Iraq, Israel, Italy, Jamaica, Jordan, Japan, Kenya, Kuwait, Kyrgyz Republic, Kazakhstan, Laos, Latvia, Lesotho, Libya, Lithuania, Mauritania, Macedonia, Madagascar, Malaysia, Mauritius, Malawi, Mexico, Moldova, Mali, Mongolia, Morocco, Burma, Mozambique, Namibia, Nepal, New Zealand, Nicaragua, Nigeria, Niger, Norway, Netherlands, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Papua New Guinea, Poland, Portugal, Qatar, Korea, Romania, Russia, Rwanda, South Africa, El Salvador, Saudi Arabia, Senegal, Sierra Leone, Singapore, Slovak Republic, Slovenia, Somalia, Spain, Sri Lanka, Sudan, Swaziland, Sweden, Switzerland, Syria, Tajikistan, Taiwan, Tanzania, Thailand, Turkmenistan, Togo, Trinidad & Tobago, Tunisia, Turkey, United Arab Emirates, Uganda, United Kingdom, Ukraine, Uruguay, United States, Uzbekistan, Venezuela, Yemen, Zambia, & Zimbabwe.

THE ECONOMICS OF TERRORISM Michael D. Intriligator and Steven Coissard INTRODUCTION AND MOTIVATION From the Zealot rebellion against the Roman Empire that occurred in the first century to the Baader-Meinhof Group in the 1970s to Al-Qaeda today terrorism has evolved. A new era came within the scope of geopolitical and economic issues since the collapse of the USSR. Economic deregulation, globalization, and the growth of international organizations have been unable to prevent crises and could not explain the reasons for the growth of terrorism. Of course, economics does not explain all the reasons for terrorism as ideology, religion, and belief are all very important. Before, terrorism was based on a particular political context and struck a particular state, but now it is no more the state, but the symbol that it represents which is struck (Morin, 2001). The Twin towers symbolized power, wealth, capitalism, democracy, and domination. Today, it is a fact that the motivations of terrorists have shifted from nationalism, separatism, or Marxism to religious ideology and fundamentalism. Al-Qaeda is the perfect example of this mutation, with no state, no national territory, yet with an international network and financing. If that is the case, there are several ways to analyze terrorism. According to one definition: Terrorism is the premeditated use or threat to use violence by individuals or subnational groups against noncombatants to obtain political or social objectives through the intimidation of a large audience, beyond that of the immediate victims. (Enders & Sandler, 2007a) War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 161–172 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06010-4

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The purpose of this paper is to treat terrorism as an economic phenomenon as a way to understand it and to control it. It treats both terrorists and antiterrorists as economic agents, maximizing their objective function (or utility) subject to constraints. Such an economic approach is complementary to other approaches that treat terrorism in terms of law and law enforcement, psychology, international relations, military studies, etc. The paper does not treat the economic consequences of terrorism, such as the impact of the September 11, 2001 (9/11) Al-Qaeda attacks on the United States World Trade Center (WTC) and Pentagon, which is the subject of a different type of study, but it would be complementary to such studies (on the economic consequences of 9/11, see Ross DeVol et al., 2002). The threat of terrorist strikes, particularly those involving weapons of mass destruction (WMD), represents a most serious threat to the U.S. and other nations that are potential targets of subnational terrorist groups or networks (Intriligator & Toukan, 2006). Given that situation understanding the economic aspects of terrorism can help to prevent or to mitigate this danger. The structure of this paper is as follows. The primary purpose is to discuss about terrorists and antiterrorists, their nature, interactions, and differences, as discussed in Section ‘‘Terrorists and Antiterrorists’’. Section ‘‘Means and Ends’’ sets out the ends and means and finally, Section ‘‘Concluding Remarks’’ concludes.

TERRORISTS AND ANTITERRORISTS Methodology In this paper, we will follow the methodology developed by Landes (1978). We named our two rational actors, terrorists and antiterrorists, but the terminology is not essential. They are closer to dissidents and the government in Blomberg, Hess, and Weerapana (2007), terrorists and authorities in Enders and Sandler (2007b), or terrorists and government in Atkinson, Sandler, and Tschirhart (1987). Terrorists are assumed to be maximizing utility in terms of inflicting damage subject to constraints on funding, personnel, technology, etc., leading to a supply of terrorist acts as a type of ‘‘goods’’ from the vantage point of the terrorists. Stemming from this utility function, there is a derived terrorist demand for weapons, suicide bombers and others recruits, financing, etcy.

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Antiterrorists are also assumed to be maximizing utility subject to constraints, in terms of seeking protection from terrorism and risk reduction. Risk perception impacts on economic decisions to prevent terrorism using microeconomic theory. Both are involved in a type of game, in which each player has strategic actions and anticipate the response of others in advance of his own actions. This game takes place between both actors, that is, between terrorists and antiterrorists groups. ‘‘Game theory is appropriate because it captures the strategic interplayy, incorporates uncertainty and learning relevanty, includes bargaining behavior’’ (Enders & Sandler, 2007a).

Nature of Terrorism Terrorism is often noted as the weapon of the weak or the poor. According to Marxists, even if Marx did not approve of terrorism, in terms of class struggle, terrorism is a form of violence expressing the frustration of an oppressed population. Liberalists emphasize the relationship between growth and terrorism. Economic activity and terrorist incidents are sometimes linked, for example, ‘‘yperiods of economic weakness increase the likelihood of terrorist activities’’ (Blomberg et al., 2007). Terrorism is a tactic used by the weak, those on the outside without power or access to military command, but with grievances against the strong in an asymmetric warfare situation. That situation can be studied using the rational actor model of economics, where the terrorists are attempting to achieve a political agenda subject to various constraints: financial, organizational, and logistical. The Madrid suburban attacks in 2004, 911 days after New York and 3 days before the Spanish elections, lead to the defeat of Jose´ Maria Aznar and the withdrawal of Spanish forces from Iraq and Afghanistan. Terrorists seek a political agenda but also publicity, recognition as a means to intervene in politics or to give a voice to the widest possible audience. If ‘‘it is clear that war is not a mere act of policy but a true political instrument, a continuation of political activity by other means’’ (Clausewitz, 1982), that is also the case with terrorism. Terrorism has a long history including American revolutionaries against the British King, French resistance to Nazi occupation, groups seeking to establish the State of Israel, various anticolonial groups seeking the overthrow of the colonial regimes of U.K., France, Spain, Portugal, and groups seeking the overthrow of tyrannical regimes such as in Africay. Terrorists are present in every region, culture, or religion, so they include not

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just Islamic extremists, such as Al-Qaeda. The source of terrorism is probably not poverty and ignorance, as is often alleged, but rather humiliation and retribution for past actions. This was noted by Mahatir of Malaysia at the Islamic Conference, and further elaborated by Tom Friedman of the New York Times in his column and at Davos as well as by others. It should be noted that the terrorists of 9/11 were neither poor nor uneducated but middle class or rich, and well educated. The same thing occurred in the 2007 terrorist attacks at Glasgow International Airport by medical doctors. In the nature of terrorism, we have to differentiate between domestic terrorism and transnational terrorism. Domestic terrorism takes place on national soil and the consequences of such attacks hit just the host country through its citizen, institutions, policies, etc. For example, we can cite the Corsican groups in France, Euskadi Ta Askatasuna (ETA) in Spain, the Irish Republican Army in Ireland, and the Palestine Liberation Organization in Palestine. By contrast, transnational terrorism ‘‘involves perpetrators, victims, institutions, governments, or citizens from at least two countries’’ (Enders & Sandler, 2007a). The 1998 U.S. embassy bombings in Nairobi and Dar es Salaam should be seen as a case of transnational terrorism. Often, transnational terrorism aims to target citizen, institutions, etc. of a country supporting the government that the terrorists wish to overthrow. This distinction between both forms of terrorisms is blurred by globalization that allows for international ramifications of domestic terrorist incidents. Terrorism incidents come in waves or cycles, similar to the corn-hog cycle or the cobweb model in microeconomic theory (see the work of Enders & Sandler, 2005, 2007b, or Dagobert Brito & Michael Intriligator on narcoterrorism, 1992). For example, the 1986 retaliation raids against Libya induced an increase in terrorist attacks against American and British interest but then to a lull due to resources impoverishment. Brito and Intriligator’s model leads to cycles and to situations where it might appear the antiterrorists are winning against the terrorists when they are actually losing. The reasons for the existence of such cycles are numerous, including copycat attacks (Alexander & Pluchinsky, 1992), economies of scales, attack– counterattack processes, logistics, recruitmenty (Enders & Sandler, 2007b).

Terrorist Groups Through the world, various terrorism types and terrorist groups coexist. Terrorism has different forms, including traditional terrorism (domestic or transnational), rogue States, ‘‘hyperterrorism’’ (Heisbourg, 2001), cyber

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terrorism, economic terrorismy After the 9/11 attacks, President George W. Bush was talking about a ‘‘war against terrorism’’ to defeat it (see Fontanel, 2003). It is a mistake, however, to focus only on Islamic extremist terrorists as there are many different types of terrorist groups or networks worldwide. They are not all fundamentalist Muslim or based in the Middle East or South and Southeast Asia. Their motivation is probably not merely poverty and ignorance, as is often alleged but rather probably revenge for past humiliations and retribution. An illustration could be done with what Abu Gheith (Al-Qaeda spokesman) wrote after the 9/11 attacks: ‘‘we have not reached parity with them. We have the right to kill four million Americans – two million of them children – and to exile twice as many and wound and cripple hundred of thousands’’ (2002). They are in various countries and with different religion, agendas, so there is no such thing as a ‘‘stereotypical terrorist.’’ All these groups have different goals, with some intent only on inflicting destruction and others with a clear political agenda. Furthermore, they are in competition with each other for resources (recruits, funding, contacts, and arms) and they are trying to outdo one another for publicity. John Scott (2001) wrote about the ‘‘media congestion’’ and Palestinian terrorist attacks have lost much of their media impact simply because they are too common. On funding, things are different but competition is important too. We have to distinguish between macro-funds, referring to international flows and international finance practices, and local micro-funds that are used in order to finance an autonomous operational cell. Terrorist groups finances have several sources as State aid (especially during the Cold War, but now mainly referring to tax havens), direct aid from partisans, revolutionary tax racket (Zakaty), crime (drugs, kidnappingy) so the boundaries with organized crime is becoming smaller and smaller. A ‘‘can you top this’’ mentality is one driver toward terrorist use of WMD starting perhaps with radiological dispersal devices or chemical/biological weapons but eventually moving to the use of nuclear weapons. If the terrorists are looking for a new and even more spectacular strike that would give them coverage and publicity outdoing 9/11, the answer is WMD. Potential targets are numerous, including the port complex of Los Angeles and Long Beach (the largest port complex in the U.S.), nuclear power stations in France,y.

Antiterrorists Groups As in the case of the terrorists, several types of antiterrorist groups currently coexist, including governments but also international organizations, private

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sector firms and other organization, NGOs, etc. The rational actor model is useful to analyze their behavior, especially using game theory. Antiterrorist policies aim to improve (inter)national security, to reduce the terrorist groups – size and/or number, thus inhibiting terrorist attacks. National security is a public good and cannot be addressed using the standard assumptions of perfect competition. In other words, it is difficult to exclude people within the country from the safety and security generated by such a public good as national security (non exclusion) and multiple individuals can enjoy the added safety of such security without limiting that received by others (non rivalry). That is also true for international security (Sandler, 2005). Antiterrorist policies could be offensive (proactive) or defensive (passive). The latter aim to improve the protection of potential target and they include deterrence (installation of technological barriers, deployment of security personnely), hardening of targets (fortifying embassies, civil servant protection against kidnapping), and in general, shoring up the weakest links. ‘‘Deterrence spending is analogous to an insurance policy’’ (Arce & Sandler, 2005). It can improve national security but could lead to a deterrence race and to added risks for citizens abroad. To fight against such risk, counterterrorism policies should include the hardening of embassies. However, this policy involves substitution, deflecting to other less protected targets, and it could lead to a competition between targets in terms of fortification. Second, antiterrorists shore up a vulnerable country, one that cannot afford to struggle against terrorism. That is one of the four pillars of U.S. antiterrorism policy. Proactive policies include preemption, freezing of assets, retaliation, intelligence,y. An offensive or direct action against terrorists makes a safer world supported by a government or countries choosing this strategy, so a national cost generates an international benefit. Furthermore, a country using offensive actions could become an attractive target for terrorists, whereas free riders profit without risks and financial cost. Arce and Sandler (2005) examined a situation, in which a nation has three strategic options: deter, status quo, and preempt. Knowing that preemption implies public benefits and private costs, and that deterrence implies public costs and private benefits, in each of the situations analyzed by Arce and Sandler the deter choice dominates. As in the case of terrorists, antiterrorists are in competition to improve their national security, to force terrorists to switch targets. Target substitutions could occur inside a country or between countries. So, during the elaboration of their antiterrorist policies, governments have to integrate the policies of other countries and their reactions to national policy.

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Another dilemma with antiterrorist policies is that they perpetuate a climate of terror and lead to reactions by terrorists.

MEANS AND ENDS Intelligence ‘‘If you know the enemy and know yourself, you need not fear the result of a hundred battles’’ (Sun Tzu, Art of war). ‘‘Know your enemy’’ is a basic precept of warfare and it emphasizes the key role of intelligence. In the war on terror, intelligence is essential to know terrorists, their motivations, goals, and patterns as well as their means. The United States has the best intelligence system in the world (see Coissard, 2007) but it did not avoid 9/11. Why? It does not appear important now, but the U.S. system had been reorganized according to the 9/11 Commission’s recommendations for improving information sharing among agencies involved in the national security work and embracing the information revolution while protecting sensitive national security information, and preserving privacy in the continuing changes underway at the CIA and FBI. According to Sara Daly (2003), a former CIA counterterrorism analyst, ‘‘information gathering is the most powerful weapon in the struggle to dismantle terrorist networks and prevent attacks.’’ In the fight against terrorism, military capabilities are meaningless if one cannot find the enemy, and the battlefield has no boundaries. Furthermore, the fight against terrorism may not require military capabilities if, upstream, the job is done right: gathering accurate information and stopping an attack from happening, without public awareness. Nevertheless, as terrorists groups are organized in small and operational cells, it is difficult to infiltrate or even to unmask them. Daly suggests collaboration with local police in places like Morocco, Saudi Arabia, and Turkey in order to monitor ‘‘the activities of local extremists in individual countries – such as travel in and out of the country and involvement in criminal enterprises’’ (Daly, 2003). Intelligence is one of the best means in the fight against terrorism, all the more since government financing this strategy yields the information. It limits free-rider behavior (Arce & Sandler, 2005). On the other hand, it would be a mistake to minimize the importance of intelligence inside terrorist groups. Even if such groups don’t have an organized system they apply some form of intelligence.

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Substitution Robert C. Bonner, Commissioner of Custom and Border Protection at the U.S. Department of Homeland Security did not realize importance of substitution at Pacific Council on International Policy program on homeland security in July 2005 when M. Intriligator noted this point. He said that he had never heard of this issue of substitution from his DHS colleagues. However, it was part of one of the first articles on the economics of terrorism by William Landes, of the University of Chicago School, ‘‘An Economic Study of U.S. Aircraft Hijacking, 1961–1976,’’ published in April 1978. Landes noted that adding metal detector in airports would not stop terrorism but rather shift it to other areas such as embassy bombings. Then adding protection to the embassies could lead to kidnappings of embassy personnel as hostages. Ultimately this process could lead to suicide bombers as the smartest weapon, the one that is hardest to deter or defeat. Substitution limits the effectiveness of antiterrorist policies because terrorists will adapt to the situation and switch their actions or targets to other attacks on softer targets. If a government chooses deterrence by improving security policy domestically, the terrorists will limit their attacks on the national territory but increase their attacks against national interests or citizen abroad. For example, following 9/11, the U.S. and the European Union efforts to provide greater security led to a shift of attacks to developing countries including Indonesia, Morocco, and Kenya (Sandler, 2005). Consequently, antiterrorist policies have to take account of substitution that limits its effects. The antiterrorist authorities should work to limit the resources of terrorists, because that would reduce their recruitment and limit their targets and actions, as well as force them to think about the most important kinds of possible attacks. Admittedly, this is a short-term solution because terrorists will innovate to thwart these measures, such as using plastic gun to get through airport metal detectors. According to Sandler (2005), in order to avoid such substitution effects between countries, it is preferable to have global and collective antiterrorism policies.

Innovation ‘‘Innovation process is an intertemporal externality that’s terrorists impose on tomorrow’s victims’’ (Sandler, 2005). It is part of the game played between terrorists and antiterrorists. The 9/11 attacks combining two approaches to

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terrorism that were each used previously, airplane hijacking and suicide bombing, but never combined before in this form. The response on the part of U.S. government was not innovation but rather reorganization, creating the U.S. Department of Homeland Security, which is dysfunctional and has been largely ineffective as seen in the disastrous response to hurricane Katrina. The problem is the need for but lack of comparable innovation on the part of the antiterrorists. More recently, the innovation of improvised explosives devices (IED) in Iraq was not countered by innovation on the side of the antiterrorists. Innovation of modern suicide bomber, as pioneered in Sri Lanka, with recruitment, training, provision of weapons, control, etc. were not countered by innovation on the side of antiterrorists. Innovation by terrorists could concern new products or targets as the Nizariyya have, during 200 years, sowed terror among Muslim Princes and Christian lords with innovation in ideology, territorial settling, and military technique. Antiterrorists try to innovate too. The Israeli Defense Ministry is investing in sensors (adapted from seismology science) able to detect movements and to call peacekeeping forces in case of intrusion. Great Britain created a Counter-Terrorism Science and Technology Centre, involving experts from government, industry, and academia. According to John Reid, Home Secretary, ‘‘This new centre will provide a world class hub to ensure government laboratories, industry and academia are used as efficiently as possible to enhance innovation and keep one step ahead of evolving terrorist threats.’’ It will develop new technologies such as robots to disarm explosives and devices, and can also detect harmful substances after a blast, as ways to detect traces of radiological, chemical, or biological substances after an explosion, etc. This center aims to respond to current threats but also to anticipate threats as they emerge and develop. All antiterrorists know, ‘‘in response to our efforts, the terrorists have adjusted’’ (The White House, 2006), they have to act now.

Cooperation International security is a public good, so individual policy fails to internalize foreign costs and benefits (substitution, free rider, resources waste). The freezing of assets will be ineffective if only one country implements this policy, as assets will move toward other countries (substitution). In the war against terrorism, all countries are not subjected to the same risks. Given that situation, how do all of them participate in the fight against terrorism? Concerning intelligence, it is not worth to get the

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same information; it will be a waste of resources and an increase in the risk of unmasking agents. Collaboration will consist in sharing of the tasks. However, the problem is that sharing leads to a loss of autonomy and is difficult to accept when it deals with national security (Arce & Sandler, 2005). To defeat terrorism cooperation between countries is necessary at all levels, from local to global. For example, the local Terrorism Early Warning (TEW) group in LA County, involving joint production of intelligence, mutual support, etc., that could be emulated at the national, international, and global levels. In France, same plans of action exist in economic intelligence, in which intelligence, data, devices, etc. are created by chamber of commerce and industry at the local level.

Medias As a result of 9/11 attacks, terrorism became a spectacle set out both by media and the terrorists themselves. Crettiez and Sommier (2002) pointed out terrorists left nothing to chance and offered to the whole world a scenario never directed by Hollywood. Terrorists respected the classical unities rules when they planed the attacks against WTC:  Time unity, with an hour coinciding with schedule of starting of the economic and financial life, a lot of people could stay watching news up to evening.  Scene unity, hitting of the U.S. powerful symbol – Pentagon and World Trade Center – with use of modernity (plane hijacking, informatics) and of archaism (knifes, sacrifice).  Action unity, with two hereditary enemies in a merciless fight. The novelty in 9/11 attacks is, without a doubt, the resulting pictures. All media, anywhere in the world, reproduced the burning and collapsing Twin Towers. Terror was staged, filmed from one end to the other with suspense and a dramatic end. The media appeared as a sounding board, that is to say, they increased results with theatric. Spectacle terrorism was an arm used by terrorists but increased by the media. Another thing about Media is the competition between terrorist groups to focus on their cause. As we noted earlier, that could lead to media congestion.

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CONCLUDING REMARKS The paper aims to introduce terrorism as a game between two rational actors, terrorists and antiterrorists, in order to improve the implementation of antiterrorist policies. Such good policy should integrate reactivity and innovation through intelligence and international cooperation. According to E. Morin (2001) the ‘‘war’’ against terrorism needs more solidarities and the creation of an international center dedicated to the fight against terrorism. If at least two countries are engaged and ‘‘when asymmetries are sufficiently great, a nation will engage in both proactive and defensive actions’’ (Arce & Sandler, 2005). To thwart the prisoner’s dilemma, international community could to some extent, subsidy the prime target country in order to avoid status quo or deter. Then, other countries have to know if they want to be free rider, at their own risks, or take steps to fight against terrorism. Cooperation or better international centralization is the best solution, but it is confronted with the same problem, it deals with national security and who would want to give up his sovereignty on the basis of such issues.

REFERENCES Alexander, Y., & Pluchinsky, D. (1992). Europe’s red terrorists: The fighting communist organizations. London: Frank Cass. Arce, D., & Sandler, T. (2005). Counterterrorism, a game-theoretic analysis. Journal of Conflict Resolution, 49(2), 183–200. Atkinson, S. E., Sandler, T., & Tschirhart, J. T. (1987). Terrorism in a bargaining framework. Journal of Law and Economics, 30(1), 1–21. Blomberg, B., Hess, G., & Weerapana, A. (2007). Economic conditions and terrorism. In: T. Bru¨ck (Ed.), The economic analysis of terrorism (pp. 29–46). London: Routledge. Brito, D. L., & Intriligator, M. D. (1992). Narco-traffic and guerrilla warfare: A new symbiosis. Defense Economics, 3, 263–274. Clausewitz Von, K. (1982). On war. Penguin Classics; Abridged edition. 464 p. (first edition in English, 1873), London. Coissard, S. (2007). Le syste`me d’intelligence e´conomique ame´ricain. ARES, 22(58), 39–50. Crettiez, X., & Sommier, I. (2002). Les attentats du 11 Septembre: Continuite´ et rupture des logiques du terrorisme. AFRI, 3, 58–69. Daly, S. (2003). Fight terrorism with intelligence, not might. Christian Science Monitor, December 26. http://www.csmonitor.com Devol, R. C., Bedroussian, A., Fogelbach, F., Goetz, N., Gonzalez, R., & Wong, P. (2002). The impact of September 11 on US metropolitan economies, Milken Institute Research Report, January. Enders, W., & Sandler, T. (2005). The political economy of terrorism (November, p. 292). New York: Cambridge University Press.

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Enders, W., & Sandler, T. (2007a). Applying analytical methods to study terrorism. International Studies Perspectives, 8, 287–302. Enders, W., & Sandler, T. (2007b). An economic perspective on transnational terrorism. In: B. Tilman (Ed.), New York: Cambridge University Press. Fontanel, J. (2003). Le couˆt du terrorisme, in Globalisation e´conomique et se´curite´ internationale. Introduction a` la ge´oe´conomie, Edition Jacques Fontanel, Avant-propos de K.Arrow), Coˆte´ Cours, Grenoble, De´cembre 2002. Gheith, A. (2002). ‘Why we fight America’: Al-Qa’ida spokesman explains September 11 and declares intentions to kill 4 million Americans with weapons of mass destruction, MEMRI No. 388, June 12. Heisbourg, F. (2001). Hyperterrorisme: la nouvelle guerre. Paris: Odile Jacob. Intriligator, M. D., & Toukan, A. (2006). Terrorism and weapon of mass destruction. In: P. Katona, M. Intriligator & J. Sullivan (Eds), Countering terrorism and WMD: Creating a global counter-terrorism network. London: Taylor & Francis. Landes, W. M. (1978). An economic study of US aircraft hijackings, 1961–1976. Journal of Law and Economics, 21, 1–31. Morin, E. (2001). Socie´te´-monde contre terreur-monde. Le Monde, November 22. Sandler, T. (2005). Collective versus unilateralism responses to terrorism. Public Choice Springer, 124, 75–93. Scott, J. L. (2001). Media congestion limits media terrorism. Defence and Peace Economics, 12, 215–227. The White House. (2006). National strategy for combating terrorism, September.

ECONOMICS OF UN PEACEKEEPING OPERATIONS Nade`ge Sheehan INTRODUCTION Since the end of the Cold War, the number of UN peacekeeping operations deployed and their expenditures have significantly increased. Out of an estimated total amount of $44.81 billion spent on 61 UN peacekeeping operations, approximately $41.02 billion, or almost 92%, went to financing 50 missions between 1990 and 2006. There are two main reasons for this significant increase in spending: one is that international security is now threatened with multiple conflicts arising within nations; the second is the significant increase in UN responsibilities in international security. With the end of the Cold War, international strains have been replaced with civil unrest. Intrastate conflicts that were contained until then freely emerged in many developing countries, particularly in Africa. These sorts of conflicts can quickly spread to neighboring countries and seriously affect international security if no measure is taken for their resolution. We live in an era where countries are economically interdependent, thus calling for peaceful cooperation between governments. Peace is therefore recognized as a necessity. The UN had to change its approach in terms of international security, opting for a culture of prevention rather than reaction. Conflicts have to be anticipated and tackled at their sources by first seeking to eliminate or to reduce poverty, inequality, and environmental

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 173–188 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06011-6

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problems, as these can easily lead populations to criminality, corruption, and conflict. UN peacekeeping activities have then undergone a geographic expansion and an increased complexity of their mandates. Although UN peacekeeping operations are evidently important for good international relations and for the economic development of nations, the UN has great difficulties obtaining the necessary support to support its missions, whether financial or in terms of military personnel and equipments. This is due, in part, to the observation that when it comes to decisions on financing UN peacekeeping operations, governments put forward their national interest as the underlying basis of this activity and the system used for obtaining contributions allow this behavior. In this paper, we will first discuss the individual characteristics of peacekeeping operations. Because UN missions generate joint products and contributor-specific benefits, Member States are motivated to contribute according to their national interests. This situation places the UN into a financial crisis that influences peacekeeping outputs. As UN peacekeeping budgets go up, as well as outstanding contributions, it becomes difficult for the UN to pay contributors of personnel and equipments, thus affecting future missions, especially as deployments of forces depend on voluntary contributions by governments. It is, in fact, interesting to analyze and explore other potential deployment options for producing peacekeeping.

CHARACTERISTICS OF UN PEACEKEEPING OPERATIONS A good or a service that creates benefits that are nonrival and nonexcludable among nations is considered as an international public good. Ironically, peacekeeping operations cannot be considered as such, because they do not provide the international community with equal benefits, and those benefits can be private or semi-private. Peacekeeping is then an impure international public good. Indeed, the production of peacekeeping in countries in conflict generates, notably, conflict prevention, compliance to peace treaties, peacebuilding, demobilization of fighters, assistance to refugees and displaced people, and fair elections. Through these efforts, if peacekeeping missions succeed, they significantly improve international security and promote democracy. Furthermore, peacekeeping activities facilitate international relations through the peace produced, thus contributing to economic development.

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Peacekeeping operations seek then to create peace, a pure public good. However, in creating peace, peacekeeping also yields some joint products that are mainly semi-private, such as promoting commercial interests for countries. Governments also participate in UN peacekeeping in their own self-interest, as they see specific benefits and gains. These contributorspecific benefits and joint products lead to problems of free-riding and disproportionate burden sharing. Why finance the production of a good if it can freely be enjoyed once it is produced by others? Motivations of governments to contribute to UN peacekeeping operations are proportional to the level of their national interests. They will send their contribution on time according to their utility for the mission. When that utility is very high, nations may even provide the UN with additional financing, made on voluntary basis. However, these voluntary contributions send a signal that some countries want to see the resolution of the conflict and are, therefore, willing to pay more. In a situation where countries either do not fulfill their financial obligations, whether because they have a low utility for the conflict or whether because others show higher interests, there are problems of disproportionate burdens as some governments carry heavier charges than others. Peacekeeping cannot be considered as a pure international public good also because not everyone in the country where UN peace forces are deployed may necessarily have access to the peace produced. Some civilians, who cannot have access to peace, whether because of geographic reasons or because there are belligerents that choose to disrupt the peace created, may have to finance the implementation of some kind of local security measure. The peace produced in a country may furthermore improve its competitiveness in a specific market area, forcing another nation that was previously competitive in the same market to invest in production methods that are more efficient to face the new competition. Some nations can therefore have to spend more in order to enjoy some of the benefits generated by peacekeeping. UN peacekeeping operations are, furthermore, not purely international collective goods, as their consumption can be optional or conditional. Consumption of peacekeeping is optional because, in compliance with a country’s sovereignty, the UN cannot intervene in a country’s affairs if the government does not authorize a deployment on its land. For example, even though the refugee problems caused by the fighting between the army and the rebels in Central African Republic called for a rapid deployment of a UN peacekeeping force, such a deployment in Eastern Chad was stifled by the President himself who was concerned about the force composition.

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Unless the Security Council is forced to bypass sovereignty and dispatch aids because of the gravity of the conflict, the deployment of a UN peacekeeping operation first depends on the desire of the country’s leader to have a force intervene. Despite the gravity of the Darfour conflict, the Sudanese Government preferred to limit interventions in the country to the 7,000 soldiers sent by the African Unity (AU) and would not accept the dispatch of UN peacekeeping forces. Although the resolution of the conflict really called for a more substantial UN deployment of 20,000 men, when the government finally agreed with a deployment of UN peacekeepers, in mid-April 2007, the conditions were only to have a small force of 3,000 soldiers from African nations that would support AU’s men. Consumption of peacekeeping can be subject to some conditions as there are also situations where a country in crisis asks the UN for humanitarian assistance and does not receive the help needed. As humanitarian assistance is not subjected to the same urgency, before agreeing to send aid, the Security Council can impose some conditions. These conditions usually call for the country to agree to make economic or political changes imposed by the UN Permanent Members. The changes often aim at satisfying interests of the Western world, especially those of the five Permanent Members.

CONTRIBUTIONS TO UN PEACEKEEPING: THE UN PEACEKEEPING ASSESSMENT SYSTEM The UN peacekeeping scale of assessment is based on the scale of assessments for the regular budget, with some adjustments made based on levels of Member States. Two criteria considered most viable by the UN Committee on Contributions are used to define this ability: first, the average per capita gross national income (GNI) for five years and secondly, the conversion rates based on market exchange rates in US dollars. So that the scale is equitable, the Committee on Contributions has introduced a system of discounts. This system is meant, in fact, to compensate contributions that developing countries – in particular, the less advanced countries – are not economically capable of allocating to peacekeeping, especially since peacekeeping operations now involve heavier expenditures. Depending on their category, developing and less advanced countries then benefit from lower assessment charges; the balance becomes the financial responsibility of the Permanent Members of the Security Council. The five members

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therefore pay more than 100% of their regular assessment. The less advanced countries benefit from a 90% discount, their rate of assessment being set at 0.01%, with the minimum percent being 0.001%. It is important to note that whatever may be a country’s economic situation, the minimum contribution would never be set to zero, as nations that would not be assessed would not value peacekeeping efforts, since they would suffer no charge or risk of investment. The discount allows countries that are temporarily in a difficult economic phase to benefit from a lower assessment and still be able to participate financially in peacekeeping. However, although this system is implemented to introduce some kind of equity and fairness, it is subject to some deficiencies. Firstly, the peacekeeping scale of assessment allows countries to play a game with the classification system. The UN indicates that countries can request, voluntarily, to be moved to a superior category of assessment from the one that was calculated based on their capacity to pay. They can also request to be placed on a lower category of assessment if they meet the requirements (UN, 2006). Governments, however, are made of people whose normal instinct would be to take advantage of a good or service at the lowest possible cost. Nations therefore generally will not propose to pay more unless economic or political personal interests motivate them, or if they are concerned about their world image. Countries could be concerned that they will suffer a relative loss of wealth, political weight, and influence on global security if they are placed at lower levels in the scale of assessment. What we also have to consider here is the fact that if countries voluntarily decide to move up in the assessment scale, this could imply that their capacity to pay was, in fact, under-evaluated. Miscalculations of a country’s capacity to pay can easily occur as data are not always viable or readily available, but also because a country’s economic situation may have improved from the time the capacity to pay was calculated. For instance, effective rates of assessment for peacekeeping between January 2007 and December 2009 were based on GNI data calculated for the period from 1999 to 2004. Secondly, the discount system could have psychological effects on the contributing behavior of the five Permanent Members. Even though the surcharge imposed to these countries may relatively be insignificant, these Members could feel that they are heavily taxed and their motivation to contribute can be reduced. Consequently, they may put off payments of the surcharge, or simply delay sending their entire contribution. In this case, total contributions received by the UN can be reduced significantly and financing of peacekeeping can be more difficult as large sums come from rich countries. On January 2007, the ten largest financial contributors were

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United States, Japan, Germany, United Kingdom, France, Italy, China, Canada, Spain, and Republic of Korea. When the United States was assessed 31.4% for peacekeeping operations back to the second half of the 1990s, financial obligations to peacekeeping became a burden, especially as costs of operations had gone far higher during the first half of the 1990s. The United States decided to stop making payments to peacekeeping, thereby creating a substantial financial crisis for the UN. It would then be advisable that the UN makes the surcharge foreseeable. It would also be important to determine a maximum level for this surcharge so that Members of the Security Council can make budgetary plans. Lastly, the discount system introduces a global progressivity in the scale of assessment; nonetheless, to reach true equity, the scale of assessment should be based on a system of progressivity by groups of revenues. The Committee on contributions could then divide the world share of gross national income (GNI) of each country into a number of categories and then apply a contribution rate, to each category, that increases as we move up the scale. Such a system would verify that the constraint is the same for every nation, the marginal utility being identical for each contributor. The negative side of this system is that countries with significant share of GNI could loose their motivation to contribute, as their contribution rate can be too high.

UN PEACEKEEPING EXPENDITURES Until 1988, expenditures in peacekeeping had not been higher than $300 millions. With the end of the Cold War, they have more than doubled in just one year ($635 millions between 1988 and 1989). Amounts spent in UN peacekeeping have reached down $400 million during the two following years (1990 and 1991), but have quickly passed the level of $1 billion between 1991 and 1992, going from expenditures of about $490 millions in 1991 to almost $1.8 billion in 1992. This sudden increase was in part due to the Gulf War, but was mainly a consequence of the significant increase in peacekeeping activities. Until the 1990s, UN peacekeeping operations consisted of more traditional operations (border supervision, compliance to treaties, etcy). After that date, however, the UN scope of actions became broader and the risks taken in conflicts were far higher. Peacekeeping expenditures have reached $3 billion in just one year between 1992 and 1993. Although expenditures had gone down between 1996 and 2001 to an average of about $1.4 billion, it can be expected that the funds needed for peacekeeping will

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continue to be high for many more decades as the international security context, worsened by terrorism activities, leads peacekeeping missions to take on more and more responsibilities. Approved resources for peacekeeping operations for the calendar year, July 1, 2006 to June 30, 2007, were as high as $5.28 billion for financing 15 missions. The number of military personnel involved in peacekeeping operations has gone up to 82 685 compared to 13 700 in 1990, or slightly more than six times the amount. A comparison of the level of UN peacekeeping budgets with UN regular budgets definitely shows the important responsibility that the UN has in terms of international security (Fig. 1). Between 1991 and 2004, resources approved for peacekeeping had reached an estimated amount of $30.7 billion, or 60% more than the total amount approved for the regular budget ($18.6 billion during the same period). Although these amounts seem high, they do not reflect the total cost of UN peacekeeping activities. Humanitarian organizations, such as the United Nations Children’s Fund (UNICEF), the World Health Organization (WHO), the United Nations High Commissioner for Refugees, as well as nongovernmental organizations (NGOs), also intervene in peacekeeping efforts. Between 1992–1996, for instance, international organizations, such as Doctors Without Borders (Me´decins sans frontie`res), the Red Cross, Pharmacists Without Borders (Pharmaciens sans frontie`res) and WHO, have spent between $339 millions and $425 millions for purchasing medicine for the population of Bosnia-Herzegovina, Berckman et al. (1996–1997).

19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

Peacekeeping budgets

Fig. 1.

Regular budgets

Peacekeeping Budget versus Regular Budget, 1971–2005; (US$ million – Expenditures in current dollars).

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In 2001, UNICEF sent a total of $14 millions worth of material to Afghanistan. In the same year, 19% of this organization’s revenues, or $235 millions, went to finance aid relief and peace-building programs (UNICEF Annual Report, 2002). Costs of interventions and multinational forces deployed particularly in Somalia, Bosnia, Haı¨ ti, Kosovo, and in TimorLeste, outside costs for the UN, were not accounted for in the peacekeeping expenditures calculated by the UN. The United States, for example, have spent about $2 millions in nonmilitary interventions in Haı¨ ti and missions such as, Restore Hope and UNITAF in Somalia cost the United States more than $1 billion (Blakey, 1999). There are also headquarters support services costs. These costs finance salaries (consultants, administrators, high-level staff, and general service staff), travel expenses and training, as well as computer equipments, supplies and various materials, facilities, and infrastructures. These costs are not fully included in peacekeeping budgets as they are partially financed through the regular budget and through the Department of Peacekeeping Operations (DPKO) support account. Although these expenditures seem high, total peacekeeping expenditures are still insignificant compared to the cost of war. Some may think that UN peacekeeping operations, particularly current second generation forms of operations, show lack of organization and efficiency (e.g., Fleitz, 2002; James, 1994; Debiel, 2000). They are, however, vital for the social and economic development of countries and, thus, for international security and international relations, as nations in war suffer from bad economies and groups living in poverty are more prone to declare war. In today’s globalized world, peace is of utmost importance for healthy economic interrelations. Conflicts damage these relations. When there is no peace, people are not motivated to undertake productive investments, as it is unlikely that returns on their investment will be significant.

DEBT IN UN PEACEKEEPING AND CONSEQUENCES UN peacekeeping budgets continue to be in deficit, as many Member States accumulate unpaid assessments. At the end of January 2007, the UN estimated that outstanding contributions amounted to $3.27 billion, compared to approximately $3 billion at the end of 2005, $2.6 billion the previous year, and $1.1 billion at the end of 2003. At the end of 2004, the UN estimated that it owed reimbursements of $605 millions to military and equipment contributors. This situation creates some kind of ‘‘vicious circle’’ that can only lead to severe problems in future financing of UN

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peacekeeping operations. When some Member States do not pay their full assessment, or do not make payments on time, the UN lacks for sufficient funds to reimburse countries that have contributed military personnel or equipment. In return, non-reimbursed governments can choose to adopt different behaviors, such as: (a) (b) (c) (d) (e)

Decide not to contribute more military personnel and material; Send their assessment late; Pay a lower amount of assessment due; Decide not to pay their assessment due; or Voluntarily choose to behave as free riders.

Many African countries had chosen not to send their soldiers to the mission in Rwanda because they had not been reimbursed for previous deployments. The same problem also occurred in the case of missions in Sierra Leone, Liberia, Guinea-Bissau, and Congo (Pomper, 1999). Without these reimbursements, many countries cannot reimburse families of dead or handicapped soldiers and could accumulate new debts, in case of fatalities, if they continue to send new forces. Contributing governments are not alone to be affected by the reimbursement problem. When the UN does not receive enough financial support for peacekeeping, it cannot reimburse producers and suppliers of goods and services for peacekeeping, thereby accumulating many debts. Consequently, the UN must reduce its volume of purchase and cannot benefit from economies of scale. Materials purchased can be inadequate or of bad quality as the UN does not have enough money to buy better quality products. Insufficient, inadequate, or poor quality of materials can certainly have a negative impact on the efficiency of missions. During the UN transitional authority mission in Cambodia (UNTAC), the locks of the election ballot boxes were not strong enough and broke during their move from the polls to the vote counting location. This situation has led the Cambodian departing government to qualify the election as fraudulent, and to threaten the secession of eastern provinces (Ledgerwood, 1994). In one calendar year, about one quarter of the peacekeeping budget goes to expenditures for goods and services. The UN is not only an important client for those producers and suppliers but is also an important vehicle for the introduction of new goods and services to other countries. The contribution problem therefore evidently affects commercial activities of businesses. The debt has immediate and long-term effects. The immediate effect is a bad production of peacekeeping. When the UN does not have the necessary troops and equipments for its missions, and when it cannot find the funds to

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purchase and rent civilian and military goods, and for financing adequate support services personnel, the organization becomes unable to intervene in some conflicts. Furthermore, the missions approved by the Security Council will be deployed without the required number of personnel and will be badly equipped to meet the mandates. This situation creates important negative externalities (refugees and displaced populations, spillover of conflicts to neighboring countries, deterioration of international relations, etcy), and endangers peacekeepers lives. If the amount of outstanding contribution severely goes up, the UN could be in a difficult position to produce future peacekeeping operations, whether in terms of quantity or quality. This is made worth if the debt is caused by an increasingly large number of bad payers, as this could indicate that governments, in general, do not see or value the role played by UN peacekeeping in international security. Such situations will give way to various alternative ideas already brought forward for financing peacekeeping operations. That is financing peacekeeping operations through a private insurance administered by the United Nations Security Insurance Agency (UNSIA) or through a proposition formulated by James Tobin, in the late 1970s, for the establishment of a World Treasury that would collect taxes on large international transactions and on environment and pollution taxes. A UN debt could also give free way to the creation of numerous NGOs, non UN-accredited. Financing peacekeeping through a private insurance evidently means privatizing the production of peacekeeping. It consists of a type of insurance that a country buys to guarantee itself UN diplomatic actions and economic and military intervention for its defense and protection against attacks from other nations. The production of peacekeeping by UNSIA would then imply three kinds of situations: (a) The country that contracts to the insurance and meets payments, receives the service; (b) A country can decide to cease payments of its premiums temporarily, if it does not think that it is subject to any risks of conflicts in the following year; (c) A country that does not generally have security problems would not find it necessary to purchase this insurance. Such a country would then be unable to call upon the UNSIA services in case of a crisis. In summary, only nations that pay for this insurance can have direct access to peacekeeping services. A country that has not contracted to this

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insurance will have to find other means of conflict resolution, unless the conflict affects countries that are insured. The insured nations would then call upon the services of UNSIA for conflict resolution. The project of financing international security through a collection of international taxation seems very ambitious and difficult to implement. To be effective, this taxation would have to be applied to every nation. There is, however, no actual law that exists to impose such taxation on countries. As to the environment and pollution taxes, these forms of taxation are already difficult to impose at the national level; attempting to apply them as a common international project would trigger strong controversies that would make it impossible to implement them efficiently. Questions such as: What would be the efficient taxation rate, meaning the price to pay for its application to peacekeeping? What should be the rate imposed on each government? Should it be an international rate? etcy, would need to be answered.

DEPLOYMENTS OF NATIONAL ARMIES FOR UN PEACEKEEPING OPERATIONS: A SYSTEM WITH MANY DEFICIENCIES For its deployments to peacekeeping missions, the UN calls upon countries to contribute military personnel and equipments. If industrialized countries supply mainly military materials and equipments, as these are costly, military personnel are mostly provided by developing countries. In March 2007, the top six military personnel contributors were Pakistan (10,173), Bangladesh (9,673), India (9,471), Nepal (3,636), Jordan (3,564), and Ghana (2,907) (UN DPI). Some countries are eager to contribute to peacekeeping missions as they can benefit from important advantages. For each soldier they contribute, developing countries, in particular, receive a reimbursement generally far higher than their investment in military training (these training costs are sometimes equal to 0). In December 2000, for example, the UN owed, respectively, to countries such as, India, Nigeria, and Bangladesh, in US$ thousands, $94,325, $43,360 and $24,732. Developing countries can thus gain a surplus from UN reimbursements. The governments of these countries can make good use of the reimbursements if they invest them in productive activities that can create jobs and in economic and social development programs rather than putting them into the pockets of elite groups. Developing countries can also benefit from a reduction of both their unemployment and criminality rates. As these countries generally dispose of

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a large youth population without any prospect of employment, UN peacekeeping operations constitute good job sources for these young men and women. Peacekeeping is also an opportunity for developing countries to reduce their criminality level through the transformation of their potential delinquents into soldiers, thereby receiving free and efficient military training that should further benefit local security. Deployments through the system of a patchwork of national armies, however, generate costs that are far superior to the advantages from which developing countries benefit. As contributions of military personnel by countries are left to their discretion, industrialized countries, in particular, negotiate the conditions for the participation of their soldiers in each mission. They will not contribute military personnel until those conditions are acceptable. Countries evaluate the risks involved for their soldiers and the public opinion. Furthermore, as said earlier the system allows governments to bargain with the UN: They will participate in missions only after they are reimbursed for previous deployments. These situations slow down the deployment process and the production of peacekeeping becomes sub-optimal and costly. The peace produced is then insufficient, both, in terms of quantity and quality. The patchwork of national armies is also composed of highly heterogeneous peacekeepers; Each nation has its own military training system and its own cultures, language, and customs. These differences affect significantly the implementation of the mandates and generate costs of inefficiency of the mission command. Inefficiency of soldiers can also create civilian deaths, infrastructures damages (roads, transportation systems, housing, etcy), unemployment, or environmental problems (pollution, etcy) in the countries of the parties in conflict as well as in neighboring countries. All these factors quickly lead to slow economic and social development growth. Damages that may occur during a peace operation are surely far less important than those that could happen if no action were taken to solve the conflict. However, the negative externalities generated become more and more important as peacekeepers are badly trained, lack of communication, do not respect the culture of the parties in conflict, and do not always understand the objectives of the mission. They increase costs of peace-building efforts. The UN has implemented a system of strategic deployment stocks (SDS) of materials that aims at accelerating deployments between 30 and 90 days. These SDS consist of new materials with a useful lifetime. The idea is to set up a reserve of materials made available from current or closed peacekeeping operations. Materials are then being sent to peacekeeping missions in conformity with their approved budget, and capital costs of SDS are

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charged to the mission. Although the system has positive aspects, it could become more of a constraint in the end. Among the positive points, the SDS allow companies in developing countries and economies in transition to gain economically, since the UN wants purchases of materials to be made, in priority, in these countries. In 2004, out of total procurement value of $140,639,432, contracts valued at $12 millions were awarded to these companies. In addition, contracts for $1.9 million were awarded to companies from Africa (UN, 2005). A second positive aspect is that the UN would not have to wait for contributions of materials from Member States, as the stocks become more complete. When a material is transferred from one mission to another, its rental cost will be debited from the new mission’s account. Contributions of materials, therefore, will not be subject to national interests of countries. As to the negative aspects of the SDS, since purchases made of new materials in response to new technologies, for instance, will depend on contributions by Member States, the funds available for acquiring new materials will therefore be low if contributions are not made on time. At the end of December 2004, outstanding contributions to these SDS amounted to $13.6 millions, leading the UN to borrow temporarily to settle SDS invoices. Financing of the stocks will also be difficult when closed missions show deficits or zero balances. Replenishments of the SDS are then subjected to the efficient use of missions’ budgets. And, although countries will not control the existing stocks, the purchase of new materials will depend on their assessments being paid on time and in reasonable amounts. In the end, the funds required for the maintenance of these strategic stocks will end up being presented as part of peacekeeping budgets. Member States will therefore control the appropriation of their contributions. They will not accept to finance the purchase or the rental of equipment for a mission in which they have no economic or political interest. The success of these SDS will therefore depend on national interests. Finally, as the stocks are not necessarily inspected, the reserve could easily include useless materials. In this case, the reserve would not reduce the global costs of these strategic stocks.

ECONOMIC OPTIONS FOR UN PEACEKEEPING PRODUCTION After analyzing three options for producing peacekeeping, other than the system of national armies (a gendarme NATO/USA, a permanent army,

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and mercenaries), we find that mercenaries are to be avoided as this means total privatization of peacekeeping. Peace cannot be efficiently produced solely by mercenaries, as these for-hire-companies first aim at the satisfaction of their shareholders and their surplus increase. Mercenaries show, to some extent, that they can manage small conflicts. However, they do not have the means – whether in terms of financial, personnel, or equipment – to intervene in large conflicts. This is a production system that is costly and that can create important negative externalities. Mercenaries principally deal with the conflict itself, following pre-established contracts as to what they are paid to do. They can leave the conflict even though there is evidence that peace is not fully established. They are hardly motivated to deal with peace-building activities, as this phase of peacekeeping requires fastidious efforts. Instead of being an international public good, peacekeeping, produced solely by mercenaries, would deteriorate international security, thereby, preventing fructuous commercial and international relations. The gendarme NATO/USA and a permanent army seem to be two options that could be considered for producing peacekeeping. In terms of advantages, we think that a permanent army could make deployments of troops and materials faster than NATO. In the case of a permanent army, deployments would only be subject to Security Council decisions, whereas deployments under NATO would require the agreement of an important number of Allies. This can be worst if NATO keeps the system of unanimous votes. However, by giving NATO the role of peace gendarme, the international community would benefit from better collective defense capabilities and from strong deterrence. In terms of costs, in NATO’s case, military expenditures of Allies will generally increase. This would however, happen, regardless, since countries in NATO and those entering the Alliance already have to engage additional national funds in order to meet the requirements for NATO’s rapid reaction capabilities. The creation of a permanent army will however require some additional efforts and financial investment. These two production options both show numerous potentials for improving peacekeeping operations. A permanent army seems to be a better choice because Member States usually give more credibility to decisions taken by the UN than to those initiated by a Western organization. The permanent army would be under the UN authority. It would be impartial and its goals would be clear: To obtain and maintain international security through positive prevention, mediation, interventions, and peace-building efforts. However, although the permanent army shows some strong potential, it is unlikely that its implementation would be

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accepted by some nations, especially the United States. The army would then lack efficiency and strength as it would not dispose of the heavy American military capabilities. As UN peacekeeping operations bring peace to countries in conflict, they also promote their economic and social development. The world needs UN peacekeeping operations since it is unlikely that countries in conflict will be able to face globalization and since, through the spills over that they generate, conflicts can affect economic growth of other nations. However, as the characteristics of this activity incite governments to free ride, the UN finds it difficult to obtain adequate financing for the missions. Countries do not take into account the general benefits they enjoy from peacekeeping operations, whether or not they feel directly concerned with the conflict. They rather put forward their national interests when making decisions on contributions. When important contributor-specific benefits or joint products can be extracted from a mission, some nations will be more motivated to contribute. If the expected benefits are low, countries will reduce their contributions, leaving the burden on others. The inherent characteristics of peacekeeping will not change, as the UN will never be in a position to force any nation to contribute their military personnel, equipment or material. The UN cannot even force a country to pay its contribution in full or on time. A better option for producing peacekeeping, where contributions are not discretionary, remains to be found. We consider a permanent army or a NATO/USA association as better production solutions than the current system of a patchwork of national armies that involves calling upon countries to contribute personnel and military equipment to each mission. However, even under other forms, the problem of contribution to peacekeeping will always exist, as participation of nations in peacekeeping operations is strongly guided by their own political and economic expectations.

REFERENCES Berckmans, P., Dawans, V., Schmets, G., Vandenbergh, D., Autier, P., & Mattys, F. (1996–1997). Drug Donation Practices in Bosnia i Herzegovina, Study supported by a grant from Me´decins sans Frontie`res, Belgium, www.fondationaedes.org/upload/83/ Main%20report%20Bosnia%20Herzegovina.doc Blakey, M. (1999). Somalia. In: M. E. Brown, & R. N. Rosecrance (Eds), The costs of conflicts: Prevention and cure in the global arena, Carnegie Commission on Preventing Deadly Conflict, pp. 42–44, 101–102.

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Debiel, T. (2000). Strengthening the UN as an effective world authority: Cooperative security versus hegemonic crisis management. Global Governance, 6. Fleitz, F. H., Jr. (2002). Peacekeeping fiascoes of the 1990s: Causes, solutions, and US interests. Westport, CT: Praeger. James, A. (1994). Is there a second generation of peacekeeping? International Peacekeeping, 4. Ledgerwood, J. L. (1994). UN Peacekeeping missions: The lessons from Cambodia. Analysis from the East–West Center, 11. Pomper, M. A. (1999). ‘‘U.S. pays a growing price for U.N. debt impasse.’’ CQ Weekly, January 16. UN Department of Public Information. UN Document A/59/701, February 14, 2005, paragraphs 11 and 12. UN Document A/61/139, July 13, 2006. UNICEF Annual Report, 2002, pp. 31, 33.

THE GENDER APPROACH IN INSTITUTIONAL RESPONSES TO CONFLICT Liliane Bensahel, Steven Coissard and Claske Dijkema INTRODUCTION According to the 2005 Human Development Report, if the number of conflicts has decreased since 1990, the last two decades are still ridden with violent disputes. These conflicts are distinct from previous periods in the sense that victims are no longer primarily soldiers or military personnel, but also civilians. Women and children are the most vulnerable in these conflicts (the number of civilian loss today is about 90%, the majority being women and children). Because of their social status and sex, women are subjected to several types of violence: rapes, sexual slavery, forced pregnancy, mutilation, or forced sterilization. Far more than the number of victims, the consequences of these conflicts on human development in terms of growth reduction due to infrastructure damages, and to food, health, and education system dislocations are important cost factors and must be taken into account (UNDP, 2005). And nevertheless, all of which revolves around the conflicts has always been considered as men’s prerogatives. National and international institutions responsible for these issues are generally composed of men. Decisions, made about conflicts and peace, are often issued by men. Women’s needs, opinions, and expectations are rarely taken into account.

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The specificity of the woman’s role has not yet been put in integrated decision-makings, whether concerning the reintegration of women fighters after conflicts, their participation in the resolution process and the prevention of conflicts, or whether concerning postconflict reconstruction. Women associations have worked a lot to be heard and to be represented in various political authorities. L’absence des femmes dans les lieux de de´cisions et de pouvoir (ou quand elles sont repre´sente´es la place singulie`re qu’elles occupent) est l’un des symptoˆmes qui re´ve`lent un dysfonctionnement de la de´mocratie et oblige a` reconside´rer les contours meˆmes de la notion de citoyennete´, e´tant entendu que les femmes ne sont pas le seules cibles de l’exclusion et que ces questions s’inscrivent dans un contexte politique plus large ou exclure est devenu un mode de gouverner1. (Apfelbaum, 1996)

In France, between 1990 and 2006, the percentage of women in the National Assembly and Senate rose from 6 to 13.9%. In 2006, these percentages were 45.3% in Sweden, 37.9% in Norway, 37.5% in Finland, 35.7% in Belgium, 32.2% in Austria, 30.5% in Germany, 21.3% in Portugal, 18.5% in Great Britain, 16.1% in Italy, 15.0% in the United States, and 10.7% in Japan. Most countries are still far from reaching parity. Political parties in France prefer paying fines for noncompliance of this obligation rather than ensuring parity. Since nearly 30 years, but more particularly since the Beijing Conference in 1995 and since Resolution 1325 (2000), the international community starts to take into account women’s roles in conflicts, peacekeeping, and postconflict reconstruction. Since 1990, women participate in peacekeeping operations, but in ways that are still not significant enough (they represent only 12.6% of the total personnel sent by the United Nations (UN) in these operations). They are often limited to subordinate roles. Consequently, ‘‘les conceptions et les besoins de 50% de la population sont ignore´s, les e´le´ments indispensables a` l’instauration d’une paix durable risquent d’eˆtre omis ou ne´glige´s’’2 (Theorin, 2000). A gendered approach allows recognizing the differences between men and women’s roles and goals. The gender program of the International Truth and Reconciliation Commission in Peru (ITRC) is an example how gender should be taken into account. The activities of the ITRC contributed to making equity between the sexes a central component for the prevention of future violence. Since Resolution 1325, a gender approach has been introduced to the UN Security Council. This approach represents an important step in recognizing women’s needs and priorities. Beyond the simple compliance to Human Rights, a gender approach and the recognition of women’s roles generates important responses for the

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development and for restoring peace. The goal of this article is to give a progress report on the contributions of a gender approach to international security (Gender Approach: A Historical Review). However, we cannot avoid presenting a synthesis of the theoretical (Introduction) and empirical (Components of a Gender Approach) aspects.

COMPONENTS OF A GENDER APPROACH The various statistics and analyses make little differentiation between men and women. This often results in stereotyped representations of the roles of each one. Men and women live in armed conflict in distinct ways, which can in turn alter the gender social relationship. Even though, men and women often assume these traditional roles, the dominant literature has a certain tendency to exaggerate the degree of endorsement of these stereotypical roles of both sexes in armed conflicts. The reality is that women are also active as soldiers and attackers, while men can be victims as well as fighters. Meanwhile, women who illustrate themselves in nonstereotyped roles as fighters, can desire to keep the dominant position or independence that they gained during the conflict, while men expect them to return home and continue to fulfill their assigned roles of wife and mother (in the case of El Salvador, statistics show that a minimum of 30% of fighters were women). Women then find it very difficult to go back to their traditional role and acts of self-mutilation or depressions become numerous. A gender approach deals with the ways men and women interact: it takes into consideration their division of labor resources and time allocation. Studies concerning gender are tied to the social construction of the masculine and feminine, i.e., to the roles and expectations determined by the same society that shapes men and women’s lives. It deals with the universal principle of social organization based on sex differences. One of the topics of studies carried in terms of gender is to provide material for an analysis of the ways that this functional and ideological definition of sexes, which impregnates all dimensions of social life, affects the activities carried out by men and women. The Bridge Report (2003) looks at the impact of armed conflicts on these relations by analyzing in what different ways war affect power dynamics between men and women. Two debates, dealing with the relation between sexes and conflict resolution, could be notified: the first relates to the contribution of women as components of effectiveness within the authorities and conflict resolution programs. The second approach focuses more on the

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incidence of reconstruction programs/initiatives on both sexes, in particular women. These debates are also tied to two approaches in the development programs. One, called ‘‘Women in Development,’’ relating to macroeconomic and social aspects; the other, called ‘‘Gender and Development,’’ focusing on its microeconomic and social bases, and the randomness character of the gains expected from the social change. Recently a sexo-specific dimension must be systematically established in the operations of peace keeping, the peace treaties, and the reconstruction. The conference of Beijing introduced the gender concept and we notice the appearance of related notions used today to define analyses on gender such as the gender mainstreaming or the empowerment. Mainstreaming is based on principles which recommend, on the one hand, an engagement and conceptions to promote equality and a more equitable society and on the other hand, recommend various systems (strategies, policies, structures, mechanisms, and tools) to put these principles into practice. Mainstreaming integrates the specific characteristics of the place and situation of men and women in the development of policies and economic and social measures, in their implementation, but also the analysis of consequences of any kind that these measures could have on men and women (Laboure´-Racape´ A.). Mainstreaming is composed of two approaches: the integrated approach, relating to the concept of equal opportunity, and the participative approach, raising an awakening on men/ women relationship. Mainstreaming supposes, moreover, the existence of legislation and policies, but also of a good understanding of the relationship between men and women. It further supposes a balanced participation of men and women in public lifey. It is to say that in most countries mainstreaming is only at its stammering. Current expressions of ‘‘mainstreaming’’ are the principle of positive discrimination and parity. For Jacquet (1995), the concept of empowerment deals with the right of speech and social recognition. Eisen (1994) defines it as the way, through which a person increases his abilities to promote self-esteem, self-confidence, initiative, and control. Julian Rappaport (1987) proposes to place this concept in the center of all thoughts. Empowerment includes four essential components: participation, competency, self-esteem and critical individual, social and political conscience (Le Bosse´ & Lavalle´e, 1993). Hawley Mc Whirter (1991) adds to this list, social and community prospects, when empowerment is at the collective or community level. Empowerment, then, contributes to community health development through behavior, values, capacities, organizational structures, and leadership. In this

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approach, empowerment touches more often groups of people without any recognized power. People whose strength, often not utilized, is important to reinforce. It is a question of helping communities analyze their own situation, define, and solve their own problems so that they can fully enjoy their rights. In a political aspect, empowerment is the result that can allow change in current structures and in the power-relation between the various institutions, actors, and people (Susan Sherwin, 1992). The concept of empowerment concerns power, but excludes the notion of ‘‘sure power’’ which is an expression of domination. It relies on the ‘‘power of’’ (capacities, means), ‘‘power with’’ (solidarity, care, organization of oneself), and ‘‘interior power’’ (self-esteem, self-confidence) (Hofmann & Marius-Gnanou, 2007). Un travail spe´cifique a e´te´ re´alise´ sur la notion du pouvoir justement pour indiquer que l’approche G&D n’envisage pas de chercher a` renforcer le pouvoir des femmes pour dominer les hommes mais qu’il s’agit de la recherche de la synergie entre les deux sexes pour arriver a` quelque chose de plus riche et surtout pour atteindre une situation plus juste3. (Caubergs, 2002)

Empowerment relates to the manner that choices are made. It reintroduces the idea that women and men have an aptitude that can be acquired, to make choices. Empowerment should help people living in poor conditions reach a sustainable and richer life condition, by reducing their social, economic, political, or psychological vulnerability. The various levels of intervention of empowerment concern the wellbeing (satisfaction of practical needs of women), equality in access to resources and services, consciousness (conscious understanding of the difference between sex and gender, collective participation of women), participation (equal participation of women in all decision-making process), control of decision-making processes, wealth and benefits (Palier, 2005). The symbolic approach of social relations, which relates to the concept of ‘‘capacity’’ and of ‘‘power,’’ is too often neglected. Sen (2000a, b) shows that perception by women themselves of the secondary character of their contribution affects their ability to negotiate and thus to hold dialogs. This contributes, then, to the perpetuation of the game rules in terms of ‘‘cooperative conflict,’’ which ensure male preeminence. One can, however, wonder about the concept of equality. The masculine and the feminine cannot be identical; they are complementary. As He´ritier (1996) indicates, their equality is not the issue. What is more important is the hierarchy dissolution.

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Vouloir parvenir a` l’indiffe´renciation entre les sexes, c’est ne pas tenir compte d’un donne´ avec lequel le vivant doit composer, a` savoir l’existence de la diffe´rence sexue´eyLa lutte contemporaine pour que les femmes acce`dent a` la liberte´ et a` la dignite´ de personney a pour objet un re´e´quilibrage politique, intellectuel et symbolique des cate´gories qui forment le social pour aboutir a` une situation plus juste et plus cohe´rentes de nos savoirs, et non a` un renversement qui reproduirait un syste`me d’ine´galite´s4.

GENDER APPROACH: A HISTORICAL REVIEW The creation of the UN in 1945, lies within a particular scope, as to the place of women in society. During the Second World War, women had a new role. They were in factories, in the army, and also in the resistance movements. Their actions were determinant. On April 18, 1944, the Canadian Minister of Defense, J. L. Ralston, said ‘‘We live in a most crucial time, the most decisive in the war, and it is up to those girls, those women who enroll themselves in the army y the decisive impulse which will lead us to victory.’’ A month earlier, the General de Gaulle had stated before the provisional Consultative Assembly of Algiers that ‘‘the new regime must include an elected representation by all our men and women.’’ This amendment was voted by 54 votes against 16, on March 24, 1944. In 1945, the United Nations Charter represents the first international legal document that mentions the ‘‘Equal rights between men and women,’’ while only 30 of the first 51 Member States were given the same rights to women and men. The fight against discriminations toward women, which has become one of the pillars of the UN proceeded in two stages: first, the coding of their legal and civil rights, and second, the organization of international conferences on the promotion of women. The next paragraphs will focus on the latter. In this section, we will chronologically recall the six international conferences on the promotion of women and we will describe two of the principal resolutions voted by the UN (1325 and 1366), as well as the progress made by the European Union.

From the Beginnings to Beijing The first global conference on the status of women in the world was held in Mexico, in 1975, with an aim ‘‘to draw attention to the need to develop precise future goals, efficient strategies and action plans for the promotion of women’’ (United Nations Department of Information, 2000). World dialog on

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the situation of women had begun and three key objectives had been identified: (i)

Full equality between men and women and the elimination of discrimination based on sex. (ii) Integration and full participation of women in developmental activities. (iii) Increasingly important contribution of women on securing international peace. From these objectives, the conference adopted a global action plan establishing the minimal results which were to be reached by the international community, before 1980. This plan aimed at eliminating discrimination against women in areas, such as education, job opportunities, participation in political life, health services, housing, nutritiony. In addition, the Mexico conference generated the creation of the United Nations Research and Training International Institute for the advancement of women (UN-INSTRAW) and the United Nations Development Fund for Women (UNIFEM). Finally, in 1979, the UN General Assembly adopted the Convention on the elimination of all discriminations toward women, called ‘‘Declaration of Women’s Rights’’ signed by 165 countries. The second world conference on the promotion of women met in 1980, in Copenhagen, in an ambiguous context. On one hand, the conference followed-up the ‘‘Declaration of Women’s Rights’’ and could rely on the progress made since the Mexico Conference. On the other hand, the conference had to overcome political tensions (some dating back from Mexico) and had to take note of the gap between women’s rights in theory and women’s real capacities to exercise these rights. The Copenhagen conference was aiming to essentially eliminate these disparities. First, it isolated three areas where specific actions should be taken: education, job opportunities, and health services. Second, an action plan proposed governments to reinforce national measures as to land issues, succession, parental guarding, and nationality loss. The conference also identified the causes for this gap and asked the international community to focus on:  Lack of sufficient engagement from men to improve the role of women in society.  Insufficient political will.  Lack of recognition of the value of women’s contributions to society.  Lack of focus on the particular needs of women at the planning level.  Scarcity of women in decision-making posts.

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 Insufficiency of services such as cooperatives, centers for daily care, and lending institutions intended to support women role in the country.  General lack of financial resources.  Weak awakening of women with regard to existing opportunities. The evaluation process had just begun. The third world conference on women was held in 1985, in Nairobi, with the objective to review achievements of the UN Decade for Women. Ten years of work, of negotiations, and of information and experience sharing had made it possible to unite the different viewpoints at the Mexico conference. Nevertheless, the conference opened with a presentation of rather troubling evaluation reports. Indeed, in spite of all efforts made, only a minority of women had taken advantage of the improvement of their status. In developing countries, this improvement was almost zero. As the objectives set during the declaration on the woman decade were not reached, the Nairobi conference concentrated on finding new ways to overcome the obstacles. The Millennium Development Goals, adopted by consensus by the 157 delegations present, have modified the working base. From then on, women’s issues were to be taken into account or mainstreamed in all programs. Moreover, ‘‘Women participation in the decision-making process and in management all human affairs is recognized not only as a legitimate right, but also as a political and social necessity that all institutions in society were to comply to’’ (UN Department of Information, 2000). At the national level, governments had to set their own measures according to three basic categories: legal and constitutional measures, equality with men on the level of social participation, and equality with men in political life and decisionmaking processes. The Nairobi conference made it then possible to include the question of women promotion in all human activities. In many areas, women from developing countries undertook actions thus slackening the pressure on the domination of women from the western world. A consensus around a world feminism movement was born.

The Beijing Conference, 1995 The fourth conference on the promotion of women held in Beijing, in 1995, is a follow-up to a series of world conferences organized by the UN on various aspects of development. During the second conference on Human’s Rights held in Vienna, in 1993, the international community notably confirmed that women’s rights were fundamental human’s rights. Efforts

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were made since Mexico had contributed to improving women conditions and to give them better access to resources. However, the balance of power between men and women remained very unequal when it came to the question of decision-making. The goal of 189 countries and of nongovernmental organizations (NGOs) gathered in Beijing was then to reach real equality between men and women, besides development policies and sincere engagement toward peace. The Beijing conference ended with a declaration and a plan of action adopted by consensus on September 15, 1995. Rather than consensus, it seems nevertheless more suitable to talk about compromise between NGOs, countries that defend women’s rights and recognize their free access to contraception, abortiony and religious conservative countries, such as the Vatican, Iran, Sudan, Yemeny. New bases to the debate on the elimination of discriminations toward women were established by shifting the focus to a wider concept, the gender. This choice is not anodyne since it implies a reevaluation of the whole society structure, of its institutionsy so that women can acquire the same powers that men have and so that they become equal to men. By reaffirming the universality of women’s rights as human’s rights (Article 2, Platform for Action) and by recognizing a direct relation between women’s rights and their social, economic, and/or sexual conditiony ‘‘La de´claration de Beijing e´nonce clairement que le principe de souverainete´ des Etats ne saurait e´quivaloir au de´terminisme de particularite´ nationales sur le contenu de ces droits’’5 (Lamarche, 1996). From then on, a ‘‘sexo-specific’’ approach is to be established before the application of all national, regional, or international policies. The plan of action aims at giving more powers to women and at accelerating the application of strategies adopted in Nairobi. To this end, the plan of action requires a firm engagement from governments, institutions, and from international organizations as well as the mobilization of sufficient resources. As to developing countries, all usual financing mechanisms are to be implemented. From the results obtained after the Nairobi conference, the authors of the Beijing conference underline ‘‘some particularly alarming problems in certain areas that are, in fact, areas of priority, where action is urgently required’’ (United Nations, 1996). The Beijing conference cannot be considered in isolation with previous conferences and with existing texts and directives. It recalls the various recommendations and rights, established before, to include the promotion of women in a plan of action that is the most complete possible. More than the subject of women, the Beijing declaration proposes a recasting of stereotypes in modern societies around the notion of gender, by requiring a

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focus on sexo-specificities during the implementation and application of new policies. The first results were presented five years later during a special session of the UN General Assembly, in June 2000, on the topic. The objective of this session, now more known under the title Beijingþ5, was to draw some first lessons from the implementation of the plan of action prepared during the Beijing conference. Nevertheless, the session had to last one more day, because of the harshness of the debates and the numerous controversies. In parallel, more than 3,000 accredited NGOs, gathered in the NGO forum, were confirming their new prerogatives by influencing the official delegations. In 2005, during its 49th session, the Commission held an exam and an evaluation on the implementation of the declaration of the Beijing plan of action and of the texts from the 23rd special session of the General Assembly.

The United Nations Security Council Resolution 1325 For the first time in history, the UN Security Council met on October 24–25, 2000 for a session entirely devoted to women, peace, and security. Progress made during a seminar held by the UN Peacekeeping Department in Namibia, in May 2000, Mainstreaming: A Gender Perspective in Multidimensional Peace Support Operations, and during the 2000 UN General Assembly in New York, Beijingþ5, were used as a base for Resolution 1325. The positive political context facilitated the preparation of such a resolution, notably because of the significant influence of NGOs on the UN Member States. In addition, the gender approach had already begun to emerge in Beijing. Consequently, Resolution 1325 was unanimously adopted by the Security Council at the closing of the session of October 2000. Resolution 1325 must then be viewed as an international law. Even though, these resolution and declaration were not the first to discuss the subject of women, peace, and security, the importance and the impact of Resolution 1325 was by far the best existing support. Resolution 1325 is composed of 18 articles that can be grouped under four principal recommendations: women representation, training on gender issues, fairness of treatment and compliance to international laws, and development of DATA. Articles 1–5 and Article 15, relate principally on the problem of insufficient women representation to discuss resolution of conflict and peace process, at the decision-making level. Indeed, although the Beijing plan of action imposes a minimum quota of 30% of women in decisional

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posts, this number is far from being reached. UNIFEM notes, in particular, that since 1992 only two women have been ambassadors at the Security Council that between 1992 and 2002 only 5.4% of ambassadors sent to represent their country at the UN were womeny. In short, women are systematically and largely insufficiently represented in peace negotiations. They are sometimes completely absent from these negotiations. Resolution 1325 reaffirms the UN desire to reach larger women representation in positions of decision-making at all levels of management and in conflict resolution (Article 1), in conflict resolution and peace processes (Article 2), whether at the level of institutions, national, regional, and international mechanisms (Article 1), or at the UN (Article 2). The resolution recommends, notably, the application of the strategic plan of action prepared by the Secretary General (A/49/587, 1999) which aims to reach, in particular, sex equality within the UN by focusing and by allocating some posts to women. Articles 3, 4, 5 and 15 seek to increase the number of women working on the field as representatives and mission envoys (Article 3), civilian and military observers (Article 4), in the peacekeeping department (Article 5), and to increase the recognition of parity between sexes and women’s rights by reinforcing consultations with local and international women gatherings (Article 15). Resolution 1325 also puts forward the importance of training military and civilian personnel in charge of peacekeeping, on issues relating to protection of women’s rights and her particular needs, as well as awareness to HIV/ AIDS (Article 6). To this end, governments are encouraged to increase resources allocated to training and to support efforts made by UNIFEM, UNICEF, and HCR (Article 7). An important section of Resolution 1325 (Articles 8–13), aims at establishing equity between sexes, and compliance with international law during conflicts, negotiations, and peacekeeping operations. The Security Council wishes to improve the awareness of the needs of women and girls during repatriations and reintegration after conflicts (Article 8), their needs in refugee camps and in facilities (Article 12), and during the general demobilization and reintegration programs (Article 13). By recalling international laws on women’s rights and protection (Article 9), the Security Council seeks to obtain compliance with international laws, notably on the issue of violent sexist acts (rapes and other forms of sexual mistreatments) (Article 10). Considered as crimes against humanity, war, and genocide crimes, the goal is to put an end to impunity toward all forms of sexist violence against women and girls (Article 11). The goal is not to give up by granting amnesty during peace negotiations in the reconciliation process.

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Finally, two Articles of Resolution 1325, the antepenultimate and the one before last, are devoted to the promotion of information and data research on the consequences of conflicts, their role in peace building, women components in peace process (Article 16), and issues of sex parity in all peacekeeping operations (Article 17). In short, Resolution 1325 recognizes that it is important to take into account the gender approach and women specific needs at all levels of conflict management and peace development. Furthermore, concerning the protection of women and girls, the resolution makes governments and nongovernment actors responsible for their actions of offense during conflicts. Lastly, women’s power is considerably increased in all operations aiming to promote and maintain peace, including local initiatives. One sentence summarizes well this desire ‘‘if the impacts of armed conflicts on women and young girls were better understood, if there existed efficient institutional arrangements to guarantee their protection and if women participated fully in peace processes, then maintenance and promotion of peace and international security would be facilitated.’’ We have just seen that the awareness on women’s rights, but also their importance in conflicts resolution and peacekeeping has taken a long time to take shape. However, the international community now seems judicially and legally armed to face the violence exercised against women and young girls, to allow them to play the role that is theirs at all levels of decision-making, to hold a place in society that is equal with men. We will now try to see if the reality confirms the good resolutions taken in the texts.

THE CONTRIBUTION OF THE GENDER APPROACH We first propose the contribution of the gender approach through, on one hand, the assessment of the different actions taken, and on the other hand, the impact of women actions on development.

Assessment of Actions One of the first steps showing evidence of the contribution of the gender approach consist in establishing an assessment of the different actions taken, whether in the name of Resolution 1325, the Beijing Plan of Action, judicial institutions, representation by women or organizations, and associations or women.

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About the UN Actions The first reactions to the adoption of Resolution 1325 were mitigated. ‘‘Applauded for its innovative character,’’ it was also ‘‘criticized for its lack of firmness and the insufficiency of follow-up and evaluation mechanisms’’ (Valasek, 2007). Since 2000, Resolution 1325, peacekeeping operations deployed by the UN included sexo-specific contents in their resolutions. In various countries (Afghanistan, Burundi, Democratic Republic of Congo (DRC), Haiti, Ivory Coast, Liberia, Sierra Leone, East Timor, and Sudan), many UN Security Council resolutions tackle the questions of sexospecificities and of discrimination against girls and women. The UN urges governments to contribute to the promotion of human’s rights by allowing a better representation of women in political institutions, and by seriously investigating violent acts committed against women and girls. The issue of women and gender, however, has not been included in any UN Security Council resolutions prepared in countries where peacekeeping is deployed. This is particularly the case in Cyprus (8 resolutions were prepared between 2000 and 2004), in Ethiopie Erytrea (8 resolutions), in Georgia (8 resolutions), in the Golan (9 resolutions), in Lebanon (9 resolutions), and in Western Sahara (13 resolutions). The fact that the Security Council has to adopt resolutions aiming at defending women’s rights shows the work that is left to do, so that Resolution 1325 is respected. If ‘‘time has come for us to rejoice’’ from the existence of Resolution 1325, it is important to ‘‘double our efforts in order to guarantee its full application’’ (Valasek, 2007). The gender and peace building Program of ‘‘International Alert’’ has noted several major problems during their tour of Nepal, the Caucasus, and Uganda. Their visits showed the persistence of violence against women, the absence of protection of the fundamental rights of women and girls during and after conflicts, the absence of women in negotiations regarding peace process and political life, and prostitution as a mean of subsistence. These problems, identified on the individual level can be added to those on the collective level, such as women trading, inefficiency of the protection mechanism for civilians, or lack of early warning and rapid reaction mechanisms to prevent these conflicts. These same limits are also presented in Rehn and Sirleaf’s report (2002). They denounce the impunity of authors of violent sexual acts against women in the 14 areas in conflict that they visited between 2001 and 2002 (Bosnia-Herzegovina, Cambodia, Colombia, DRC, Yugoslavia ex-Republic of Macedonia, Kosovo, Guinea, Israel, Liberia, Rwanda, Sierra Leone, Somalia, occupied Palestinian territories, and East Timor). They note among other things that women’s needs were rarely presented in political,

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civilian, or in interest group meetings and that women action toward peace building lack support and recognition. As a result, women are rarely present at these negotiation tables. The funds allocated to modify this situation are not important at all. For these reasons, women plead so that Resolution 1325 understood as a tool to legitimate and recognize women actions are really carried out. According to Rehn and Sirleaf, peace building is possible through the implementation of national and international institutional rules which aim to end impunity by authors of violence toward women. For peace building to work, women must also be allowed free access to elections as voters or candidates, and they should be able to play a role in decisional processesy. That being said it is advisable to take advantage of the peace building period to modify the constitution, the electoral, and the political systems. The goal is to reach a true democracy, equality between men and women, and the establishment of participative governance. A study carried out by Silvia Roque and Tatiana Moura from the University of Coimbra, in Portugal, questions the application of Resolution 1325 on countries not in conflict. Why limit the application of this resolution to countries in war whereas the threats to women in countries ‘‘so-called’’ in peace are not less important. The authors quote, in particular, the situations of insecurity generated by the proliferation of guns in countries such as Brazil, Salvador, and South Africa where there remains a high level of violence, even though these countries are not in wary. Resolution 1325 does not contain Articles that can be used to guarantee the security of women’s rights, even though it makes reference to preconflict situations. Therefore, Roque and Moura propose to governments not to be only preoccupied with other countries’ problems, but to also try to ‘‘analyze the direction [of Resolution 1325], and to best apply it in their own situation, marked by a continuum of violence.’’ Otherwise, it could be judicious to widen the resolution so to concern the situation of countries in peace but in which there nevertheless reigns extreme violence. In fact, the basic problem is rather to reconsider actions to be taken for the promotion of women victims of violence so that they can be applied in times of peace. The two authors propose an implementation of more inclusive public safety policies, efficient programs to fight familial violence, or even projects to encourage compliance to human’s rights. Although the results following the application of Resolution 1325 are contrasted, one cannot forget that the Resolution represents a considerable progress for the promotion and defense of women’s rights. For this reason, it must be widely defended, and countries must be encouraged to implement its recommendations.

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The Beijing Plan of Action The Beijing þ 10 Conference, which followed Beijingþ5, was held during the 49th session of the Commission in 2005. One particular point noted is the very high attendance. This conference gathered more than 1,800 government delegates from 165 Member States and more than 2,600 nongovernmental representatives from all regions in the world. This high participation level shows the increased interest on the decennial assessment and the expectations raised by this assessment. The governments present in New York have reaffirmed their determination to promote equality between sexes, and women’s dignity. Among the most significant accomplishments of the last 10 years, the international federation of human’s rights leagues underlines the recognition of feminization, poverty, and violation of women’s rights, as principal obstacles to democratization and development to the incrimination of sexual crimes in the statute of the International Penal Court, to the establishment of mechanisms for the protection of human rights defendersy. The majority of governments attending the Beijing þ 10 Conference presented the efforts carried in their country. Progress is evidently made in women and girls education, in women access to job (it is important to note the influence and importance of micro-credit, especially in reducing poverty and in allowing women to participate in the social and economic development), and in women representation (the number of women in parliaments has increased, especially in the South). Education, employment, and women representation are not the only sectors witnessing some important improvement on women condition. In many countries, access to health has been one of the priorities. In the United Arab Emirates, 7% of federal expenditures are allocated to health. In Mauritania, the Secretary of State for women condition has indicated that the maternal mortality rate has gone down. And military, civilian, and police trainings, have been given in the Bahamas, for example, where ‘‘the police force is trained on domestic violence.’’ Nevertheless, although there seems to be strong progress, the reality shows that there are still some significant efforts to be made. According to the International Federation of Human’s Rights Leagues (IFHR), if the number of countries that have signed the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) is positive (179, with 27 new countries that have signed during the last 10 years), these findings are very limited. During the Convention, 52 countries showed some reserve, among which are many countries that violate women’s rights in obvious ways. Also, a number of new countries that have signed the

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Convention (Algeria, Bahrain, Kuwait, Lebanon, Pakistan, and Saudi Arabia) have expressed such high reserves that they empty the content of the Convention. Furthermore, women promotion is very difficult in countries where access to education and adequate health facilities remain very important issues. The IFHR has noticed that in many areas the situation of women has been at best stagnant and at worst it has deteriorated. The universal ratification of the International Convention of 1949 concerning human trafficking and prostitution is not yet obtained, and the UN still has not put in place some forms of control mechanisms. The IFHR also notes that regional and international organizations and governments are far from allocating 20% of their annual budget to NGOs for organizations working on defending women’s rights. Finally, the IFHR underlines the low desire of countries to end impunity of authors of all forms of violence toward women and that very few countries give the refugee status to women escaping sexo-specific violencey. Worse, some countries, among which is the United States, have attempted since the opening of the international conference Beijing þ 10 to dispute the progress made from past conferences on the subject of abortion. Despite all achievements, nothing is secured and it is still crucial to pursue our efforts toward the improvement of women condition, while being vigilant against all tentative to step back.

Justice The Beijing Declaration and the Resolution 1325 exhort the international community to fight against sexual violence against women and girls. Important progress has been made at two levels, for the last 10 years. First, terms of genocide, crimes against humanity, and war crimes, have been broadened to include acts of sexist violence. Second, the Security Council has given some ad hoc statutes to courts to judge crimes committed in exYugoslavia and in Rwanda (created specifically to manage a particular mission). These two courts have, each time, interpreted rape as crime against humanity. The Rwanda Court, itself, has charged an accused of genocide for sexual violence. At the regional level, the Inter-American Court and the European Court for human’s rights have done the same, by considering sexual violence in situation of armed conflicts, as a violation of human’s rights. Finally, the statute of the international Penal Court, established in 1998, facilitates the proceedings against people presumed responsible of crimes committed exclusively against women (rapes, sexual slavery, forced prostitution, forced pregnancy, forced sterilizationy).

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Despite all these significant progresses, the Security Council resolutions for Sudan, for example, and the report prepared by E. Rehn and E.J. Sirleaf, still note the atrocity of violence against women and the ‘‘triste re´alite´: justice n’est pas rendue aux femmes’’6 (Rehn & Sirleaf, 2002). Conflicts exacerbate sexist violence in countries where governments are very often weak and do not have the means for establishing adequate and independent juridical structures. Moreover, peace building operations and negotiations to reach peace agreements often allow the authors of sexist crimes to escape justice, without being pursued. We can only hope that the zero tolerance approach put in place recently by the Security Council will help to seriously tackle this problem. If it is evident that a lot more has to be done, we have gone a long way and should be pleased with the progress achieved so far.

Women Representation The Beijingþ10 Conference and the declarations from government representatives show the efforts carried out and the work left to be done to improve women representation at all levels of decision-making. One crucial point of Resolution 1325 and of the Beijing Declaration is that women are often still absent from discussions on postconflict issues at negotiation tables. The goal set by Kofi Annan concerning the number of women peacekeepers (50%) is far from being attainable. The number of women among representatives or special envoys is also insufficient. Women almost never participate in the commissions ‘‘Truth and Rebuilding,’’ facilitating the peace building process after conflicts. Rehn and Sirleaf propose ‘‘cre´er un fonds d’affectation spe´ciale pour les initiatives prises par les femmes en faveur de la consolidation de la paix.’’7 This solution is also put forward by V. de Keyser who asks the Commission and Member States ‘‘garantir une assistance technique et financie`re suffisante pour soutenir des programmes permettant aux femmes de participer pleinement a` la conduite des ne´gociations de paix et donnant davantage de pouvoirs aux femmes dans l’ensemble de la socie´te´ civile’’8 (De Keyser, 2006). Moreover, though it is desirable not to have recourse to quota policies, it is still the best answer to allow women access to decision-making posts. These situations has to be qualified as a progress made by countries to ensure better access for women to decision-making, notably in the Bahamas, Chile, Paraguay, Spain, Zambia, and Bangladeshy. It is also important to note how women went these last few years from power resistance, as Ellen Johnson Sirleaf, in Liberia, or Micheline Bachelet, in Chili, although these cases remain isolated.

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Role of Women in Development The gender analysis applied in social sciences constitutes a new epistemological idea that puts the research methodology into question. It brings forward the question of statutes, men and women roles in the social stratification on one hand and on the other hand the impact of the relation men/women has in collective situations. The woman’s role in contribution to development has often been put in exergue in countries in the south thanks to the interventions from international organizations (UN, UNCTAD, UNDP, FAOy). Such an approach seems today unavoidable because of an increase of visibility for women in social life, their more and more active part in various political, economic, and social activities. Women also play an active role in conflicts; they take their arms, ensure production during absence of men, and participate in the transformation of conflicts (discussion and solidarity forum). The consideration of their role comes into the scope of social change perspectives and local strategies that allows changes of gender relations and an important motivation of peace building. The gender approach contribution can be analyzed under many levels: the recognition of civic rights, the participation of civil society in strategies relating to regional, national, and international politics, and an important participation in society development. The Recognition of Women Civic and Citizen Rights to Men’s The gender oppression is transversal to all other forms of domination and exploitation in human societies. It does not take into account the different social levels. The gender oppression concerns the entire collective social realities (political parties, syndicates, associations) and communal (ethnics, national, religious, local), and can be found in all societies. The gender oppression closely overlaps with the private sphere, the individual and everyday life, which makes the realization of its existence and – the emergence of a collective process of emancipation, particularly difficult. Finally, it is an oppression socially built, which produces an ideological representation of differences, most often naturalized, sent back to the biological sphere or to psychology.

Discrimination based on gender exists, to various degrees, in all countries. Access inequality for women to juridical, social, and economic resources also has some strong negative repercussions on the entire society and on the development of nations, because it affects notably health and the well-being of men, women, and children. The 2006 United Nations Annual Report

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shows that if women are not in good health or do not have the means to take care of themselves and access to education, then children are the ones to suffer. Economic liberalization is accompanied to an increase in the gap between sexes. Women are the first victims of poverty, unemployment, and of conflicts. At identical human capital level, in all countries, women are less paid than men or do not have access to high level jobs (the famous ‘‘glass ceiling’’: all seems available to women, however, a glass ceiling prevents them from having access to these high functions). The ‘‘glass ceiling’’ concept illustrates the vertical segregation in women career and their difficulties to access positions of authority. In the 5,000 leading businesses in France, only 6.3% of women are in management level. In the public sector where 59.6% of the total number of jobs are occupied by women, only 10% of these women are at a high central administration (out of 109 chief commissioners, only 5 are women. Out of 150 ambassadors, only 11 are women!). The average French women salary is 25% less than men’s (In Denmark, the average women salary in less than 9%, and less than 35% in Great Britain). With identical diplomas, experience, and qualifications, we can still note a 13% salary difference. In France, in 2005, unemployment rate for women was 10.5% against a rate of 8.7% for men. For the same date, in Europe as a whole, unemployment rate was 9.8% for women and 7.9% for men (source: INSEE). It is true that women career is often limited by maternity and their social role as mothers. Indirectly, it is to say that the social function is more important than the reality of the efficiency and competences of each person in his work.

A Contribution to Participation in Civil Society to Regional, National, and International Strategies and Politics Today’s wars affect more and more civilian society. Moreover, development theories focus on the notion of territory and actors of these territories, reinforcing the civilian society power. It is thus natural that we rediscover the weight of civilian society in activities of conflict resolution. As such, the demand of the women to intervene in this process is an encouragement to consider their notices as such as experts’ recommendations. The process of conflict resolution is the process what makes it possible to build ties and bridges between communities in conflict. The multiplication of women responsibilities in time of conflicts makes women the driving force in peace building activities. Peace restoration after conflict requires some actions to consolidate peaceful relations and the institutions that can create a new conflict reducing environment and promise development.

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The reduction of gender inequalities goes necessarily through institution reforms that could allow equality of rights and opportunities. This reform is subject to better women representation in national and international institutions, to modification of laws (in particular, in terms of accession to property, women autonomy, or access to economic resources), and to development and education. The Bridge Report indicates how gender issues can be introduced in programs for the reduction of arm circulation; what were the strategies to improve reintegration that include recruiting and training of women? How can experts in gender issues guarantee that focus is put on gender specific questions? Women’s increasing role in conflict situation, as mothers, spouses, fighters, victims, or caretakers has brought those in charge of DDR programs to perceive women integration in these programs, as a priority. Vanessa Farr (2003) notes, however, that the problem of women fighters are not yet really taken into consideration, because the various propositions especially concern civilian women. Women integration in disarmament and demobilization processes makes it possible to promote women insertion in other aspects of society, after conflict, and generates equal opportunities. Their role, as educators in the family and in the community, is also an important asset in arms collecting and reintegration. Women are, however, not always able to insist so that they are included in decision-making processes. Maj Britt Theorin notes also that when women are invited to participate in debates on conflict resolution, they often do not have the opportunity to put forward their view points. Important progress has been made; however, these matters can be illustrated by women experience in Burundi: they have put together a network, the CAFOB sets with two goals:  To develop dialog and solidarity between women from many ethnics in order to create the same vision of the conflict in Burundi and the same approaches to peacebuilding;  Support these solidarity and cohesion by activities that generate revenues (Ndacayisaba, 2001). The comparative analysis between sexes, applied to armed conflicts, reveals different forms of hidden disadvantages that make relations on gender worse. As far as social inequalities between sexes preexist in conflicts, it is the disadvantages lived by women that are the most ignored. Still, men are not always winners. The necessity of recognizing women experiences and of answering consequences of the armed conflicts on the gender relations led to the creation of the Truth and Reconciliation Commission activities of Peru

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(TRCP). The activities of the TRCP contributed to make some equality between the sexes a central element of prevention of future violence. An Important Participation to the Development of Societies The approach ‘‘women and development’’ comes from the historical approach of women integration to development. Boserup (1979) showed that in lack of integrating women fully to the development process, economic progress tends to be realized at the price of women marginalization. In this approach, the emphasis given to women contribution is perceived as an element of economic and social modernization. ‘‘The emphasis is placed on high profits, in terms of well-being and human capital, of investment in education and the increase participation of women, – notably of the lateness accumulated in this area.’’ Increasing poverty in the world and ecologic imbalance led to question the relation between the development and the growth. New approaches to wealth are put forward. Human development becomes the concern of international programs. At the same time, analysis on ethics and economics, ethics and companies, are being developed and together with behavioral exigencies through citizen approaches they are part of the objectives of sustainable development. Above types of analysis propose to place human and ecology at the center of development, in order to reduce the supremacy of market economic values. A gender approach is coherent with this movement and recalls the development analysis suggested by Sen (2000). He ties well-being with the agent function, because it is important to recognize people initiative and responsibility capacities, notably concerning women. If there is a large gap between the improvement of their well-being and the agent function (initiative capabilities), then it is important to distinguish both. The relation women/men is a development stake, possibilities for women and men to better understand each other, and better understand the other is an element for the development of a more human society (Hofmann, 2006). Current notions of human development and sustainable development lean on concepts of human capital (development of individual capabilities through access to education, in particular) and of social capital (social relations, participation in democracy). The condition of people deteriorates very quickly when there are too many inequalities, in particular, those relative to sex. Care, education, participation in public life, jobs that women are deprived of hinder country development. Furthermore, reconciliation programs often include elements of social capital and the restoring of trust. Women associations that have given more importance to the dialog between women of enemy groups constitute a movement toward this goal.

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In the context of studies on development, the constitutive theoretical elements of the gender concept concern the three roles which determine or not the gender place (reproductive, economic, and social), practical or concrete needs (material level) and strategic needs (political level), the five approaches concerning development projects and program (well-being, equal opportunity, fight against poverty, efficiency, and power obtainment) (Jacquet, 1995). These elements taken into account transform the development approach and show the important role that can be played by women for the creation of wealth even though this role is still very often hidden and not recognized. Dans un monde d’opulence et d’ine´galite´s, les liberte´s jouent un roˆle essentiel pour combattre la mise`re et l’oppression. Elles sont a` la fois la fin ultime du de´veloppement et son principal moyen. Loin de s’opposer, liberte´ e´conomique et liberte´ politique se renforcent. Elles favorisent l’action des individus, et notamment des femmes, dont l’e´mancipation est un facteur de´cisif de changement9. (Sen, 2000)

CONCLUSION Analysis in terms of gender study then the way that societies distribute the three roles between men and women, how men and women are invested in the various needs, and to what extent the different programs and development projects are the responsibility of one or the other, or of the two sexes. They make it possible to size the elements for the establishment of a society fully responsible, which can guarantee a more harmonious development and for which peace constitute wealth.

NOTES 1. Women’s absence in areas of decision and power (or, when they are present, the singular place that they represent) is one of the symptoms that show a dysfunction in democracy. It brings one to reconsider the framework of the notion of citizenship, given that women are not the only targets of exclusion and that these issues fall under a broader political context where exclusion has become a governing system. 2. The needs and opinions of 50% of the population are ignored, the essential elements for the introduction of lasting peace are likely to be omitted or neglected. 3. A specific work was completed on the notion of power to indicate that the ‘‘gender’’ approach does not seek to reinforce women power to dominate men, but looks for a synergy between the two sexes to reach a richer situation, especially, a situation that is more equitable.

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4. To want to reach the lack of differentiation between sexes, it is not to take into account a fact with which we have to compose, namely the existence of the sexual difference y. The contemporary fight so that the women reach the freedom and the dignity has for aim a political, intellectual, and symbolic rebalancing of the categories which form the social to end in a more just situation and more coherent of our knowledge, and not to a reversal that would reproduce a system of inequalities. 5. The Beijing declaration indicates clearly that the principle of countries sovereignty could not equal the determinism of national particularities on the contents of these rights. 6. Sad reality: justice is not given to women. 7. To create a special allocation fund for initiatives taken by women in peace building. 8. To guarantee a sufficient technical and financial aid to support programs that allow women to fully participate in peace negotiations processes and that give women more power in the whole civilian society. 9. In a world of opulence and inequalities, freedom plays an essential role to fight misery and oppression. They are, at the same time, the ultimate end to development and its principal mean. Far from contradicting themselves, economic freedom and political freedom reinforced each other. They promote action from people, and from women, in particular, whose emancipation is a decisive factor of change.

REFERENCES Apfelbaum, E. (1996). En guise d’introduction, principes et enjeux de la parite´. Cahier du Gedisst, 17, 5–7. Boserup, E. (1979). Women’s role in economic development. New York: St. Martin’s Press. Traduite en franc- ais La femme face au de´veloppement e´conomique. PUF. 1983. Caubergs, L. (2002). Genre et empowerment. ATOL. Vzw http://www.genreenaction.net/ spip.php?article3237 De Keyser, V. (2006). Report on the situation of women in armed conflicts and their role in the reconstruction and democratic process in post-conflict countries (Rep A6-0159/2006 referencing Res 2005/2215(INI)). Committee on Women’s Rights and Gender Equality. Rapporteur: Ve´ronique De Keyser MEP, European Parliament, Strasbourg. Eisen, A. (1994). Survey of neighborhood-based, comprehensive community empowerment initiatives. Health Education Quarterly, 21(2), 235–252. Farr, V. (2003). Gender and small arms, conversion survey 2003: Global disarmament, demilitarization and demobilization. Bonn International Centre for Conversion, BadenBaden: Nomos Verlagsgesellschaft. Hawley Mc Whirter, E. (1991). Empowerment in counseling. Journal of Counseling & Development, 69, 222–227. He´ritier, F. (1996). Masculin/fe´minin: Penser la diffe´rence. Paris: Odile Jacob. Hofmann, E. (2006). Les relations femmes-hommes comme enjeu de de´veloppement. Economie et Humanisme, 378, 12–15. http://www.oecd.org/document/45/0,2340,fr_2649_34541_ 28318317_1_1_1_1,00.html

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Hofmann, E´., & Marius-Gnanou, K. (2007, Avril–Juin). Le microcre´dit est-il le faux-nez du ne´olibe´ralisme? La microfinance et les femmes pauvres: E´tat du de´bat, Les cahiers d’Outre-Mer (no. 238, Vol. 60). Bordeaux. Jacquet, I. (1995). De´veloppement au masculin, fe´minin- l e genre, outils d’un nouveau concept. Paris: L’Harmattan. Lamarche, L. (1996). Beijing 1995: Chronique retrospective. Relations, 623, 214–218. Le Bosse´, Y., & Lavalle´e, M. (1993). Empowerment et psychologie communautaire Aperc- u historique et perspectives d’avenir. Les Cahiers Internationaux de Psychologie Sociale, 18, 7–20. Ndacayisaba, G. (2001). Gender and the work of the peacebuilding commission in Burundi, Burundi civil society leader makes recommendations for the peacebuilding commission, roundtable discussion on the peacebuilding commission & SCR 1325. Presented by Goretti Ndacayisaba, Program Executive, Dushirehamwe, Women’s Network, Burundi. Palier, J. (2005). Defining the concept of empowerment through experiences in India. In: Gue´rin & Palier (Eds), Microfinance challenges: Empowerment and disempowerment of the poor? (Collection in Social Sciences, no. 10, pp. 35–54). Pondicherry: FIP Editions. Rappaport, J. (1987). Terms of empowerment/examples of prevention. Towards theory for community psychology. American Journal of Community Psychology, 15(2), 121–148. Rehn, E., & Sirleaf, J. E. (2002). Les femmes, la guerre et la paix. Le progre`s des femmes a` travers le monde, 2002 (1). UNIFEM. Sen, A. (2000). La liberte´ des femmes, atout du de´veloppement. Le Monde Diplomatique, September, p. 22. Sen, A. (2000). Un nouveau mode`le e´conomique (p. 356). Paris: O. Jacob. Sherwin, S. (1992). No longer patient: Feminist ethics and health care. Philadelphia: Temple University Press. Theorin, M. B. (2000). Projet de rapport sur l’environnement, la se´curite´ et la politique e´trange`re: Strate´gie en vue de l’utilisation de ressources militaires a` des fins environnementales, Commission des affaires e´trange`res, de la se´curite´ et de la politique de de´fense, Rapporteur: Mme Maj Britt Theorin, Parlement europe´en, DOC_FR\PR\ 359\359319 PE 227.710, Strasbourg. UNDP. (2005). Human Development Report 2005. International cooperation at a crossroads. Aid, trade and security in an unequal world. Published by the United Nations Development Programme, Printed by Hoechstetter Printing Co. New York, http:// hdr.undp.org United Nations Department of Public Information. (2000). Beijingþ5 – Women 2000: Gender Equality, Development and Peace, Nations General Assembly Special Session ‘‘Women 2000: Gender Equality, Development and Peace’’. UNO, New York. Valasek, K. (2007). Qu’est-ce que le Re´solution 1325 du Conseil de Se´curite´ des Nations Unies, Source: International Action Network On Small Arms (IANSA). Institut International De Recherche Et De Formation Pour La Promotion De La Femme (INSTRAW). Le Re´seau des femmes du RAIAL/IANSA, Sisyphe, 1er De´cembre 2007.

FURTHER READING Comprendre le concept de genre. IFAID (Institut de formation et d’appui aux initiatives de de´veloppement) http://www.genreenaction.net/article.php3?id_article ¼ 221 El-Jack, A. (2003). Genre et conflit arme´ – synthe`se. Rapport Bridge. http://www.ids.ac.uk/bridge

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Granie´, A.-M., & Gue´tat-Bernard, H. (sous la direction de). (2006). Empreintes et inventivite´ des femmes. IRD: Presses universitaires du Mirail, 330 p. Gue´rini, I. (2003). Femmes et e´conomie solidaire. La De´couverte: MAUSS. Jolly, S. (2004). La proble´matique homme-femme et ses mythes. Genre et de´veloppement en bref. nume´ro spe´cial. Septembre. http://www.bridge.ids.ac.uk Kant, E. (1785 [1971]). Fondements de la me´taphysique des mœurs (1785). Paris: Delagrave. Labourie-Racape´, A. Un autre regard avec l’approche genre. http://www.genreenaction.net/ article.php3?id_article ¼ 3130 Laville, J.-L. (2000). (sous la direction de). Paris: Descle´e de Brouwner. Laville, J.-L., & Cattani, A. D. (2005). (sous la direction de). Paris: Descle´e de Brouwner. Levinas, E. (1982). Ethique et infini (p. 121). Paris: Fayard. Mazurana, D., & Mc Kay, S. (1999). Les femmes et la consolidation de la paix. Canada: Droits et de´mocratie. Meda, D. (2001). Le temps des femmes: Pour un nouveau partage des roˆles (p. 199). Paris: Flammarion. Meulders, D., & Plasman, R. (2003). Approche fe´ministe de l’e´conomie., In: sous la direction de Laufer, J., Marry, C. & Maruani, M. (Eds), Le travail du genre (pp. 227–237). Paris: La De´couverte. Morin, E. (2000). Les sept savoirs ne´cessaires a` l’e´ducation du futur (p. 129). Paris: Seuil. Rappaport, J. (1984). Studies in empowerment: Introduction to the issues. Prevention in Human Services, 3, 1–17. Roque, S., & Moura, T. (2006). La Re´solution 1325 du Conseil de se´curite´: vise-t-elle uniquement les pays en guerre? International Action Network on Small Arms. http:// www.iansa.org/women/bulletin8-fr/1325-guerre.htm Salomon, P. (sous la direction de) (1998). Entretien avec Michel Random, Le fe´minin au secours du vivant. in Le couple inte´rieur (pp. 15–27). Albin Michel. Vogel Polsky, E. (1996). Genre et droit: enjeux de la parite´. Cahiers du Gedisst, 17 Studies, aouˆt, http://www.ids.ac.uk/bridge

POLITICAL ECONOMY OF THE HUMANITARIAN ACTIONS Jacques Fontanel and Albane Geslin INTRODUCTION The political economy of the humanitarian is a new or a very old concept. On the one hand, if we have the main reference of the ‘‘humanitarian interventions’’ such as they were applied these last decades, there is no specific analysis of political economy on the question. On the other hand, if we introduce the concept of ‘‘humanitarian missions,’’ this one is already more ancient, but not older of two centuries. However, ‘‘humanitarian interventions’’ must not be mixed up with ‘‘humanitarian missions.’’ The first are military actions against a State to protect people within its borders from suffering grave harms. The second are peaceful actions and economic decisions to protect the life of victims of war, internal violence, natural or technologic disastersy.1 Thus, there are two ‘‘political economies of the humanitarian,’’ expressed both in the civil and military fields. Today, the international security makes less reference to the military dimension. There are five modifications of the international system since 1989:  The erosion of the nuclear threat and the loss of legitimacy of atomic weapons in the international reports are the fundamental characteristics.

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 215–233 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06013-X

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 The threats changed, they are less turned on the territorial ambitions, the conflicts of sovereign power, or the national independence. They now concern terrorism, drug, unorganized immigration, or the ‘‘dirty’’ money.  Intrastate conflicts are now more frequent than interstate ones, therefore exposing civil populations to violence: Bosnia, Kosovo, Somalia, Rwanda, Liberia, Sierra Leone, etc.  Before the Iraq war, the Western strategy was turned to the obsession of the ‘‘zero death.’’  Since 1990, the Security Council has increased its presence in the field of the peacekeeping, notably through economic sanctions or proceedings against those infringing humanitarian rights. So, the notion of ‘‘international security’’ is modified. In its widest sense, the international security is insured when the peoples feel safe and their fundamental needs are satisfied. Nations are secure when they can guarantee the rights of their citizens and when they can protect, on the long run, the environment for the future generations. Today, humanity is concerned by the problems of ecological disaster, demographic ‘‘bombs,’’ drugs, corruption, and ethnic purge, a real strategy leading to the massacre or the exile of the civil populations.2 Seize by the horror of the Shoah, renewed in Cambodia, Bosnia, and Rwanda, some democratic States have tried to clear their responsibility in front of the history, under the urge of nongovernmental organizations and media, by modifying or applying new rules of international law.3 In the new system of security, there have been three fundamental changes, partially managed by the United Nations system. First, with the process of the globalization and the development of transnational networks, the wealth and the power are not any more determined by the only territorial authorities, in order, for instance, to insure the protection of the ecosystems. Second, human rights and protection of minorities suppose common values in the contemporary world order, with the condemnation of genocides, war crimes, and crimes against humanity.4 It comes along with the development of the process of democratization. Third, with the recent creation of international criminal tribunals and court,5 the political leaders became in the international juridical order, responsible individually of the crimes of their regimes. In this context, the political economy of the humanitarian supposes two dimensions. First, it makes reference to the ‘‘voluntary’’ role of the political system for the satisfaction of the needs of the biggest number. It supposes a collective and peaceful action, engaged by states, international

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organizations, or nongovernmental organizations, to reduce the poverty, improve the conditions of life, and insure the dignity (refusal of the slavery) and the security (fight against the threats and the violence) of all people. Second, the political economy refers to the humanitarian intervention, as an action of force organized at the international level by UN, regional organizations or States, individually or in group, to fight against systematic violations of the humanitarian rights on the territory of another State.

THE POLITICAL ECONOMY OF HUMANITARIAN MISSIONS Two main problems on the civil humanitarian economic policy must be analyzed. At first, the role of the humanitarian is often the object of debates inserted into very general theories. Second, the ‘‘humanist’’ perception of the economy pains to be made recognized. Do Humanitarian Missions Have a Meaning in Economics? Before the mid-20th century, the economists, more interested in the understanding of economic mechanisms than to study the basic human needs, have neglected the analysis of humanitarian missions. But, contrary to the other sciences, the oldest theories are not obsolete and may give a sense and a social efficiency to humanitarian actions. The economic policies are not centered on the basic needs of satisfaction. The humanitarian conception of the economy implies that the fundamental objective of the economic action is the population’s welfare. However, several analyses refused to take into account this hypothesis. For the Mercantilists, the fundamental objective of the economy is the power of the state. In these conditions, the ‘‘humanitarian’’ character of the economy is not an objective in itself. So, Colbert refused to export the French agricultural productions in surplus to Spain in order to weaken the Spanish monarchy. On the other hand, he wished to have people fed well in order to insure the prosperity and the safety of France. For Frederic List and the German historic school, the states may limit imports and eventually enlarge their territories through the war. The humanitarian policy toward foreign countries is therefore not possible, except when military and strategic conditions could justify them. In that case, the humanitarian mission can

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exercise only against the ‘‘wild’’ parts of the earth, to which it is necessary to bring the Christian civilization and its rights and obligations. There is the utopic socialist idea ‘‘to civilize’’ the non-European peoples and to apply to them, by force is useful, the fundamental rules of the Western humanism. This ‘‘humanitarian’’ conception is not so opposite to the modern situation. Finally, all the theories of ‘‘economic war’’ are obviously, far from a humanist conception of the economy. For example, the strategy of the impoverishment through the military effort has the ambition to provoke appropriate social contests or the collapse of the economic national system with the burden of an arms race, as what happened with USSR (Fontanel & Bensahel, 2003). There is a constant debate about the link between liberalism and social welfare. According to the liberal theorists, the opening of the economic borders equally promotes at the same time the economic and social progress and it favors the peace. Every country has to specialize in the products, in which its comparative advantage is the best. In these conditions, the humanitarian policies are not desirable if they reduce the potential economic development in the long run. Several economic analyses go to this sense. Thus, even though Adam Smith (1776) condemned the slavery6 and the colonialism,7 it is because he considered them as counterproductive, he did not insist on the humanist aspect.8 So, he pleaded for laissez-faire, without any ‘‘humanitarian policy.’’ This one has been clearly condemned by Thomas R. Malthus (1826). He established a law of population, leading to a refusal of the public assistance. The ‘‘humanitarian’’ actions are considered as weakening the whole system. He proposed the abolition of ‘‘poor laws.’’9 Besides, he considered that unless applying a voluntary control of the births by the abstinence, there would be either threat of wars or famine. Later the Neoclassical school, which analyzes the system of a market economy in a situation of optimum and equilibrium, does not deal with ‘‘humanitarian policy’’ issues. Karl Marx has considered that the humanitarian policy has no sense in the capitalism.10 The defense of the formal liberties is only a means for the bourgeoisie, which organizes State institutions so that its own interests are reinforced. During the Cold War, numerous progressive states have criticized humanitarian intervention as being a means of the Western domination on their cultures and their customs. The French economist Franc- ois Perroux (1961) has defined in the 1960s the foundations of the economy on the basis of a triple requirement that he called the ‘‘human costs’’: to feed people, to treat people, and to release the slaves. First, the function of fight against the famine is natural in

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the economy and nevertheless our century always lives with the misery and the subnutrition. Second, the will to treat people also answers this will of respect for the life, but the life expectancy strongly diverges among nations with different development levels. Finally, the requirement of the liberation of the slaves refers to qualitative human needs, such as freedom or democracy. These ideas are resumed by Amartya Sen (1982) who analyzes the advanced economy as a society able of supplying important rights for every one, what he calls ‘‘entitlements.’’ In other words, a nation will be developed only when it will be able of insuring the freedom, the democracy, the equity (and not the equality), and the respect for all and for each. In other words, the planet belongs to the present and future population. Now, so that the development is ‘‘sustainable’’, it is necessary to respect the rules of the nature, but also to fight against the destructive tendencies of the human nature. The United Nations Organisation (UNO) has promoted since its creation peace and disarmament.11 In 1986, the UN General Assembly declared, ‘‘there is a close relationship between disarmament and development and that progress in the field of disarmament would considerably promote progress in the field of development and [y] resources released through disarmament measures should be devoted to the economic and social development and wellbeing of all peoples and, in particular, those of the developing countries.’’12 This analysis makes the hypothesis of the peace and of the uselessness of the armament. Some economists have developed models of arms race containing a parameter of fatigability that indicates the degree of economic and social acceptance of the armament effort; the military sector and the economic development were so put in opposition. However, the international security is far from being innate. Security constitutes a decisive factor of the ‘‘sustainable development.’’ The richest countries do not generally use weapons in their economic competition, but the underdevelopment probably killed ten times more than that of all the war actions since 1945. Mainly after the end of the Cold War, the progress of the international humanitarian policies is the response to this awareness.

The Humanitarian Policy, as a New Perception of the Relationships between Human Beings Today, liberalism, democracy, and globalization do not prevent the permanency of wars and famine. With their effective and intelligent action, nongovernmental organizations inform public opinions, which turn to the

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political powers. Humanitarian policies must be organized by states and international organizations, and they have to introduce a temporal conception of their actions. The underdevelopment constitutes a threat for the world peace. For the partisans of the New International Economic Order, an idea developed in the 1970s and often forgotten in the 1990s, disarmament is rather a consequence than a cause of development. The processes of disarmament should then intervene after the development of the poorest countries. Today, the power based on the force is supplanted by the development of the intelligence applied to economy and strategy. The use of the physical or economic violence has not been the objective for the domination of a welldefined political entity; it is a question of defending permanent or incidental public interests.13 This is a wide conception of the security that interests all Western countries, emphasizing the diplomatic means and allowing the use of soldiers abroad. In a mercantilist world, the humanitarian action allows the powerful nations to force the other states to adhere to their values and economic system. The Western world shows an important solidarity, notably built around the NATO, the European Union, and the Organisation for Security and Co-operation in Europe. These institutions structure this First World, in which countries obtain a mutual profit that of the stability allowing a merciless economic competition, without any armed conflict. But there are victims. The European construction stays under the American leadership, but it gives only a secondary role to the countries formerly dominated by the Soviet Union. The absence of generosity toward Eastern Europe also exists toward Southern countries, except for those having public interests with the Western system, either strategic (Israel) or financial (Arabic peninsula) or economic (oil and raw materials in Africa). The proliferation of weak and unstable States in the suburb of the Euro-Atlantic system provokes reflexes of distrust and tends to multiply barriers between the worlds, behind the mirror of the economic globalization. In the Second World, there is a proliferation of states and predation systems. This world of weak states is under the power of private interests, often dominated by criminal or illicit interests, which monopolizes the natural resources and the international aid. The state is often a folding screen of sectional interests. The ideologies, the religions, or the sects reserve the wealth or the monopoly of the violence to the ‘‘elected members’’ often on an ethnic basis. There are constantly new damages to the human dignity and the universal consciousness. Today, these two worlds coexist, but the First World has a moral and authoritarian vision of the world organization;

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it has established a battery of principles, constraints, and obligations, which promote the western culture and the defense of gains. In the Second World, there are some states that threaten the peace and the international order. The big powers try to eliminate the war by the development of a sophisticated technology, but they have to face the barbarism of the terrorism and civil wars, of an unlimited violence. Militias, bands, and militarized criminal conspiracies often assist the regular armies. It is still a society of states, which tries to banish the military war and the use of the military violence in their own balance of power. There is also a temporal conception of humanitarian policy. An economic development will be said ‘‘sustainable’’ when it allows an improvement of the conditions of life of each individual (according to different rhythms), including the potential development of the future generations (ecology, environment, health, education, or safety). The concept of ‘‘sustainability’’ contains interesting values that the economy seems to have forgotten. It differs from the notion of the Gross domestic product (GDP), which clearly expresses a one-dimension conception and a short-term vision of the economy. So a country can have a strong economic growth but with profits reserved for the smallest number. In spite of satisfactory short-term results, if the ecology is not respected, in the long run, the economic crisis will be inevitable with a decrease of the resources for the future generations. The basic needs of citizens must be satisfied and humanitarian interventions can be sometimes the beginning of a solution.

THE POLITICAL ECONOMY OF HUMANITARIAN INTERVENTIONS A peace situation is not inevitably better than a situation of conflict, in particular, when it is based on tyranny, slavery, exploitation, and disregard of the human rights. In these conditions, the conflicts intrastate and interstate question the international community, widely informed by the media. It is then impossible for the governments to be neutral. Since 1928, confirmed in 1945, the threat or use of force is forbidden.14 But, this has not been followed in the international practice. The use of force is now the sole prerogative of the United Nations Security Council, except in case of self-defense (Articles 24 and 51, United Nations Charter). However, the concept of ‘‘responsibility to protect,’’ authorizing unilateral military interventions, seems to exist in international law, de lege

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ferenda, but it is still the subject of controversies.15 Indeed, several interpretations of article 2(4) of the United Nations Charter might be made. This article provides that ‘‘All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any State, or in any other manner inconsistent with the Purposes of the United Nations.’’ For certain authors, this disposal would prohibit only threat or use of force with the aim of striking a blow at the territorial integrity or at the political independence of a state. Thus, if the resort to the army has the only object to warn or terminate grave and systematic violations of the humanitarian right, it would be licit; moreover, the protection of human rights is one of the principles of the United Nations. Protection of the humanitarian right would become a ‘‘just cause’’ of war. Other lawyers invoke principles of sovereignty and territorial integrity of states as the main foundations of the international law. Today, the question has not received a definitive answer. But we can say, as is the international law that only an authorization of the Security Council can validate a military intervention of a State or a regional organization in a humanitarian purpose. But, even in this hypothesis, the question of the consequences of these interventions must be formulated, both in strictly economic terms and in terms of economic policy.

The Disappointing Effects of the ‘‘Humanitarian’’ Intervention The results of the humanitarian intervention have been disappointing. They even turned out catastrophic in some places. Principles It is often difficult to distinguish the operations engaged for the sake of a humanitarian ideology from peacekeeping and peacemaking operations. These military operations have a moderate cost (0.5% of the world military expenditures), what can make them economically justified. Their objectives are:  To dissuade the continuation of an aggressive behavior.  To force belligerent parties to adopt a behavior corresponding to the international rules ( judgment of war criminals, embargoes, legality of the government).

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 To bring a humanitarian assistance.  To support a peace process, by a pacification of the spirits on the basis of human rights and by the implementation of democratic institutions. Besides, the new armed forces are more and more effective to solve the specific problems of the humanitarian intervention. However, the difficulties of application of the military intervention in humanitarian purposes are not easily solved. In the same time, the ‘‘responsibility to protect’’ requires the respect for certain principles to legitimize and legalize the military intervention:  The military intervention must be an exceptional measure to face an irreparable and imminent damage occurring to human beings (genocide, crimes against humanity as ‘‘ethnic cleansing,’’ enslavement, torturey); it would be justified only when every nonmilitary option has failed.  Respect of the principle of proportional means and gradualism in the application of force.  To obtain the prior authorization of the Security Council (Chapters VII or VIII of the United Nations Charter).  To give an unambiguous mandate to the military forces.  Coordination with humanitarian NGO.  The responsibility to rebuild. The United Nations Secretary-General (1998) defines very well the nature of post-conflict peace building as ‘‘actions undertaken at the end of a conflict to consolidate peace and prevent a recurrence of armed confrontation. Experience has shown that the consolidation of peace in the aftermath of conflict requires more than purely diplomatic and military action, and that an integrated peace building effort is needed to address the various factors which have caused or are threatening a conflict. Peace building may involve the creation or strengthening of national institutions, monitoring elections, promoting human rights, providing for reintegration and rehabilitation programs, as well as creating conditions for resumed development. Peace building does not replace ongoing humanitarian and development activities in countries emerging from crises. Rather it aims to build on, add to, or reorient such activities in ways that are designed to reduce the risk of a resumption of conflict and contribute to creating conditions most conducive to reconciliation, reconstruction and recovery.’’ It is probably on this point that the results are the most disappointing.

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Results The UNO and the regional organizations have successfully supported the establishment of the peace in several conflicts – African Central Republic, Guatemala, for instance – but their action was more debatable in Bosnia and Herzegovina, in Georgia, in Sierra Leone, or in Tajikistan. It was a failure in Angola and in Somalia. Unmistakably, the air forces of the Alliance filled their mission and obliged the Serbian army to withdraw from Kosovo. However, the political consequences of the war were catastrophic for the people of the Balkans and the relations with Russia and China deteriorated. The Serbian staffs used the civil populations as shields, in expiatory victims. Several hundreds of thousand persons were moved and the stability of the countries of the region was strongly shaken. Kosovo was in ruin; in Serbia the economic infrastructure was largely annulled. NATO intervened in a civil war, refusing the independence of Kosovo. Besides, the western intervention in Kosovo aroused the question of the distinction between partners and opponents, on a battlefield covered with women and with frightened and starving children. Now, the Westerners have to distinguish the humanitarian targets and the human civil targets, what supposes the use of more and more lethal weapons. The preventive diplomacy should be preferred to such actions. The UNO often compromised itself in peacekeeping operations, whose utility is debatable. But the appeal to the international authorities intervenes when the situation is already conflicting.

Price of the Military Operations There have been more than 50 operations of preservation of the peace of the UNO since 1946, for a global cost lower than 25 billion dollars spent by United Nations. The costs depend on the operations, 3.3 billion dollars in 1998 to 1 billion in 2006. Now, unlike UNO operations, NATO operations do not give place to repayment by the Alliance. The financing must be found by internal budgetary solutions.16 The UNO staffs involved in these operations came to about 10,000 persons in 1988 and to more than 73,000 in 1991 and 20,000 in 2006. The budget evolved from 230 to 1,600 millions dollars between 1988 and 1996 (among which 31% for the United States, which do not pay and ask for a reduction of 25% of its participation). Their main contingents are Russian, Bangladeshi, Pakistani, and Indian. Europe participates for 21% of the total personnel, among which 2% for France.

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These expenditures are important. However, the directly attributable additional costs for the peacekeeping operations are not excessive for industrial nations such as the United States, Germany, or France. It represents less than 0.2% of the world military expenditures. The finances of the UNO have been stabilized, with a ‘‘zero’’ growth of its budget during several years. But its position ‘‘in cash’’ is very weak and the part devoted to peacekeeping has been decreasing. Following the liquidation of heavy operations, the balance of the peacekeeping decreased from 1,697 million dollars in 1992 to 2,700 millions in 2001 and to 2,260 millions at the end of 2003. The whole budget is in deficit: 664 millions dollars in 1992 to 1,823 in 2001 and to 1,066 in 2003. The United States remains the principal debtor of the operations of preservation of the peace (50% of the total amount); it jibs paying its arrears. The UNO owes some money for the equipment and the services in France, and for the troops of Finland of Pakistan and Bangladesh.

The ‘‘Perverse Effects’’ of the Humanitarian Interventions There are five main ‘‘perverse effects’’ of the humanitarian interventions: the various economic and political values of deaths, the complexity to apply and rationalize strategies, the limited interventionist enthusiasm, a very selective ‘‘humanitarian’’ policy, and the problematic competition between the NATO and the UNO. The Preferred Protection of the Soldiers The soldiers and their weapons are mainly concerned by humanitarian interventions. They aim at protecting individuals, military, and civil, but also the material. Only three planes of the NATO did not return from Kosovo war. From an economic point of view, it is necessary to know that an American cruise missile costs 1 million dollars, one F117 costs 45 millions, one Apache costs 15 millions, and one B2 costs 2 billion dollars. The financial commitments are important. The State humanitarian intervention is often more concerned for the protection of the life of the soldiers and also that of the civilians that it is supposed to protect. The military deaths can be listed and are badly accepted by the international community. Before 2001, the government of United States avoided the military contact. Furthermore, if they contributed at the level of 5% of the total of the troops engaged in the operations of the

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UNO in 1996–1997, the European Union intervened in competition of 36%. For these operations, the diplomatic profit removed by Europe is derisory. The Difficulties Inherent to Humanitarian Strategies The Military Operations Other Than War (MOOTW)17 is an action that leads to the use of the military capacities in all their dimensions, without establishing a war action. They are normally intended to dissuade the war, to resolve the conflicts, or to promote the peace. They are driven in an environment of humanitarian assistance, but also in a hostile environment, in a situation of civil disorder, and terrorist actions. It is necessary to distinguish the operations of diplomacy support, of peacekeeping, and of peace enforcement. This last one is more binding, because it does not imply an assent of the potential belligerent parties, it supposes the defense of a philosophy (the human rights) which leads to a kind of partiality and it authorizes the use of force in the application of a mandate (Table 1). There are offensive operations (fight the enemy), defensive ones (actions to prevent an enemy attack), operations of stability (military and diplomatic deterrence), and operations of support (to reduce sufferings). The humanitarian assistance belongs mainly to this last type of justification. These conflicts reveal the inadequacy of a strategic system, which does not take into account the various social rationalities. Its failure results from a fundamental strategic confusion: the use of the soldiers at a strategic level (the purpose is not to destroy, but to force states to a diplomatic fold) and the bad use of armed forces (humanitarian, preventive diplomacy). Better interactions between the lethal and not lethal weapons are needed. The humanitarian military aid supposed new weapons and new strategies. A Limited Enthusiasm Interventionism The governments are very reluctant to send their troops for humanitarian operations. Six months have been necessary to gather 5,500 soldiers for Table 1. Variables

The Degrees of Application of the Peace Operations.

Support for the Diplomacy

Assent High Resort to forces Weak Impartiality

High

Peacekeeping

Intensification of the Peace Support

High Weak Weak, within the framework of the Being enough for the self-defense and the mandates use of force High Weak

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Rwanda, while 19 governments had undertaken to send 31,000 soldiers. The failure is due to the bad will of the belligerent parties as well as of the members of United Nations. Now, the use of force is necessary to protect humanitarian convoys, civil populations in safety zones, and to maintain law and order. The military interventions have always been organized with hesitation and even bad consciousness. The powerlessness of UNO is illustrated by the Darfour situation, where Sudan is condemned but not threatened. However, some belligerent parties sometimes should rather prolong the crisis to obtain a peace corresponding to their interests. The UNO has not succeeded in adapting itself to the new international crises. It is difficult to mobilize the democracies in limited wars. The major question is then the way major powers define their interests, and accept one degree of responsibility in the levels of conflict and use of the violence. Selective Military Humanitarian Actions After the revealing of the massacres of Bosnian Moslem by Serbs, it has been necessary to wait four years so that the United States participates in an important striking against the Serbian positions. For the Europeans, the stake was to restore the peace, even to the advantage of Serbia. President Clinton claimed the need to provide justice to the victims of the Serbian aggression. There were thus differences in the Atlantic Alliance. On a cynical point of view, the ethnic cleaning facilitated the resolution of the conflict. The Americans appear as missionaries, asked to forbid the mistreated and starving children, though their main objective was probably not there. The political international morality has progressed since the end of the Cold War. Compared with the application of the clause of the most favored nation, the question of human rights remains secondary. What Leader, the Atlantic Alliance or the UN? The Security Council has lost a part of its prestige: it has not been able to enforce the resolutions against Saddam Hussein; China prevented the minor operations of the preservation of peace in Guatemala and in Macedonia, and threatens to do the same for Haiti. The use of the veto is problematic, but the concerned powers do not want to lose it. Legally, the US President needs a Congress authorization for a declaration of war. Then, Bill Clinton preferred the application of the ‘‘War Powers Resolution,’’ which requires only information of the President to people representatives. The government of the United States did not respect the Charter of the United Nations (Chapter VIII, Article 53), which establishes that any ‘‘coercive action will not be begun by virtue of regional

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agreements or by regional bodies without the license of the Security Council’’ (Geslin, 2004). Now, the Americans did not wish to undergo a blocking of the Security Council, considering the possible veto of Russia and China. They tried to demythologize the mandate of the UN, by exploiting that their politics is the only possible method for the international stability. In any case, the criterion of support of the United States is based at first on the American interests. The humanitarian disasters connected to violence, as well as the interruption of the democracy, or the respect for human rights, constitute important, but secondary objectives with regard to the previous one. The public opinion has besides to express a self-important support. The Atlantic Alliance sometimes tries to wear a crown, which returns to the UNO, the only international organization whose rights are universally recognized. The United States even does not takes care any more of the advancing masked behind the banner of United Nations; for not being hindered in its action, the government of the United States puts deliberately aside the UN Security Council. However, according to Franc- ois Mitterrand’s words, the Atlantic Alliance did not have to become the Holy Alliance. It is not either an alliance of interests allowing the United States to make Europeans participate all around the world according to a collective interest, nor with or without the assent of the UNO against States considered terrorist. If NATO has to intervene it has to be in keeping with the international rules, the UNO remaining the source and the guarantee of the world legal order.

The Humanitarian as an Instrument of Domination Humanitarian policy constitutes an instrument of economic globalization and it appears as an interesting strategic instrument. We can neglect in the short run the economic advantages, even if the operations of peacekeeping have an important economic impact, with the purchases of possessions and 400 million dollar services, of which half is in favor of the United States. Globalization and Humanitarian Policy The American strategy is based on the shaping of the globalization. So, in his speech of the Union of January 27, 2000, Clinton asserted that: ‘‘to realize all the opportunities of our economy, we have to exceed our borders and shape the revolution which brings down barriers and sets up new networks among nations and individuals, savings and culturesy We have

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to be in the center of any global network. We have to admit that we cannot build our future without helping the others to build theirs.’’ There are three steps in this globalization:  At first it needs a consensus on the expansion of the international trade, with new standards and the opening of the markets of the South. The globalization, which leads to the growth of the actors outside the control of the State and the international law, has determining political and cultural effects. It is not enough to promote the free market and the integration; it is also necessary to implement policies of prevention. So, the national security intervenes in the international economic policy of the United States (allocation of the capital by the IMF, measures against the capital volatility, sales of weapons, etc.).  Then, United States favors the globalization to allow the American economy to benefit from the principle of the comparative advantages. For that purpose, this country wants to impose their own standards, to insure the normalization of markets. Any internal reform must be beforehand imposed on the international community, as well as the codes of conduct accepted by the American economic actors (as the laws anticorruption, the economic sanctions, the sanitary standards, or the environmental protection). The ‘‘humanitarian’’ policy participates at least partially in this ambition. The national interest leads to the exclusive search for the leadership and for the economic development. In these conditions, the policy of major powers may have positive aspects with, for example, the will of the International Labour Organization to spread the Labor Law all over the world or the fight against the new corruptions or the defense of children at work in poorest countries. But this does not solve the problem of poverty and unemployment in these countries or the health problems.  Finally, the promotion of the democracy and the peace allows the integration of the former opponents in the liberalization process, the prevention of the conflicts when the interests of Western countries are concerned or the fight against the crime, economy, and the corruption. The contemporary economy is a war field (boycott, embargo, unfair competition, etc.). It must be controlled by the international organizations, which forbid the humanitarian principles necessary for the normal functioning of the market. The economic assistance is not often mentioned, because the market economy is sensible to fight, eventually, against the poverty and the misery. To do it, it is necessary to develop the military and diplomatic power.

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The question is to know if we want a war without death or deaths without war. The United States has until now only given 0.14% of its GDP as international aid, against 0.4% for Europe and 0.5% for France. These sums are derisory, with regard to the American and Western strategic efforts. In other words, the humanitarian actions should not only be concerned with problems like famines, but also with the respect of freedom values. However, a help of the developed countries can lead to an evildevelopment. Some forms of international transfers turn out politically and economically expensive, notably when they are dedicated to the prestigious expenses, to the increase of the social disparities or to the development of the societies in which human rights are not respected. Transfers can also be the cause of dirty calculations of interest tending to accustom populations to a type of consumption making them dependent on industrial nations. An Instrument of Strategic Choices The strategy is the art to combine the totality of the available means in order to be able to reach a state objective. For Clausewitz’s concept of global strategy, there are two roads to the victory, the armed struggle or the control of the resources on which the opposition depends. Today, there is a virtual agreement between corrupt social groups and collusive western institutions. Like this, with the ‘‘diplomacy of the dollar,’’ instead of paying for the disarmament and the development of Russia, it was considered preferable to pay to lesser costs for the corruption to have the same advantages in terms of disarmament. The problem of development is then neglected. The control of raw materials and energy materials becomes an important instrument of strategies for major powers. For the United States, it is a question of using all the appropriate means of the national power to influence the actors of the world economy. The control of the information and of strategic resources like oil is essential for the security.

CONCLUSION Any conception of the peace depends on philosophic conditions of the human behavior. The war and the conflicts are at first social events resulting from the fight for power, for ideas (religions or ideologies), or from purely economic reasons. It is necessary to take into account populations sufferings, notably due to economic disparities or due to violence of the daily work. It would then be interesting to build indicators of security, to put in evidence the causes of conflicts, to underline the military and civilian

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threats (human rights, environment, relative poverty etc.), to determine the possible measures susceptible to bring remedies to every cause of insecurity, to establish a strategy capable of reducing all the factors of conflicts, by the application of a synthetic method. It is thus necessary to build deliberately the peace and not only to dissuade the war. It is essential that peace becomes more attractive than war. The international security cannot be maintained in the long run within the framework of economic and social inequalities. The economic development of nations is a fundamental factor of the international security. But also, the defense of a country is a condition of its development.

NOTES 1. It is interesting to note that this ‘‘humanitarian right’’ concerns the Marxian concept of ‘‘formal rights,’’ i.e., the liberties, the human rights, and the exercise of the democracy. 2. It is a crime against humanity, within the meaning of Article 7, Section 1, (d) of the Rome Statute of International Criminal Court. 3. The former President of the United States, Bill Clinton, wished to develop the humanitarian intervention to protect universal values, even with the intervention in the internal affairs of sovereign states. The ideology of the humanitarian benefited from new supports. With the terrorism attacks, the will of the ‘‘duty to interfere’’ is growing and seems to justify the Afghanistan and Iraq wars. 4. It is the progressive consecration of the Kouchner-Bettati doctrine on the humanitarian intervention, the right or duty of assistance for people or minority in danger (see Bettati, 1991). 5. International criminal Tribunal for the Former Yugoslavia (1993), International Criminal Tribunal for Rwanda (1994), and International Criminal Court (1998). 6. ‘‘The experience of all ages and nations, I believe, demonstrates that the work done by slaves, thought it appear to cost only their maintenance, is in the end the dearest of any. A person who can acquire no property, can have no either interest but to eat as much, and the labour as little as possible’’ (Smith, 1776, p. 387). 7. ‘‘It was because the colonies were supposed to be provinces of the British empire that this [military] expense was laid out upon them. But countries which contribute neither revenue nor military force towards the support of the empire cannot be considered as provinces? They may perhaps be considered as appendages, as a sort splendid and showy equipage of the empire. But if the empire can no longer the expense of keeping up this equipage, it ought certainly to lay it down’’ (ibid., p. 946). 8. However, A. Smith did not forget that colonialism and slavery have also a human dimension. Indeed, he wrote: ‘‘To prohibit a great people, however, from making all that can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind’’ (ibid., p. 582).

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9. The Poor Law was a system for the provision of social security in operation in the United Kingdom from the 16th century until the establishment of the Welfare State in the 20th century. 10. ‘‘[Slavery [y] is the sole natural basis of Colonial wealth. [y] the capitalist mode of production and accumulation, and therefore capitalist private property, have for their fundamental condition the annihilation of self-earned private property; in other words, the expropriation of the laborer’’ (Marx, 1867, Volume I, Chapter 33). 11. Principally on the initiative of the UN General Assembly. See, for example, resolution 41 (I), relative to the Principles governing the general regulation and reduction of Armaments, December 14, 1946: ‘‘the problem of security is closely connected with that of disarmament.’’ See also, resolution 192 (III), relative to the Prohibition of the atomic weapon and reduction by one-third of the armaments and armed forces of the permanent members of the Security Council, November 19, 1948. 12. Declaration to the Right to Development, A/RES/41/128, December 4, 1986. 13. In this context, the Atlantic Alliance saw its role developing to fight against the instability in Europe provoked by ‘‘the serious economic, social and political difficulties, including ethnic rivalries and territorial disputes, which are faced by many countries in Central and Eastern Europe. The tensions which may result, as long as they remain limited, should not directly threaten the security and territorial integrity of members of the Alliance. They could, however, lead to crises inimical to European stability and even to armed conflicts, which could involve outside powers or spill over into NATO countries, having a direct effect on the security Paragraph 9 of the Strategic concept adopted by NATO Heads of State and Government, Rome Summit Meeting, November 1991. 14. Kellogg-Briand Pact (August 27, 1928) Article 1: ‘‘The High Contracting Parties solemnly declare in the names of their respective peoples that they condemn recourse to war for the solution of international controversies, and renounce it, as an instrument of national policy in their relations with one another.’’ Charter of the United Nations (June 26, 1945) Article 2, Section 4: ‘‘All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.’’ 15. International Commission on Intervention and State Sovereignty (2001) underlines: ‘‘[e]xternal military intervention for human protection purposes has been controversial both when it has happened – as in Somalia, Bosnia and Kosovo – and when it has failed to happen, as in Rwanda’’ (op. cit., p. VII). 16. The Commission of the finances of the National Assembly in France estimates the additional cost of the outside Operations (OPEX) at 6.6 billion francs for the participation in the war of the Bay and for the Balkans in 5.2 in 1996, 3.3 in 1997, 2.1 in 1998 and more than 4 billion francs in 1999. 17. Concept in United States military doctrine that refers to the use of military capabilities across a range of operations that falls short of outright war.

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REFERENCES Bettati, M. (1991). Un droit d’inge´rence? Revue Ge´ne´rale de Droit International Public, 95(3), 639–670. Fontanel, J., & Bensahel, L. (2003). Guerre et e´conomie, les liaisons dangereuses. In: J.-F. Daguzan & P. Lorot (Eds), Guerre et e´conomie. Paris: Ellipses. Geslin, A. (2004). Le pouvoir d’habilitation du Conseil de se´curite´: La de´le´gation des pouvoirs du Conseil aux organisations internationales. Revue Belge de Droit International, 2, 484–497. International Commission on Intervention and State Sovereignty. (2001). The responsibility to protect, Ottawa, Canada. Malthus, T. R. (1826). In: J. Murray (Ed.), An essay on the principle of population: A view of its past and present effects on human happiness; with an inquiry into our prospects respecting the future removal or mitigation of the evils which it occasions (6th ed.). London: John Murray. Marx, K. (1867[1990]). Das Kapital, Penguin classics. 1152 p. London: Marx. Perroux, F. (1961). L’e´conomie du XXe sie`cle. Grenoble: Presses Universitaires de Grenoble. Sen, A. (1982). Poverty and famines: An essay on entitlements and deprivation. Oxford: Clarendon Press. Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. In: D. D. Raphael, & A. L. Macfie (Ed.), The Glasgow edition of the works and correspondence of Adam Smith (Vol. II). Oxford: Oxford University Press. Strategic concept adopted by NATO Heads of State and Government. (1991). Rome Summit Meeting. United Nations Secretary-General. (1998). The causes of conflict and the promotion of durable peace and sustainable development in Africa. Report to the United Nations Security Council.

ECONOMIC INTELLIGENCE AND NATIONAL SECURITY Carlos Seiglie, Steven Coissard and Yann E´chinard INTRODUCTION ‘‘We must have information superiority: the capability to collect process and disseminate an uninterrupted flow of information while exploiting or denying an adversary’s ability to do the same’’ (DoD, Joint Vision 2010). Since the end of the 1980s, the world economy has evolved, and there has been a rapid movement towards globalization. The end of the Cold War coincided with the end of ‘‘traditional’’ conflicts and a new dominant paradigm appeared. The terms of economic war and international competitiveness became inescapable issues dealt at the same moment by economists and the whole politico-administrative sphere. However, as Krugman (1996) noted this vision can turn out dangerous if it leans on erroneous diagnoses. Economic intelligence appears in this particular context. From a theoretical point of view, economic intelligence is presented in Michael Porter’s works, for example in his article with V. E. Millar, ‘‘How information gives you competitive advantage’’. Empirically, economic intelligence is not a new phenomenon. For example, it was practiced in the Middle Ages, when the Venetians passed information onto the Palace of the Doges through their ports and Mediterranean fleet during competition between the commercial cities of the North of Italy and Flanders.

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 235–248 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06014-1

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Economic intelligence is a broad concept defined as coordinated actions of research, processing, and diffusion of useful information in order to be exploited. Given this definition, the economic intelligence contains all forms of information up to espionage. Of course, the underlying issue is the economic power and international ranking of nations in a globalized world. Our analysis of economic intelligence will exclude espionage or any illegal activity, yet we do not confine ourselves to the economic questions, but also to the social, cultural and economic relationships between actors. On the other hand, economic intelligence supplies some means of action to protect a country against its practice. Information could be gathered by private firms for profit maximizing reasons or by governments. When it is done by government, information can be classified as a ‘‘quasi-public good’’ since it is a non-rival good. Finally, our objective is to understand how the United States organizes its system of economic intelligence and how it impacts on national security and national income.

ECONOMIC INTELLIGENCE SYSTEMS: THE US INTELLIGENCE COMMUNITY The US economic intelligence system is without a doubt the best in the world. It is structured around a private–public partnership and public structures that assist in its mobilization. Public Structure Mobilization and Information Traffic The public sector has a key role in the US economic intelligence system. Gathered around the White House, which determines objectives and mobilizes resources, there are several agencies in charge of centralizing, processessing, and diffusing information, to identify strategic markets and assist American firms in their foreign market conquest. We can identify five objectives: geopolitics, forecasting analysis, assistance to decision making, intelligence, and influence. Each agency has a clearly defined role even if September 11 revealed some inadequacies. The Intelligence Community (IC) is the best example of the overall scheme. Except for the CIA, IC members generally operate inside their departments with specific roles and assignments. Yet, all are linked when undertaking similar actions and have to share information. The IC set-up

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includes is several agencies from the DoD, the FBI, the intelligence services of military organizations (Air Force, US Army, US Navy, Marines), the Department of Homeland Security, and the Energy Department with the CIA being in charge of producing analysis of international situations and collecting information in order to improve state decision making. With this information, the government is able to undertake ‘‘covert actions’’ that is, that means political, economic, and military activities in which the State’s role has to be confidential.

Private/Public Partnership and Human Movement This partnership takes place in three ways: human capital, public structure in the service of national firms, and a strong connivance between business circles and politics. First, the connections between business and politics explains the shuffle that exists between government staff, public agencies, private firms, and think tanks. Praised in the economic intelligence literature, these connections are criticized by public choice theorist and Krugman (2002), who names it ‘‘crony capitalism’’ because economic policies are distorted for private interests and to the detriment of the general interest. On the other part, universities are also perfectly integrated in the practice of economic intelligence. The policies of universities in the US aim to attract the best minds (professors, researchers, or students). When some of these return to their home countries, they serve to support for American enterprises and values. Furthermore, the American system incorporates foreign elites by integrating them in conferences and other activities organized by think tanks. By these means, economic actors become wellinformed about innovations, research, etc. being conducted outside the US. The provision of public structures in the service of private interests constitutes the second axis of the public–private partnership. Once again, the role of the White House is central notably through its actions of destabilizing foreign companies, its assistance in setting international standards, lobbying within international organizations (WTO, OECD), or still by subsidizing in particular those engaged in developing industries to high-technology. For example, since 1982 and the Small Business Innovation Development Act, the American government has provided small- and medium-sized businesses with a program of financing to improve their research development. The Small Business Innovation Research (SBIR) program, reauthorized until September 30th, 2008, is managed by

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the US Small Business Administration and requires that federal agencies with budgets for research and development of greater than 100 million dollars,1 must participate in the program and must dedicate 2.5% of their budget in favor of small businesses with a research project potentially marketable and beneficial development to US citizens. Up to this date, about 12 billion dollars have been assigned through the SBIR program to several small- and medium-sized firms. At the same time as the SBIR program, the Small Business Transfer Act in 1992 established the Small Business Technology Transfer Program (STTR). By this legislation, federal agencies with a budget for development superior to a million dollars (DOD, DoE, DHHS, NASA, and NSF), have a mission to use 0.3% of it to finance research projects of small businesses and universities and/or of non-profit research institutions. The provision of public funding in the service of companies takes a multitude of forms, which we cannot quite detail here. It seems to us, nevertheless, that the Advocacy Centre is especially important. Initiated at the beginning of the 1990s by President Bush, the reorientation of intelligence activity was spurred on by President Clinton. The creation of the Trade Promotion Coordinating Committee, supervised by the Department of Commerce clearly mandates the government to collect economic information. One of the ‘‘tours de force’’ of the administration was the implementation in 1993 of Advocacy Centre, a public utility created with only the purpose of promoting the interests of American companies in overseas markets. It provides a unique office for coordinating the resources of 19 governmental agencies of the TPCC. Its mission is to promote exports, create and maintain jobs within the exporting companies, support these companies in gaining access to overseas markets, and to insure fair treatment of American products and services in these same markets. It also works at promoting American interests by fighting against illegal special treatments granted to the rival firms. In other words, it acts as an advocate for US companies. In order to carry out its mission, not only does it employ legal measures to win political support and gain access to financing, but also more dubious ones as outlined in the report of Lizin and Van Parys (2002). The fact that the director of the Advocacy Centre, Daniel J. Bloom, comes from the financial and banking sector may reflect the close relationship between the government and business. Finally, one of the strengths of American economic intelligence is that it allows US to become better informed about developments than their competitors. Laı¨ di (2004) quotes a member of the French security services asserting that ‘‘aujourd’huiy, toutes les entreprises ame´ricaines de rang technologique international pratiquent l’intelligence e´conomique avec un

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professionnalisme et une rigueur insoupc- onne´s et sous-estime´s en France’’.2 Effectively, the organizational chart of every firm includes a vice president in charge, officially or unofficially, of economic intelligence. The American’s influence extends up to the heart of the European Union ‘‘a` travers une myriade de petites socie´te´s de conseil y re´elles ou imaginaires’’3 (Laı¨ di, 2004). These last ones, connected to US parent companies, approach the European subsidiaries of big American firms to exploit information on their network of customers and suppliers. The collected information is then handled and sent back to the headquarters of the big groups, thereby obtaining information about the technological innovations of their competitors. It would be difficult here to review the complete system of American economic intelligence, nevertheless two actors are particularly interesting, Kroll International and In-Q-Tel. Kroll, the ‘‘premie`re multinationale du renseignementy un service secret prive´ plane´taire’’4 (Dasquie, 1999), was recently acquired by Marsh & McLennan Companies in 2004. Seemingly, Kroll would be only a consultancy firm among the others, but really its activities spread out operations of information, investigations in security, its detractors speak even about manipulations, coverage, infiltration, or follow-up with satellitey. Officially, the activity of Kroll concerns the analysis of economic and commercial risk and it, through six poles: the business intelligence and inquiries, the check of professional antecedents, security, and protection, security of information systems, the judicial strategy, and the competitive support and analysis. Composed of 2,500 employees and 10,000 consultants (in 1999) distributed in 22 offices on every continent (from New York to Paris by way of New Delhi), its capacities are widely superior to the possibilities of most of the European intelligence services. The story of In-Q-Tel is even more interesting because it is not the fact of a man, as Jules Barry Kroll, but of the CIA. Legally, the public agencies cannot make of the economic information for the benefit of companies. Strategy of the CIA then was to address manufacturers’ associations to by-pass the legislative. With the aim of the remaining at the leading edge of progress, its range widened in 1999 with In-Q-Tel, a venture capital firm with vocation to invest in the new technologies and to create new partnerships between the private sector and the CIA. Created originally to identify, acquire, and spread high-technologies, In-Q-Tel made a commitment beside more than 90 companies, 10 universities, and research centers, to built a network of more than 200 firms of venture capital, 100 research centers and laboratories and financed for more than a billion dollars in the private sector to support the technologies used by the CIA and Intelligence Community. As a consequence, it participated in the

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elaboration of more than 130 technologies. Since 9/11, its activity tightened around an objective ‘‘investing in our Nation’s security’’, i.e., to focus its investments around the technologies of surveillance, data processing y so as to insure the interests and the life of the American citizens inside and outside of the borders. The American octopus is indeed in position (see graphic), especially since in the field of the business, the targeting of the human resources is also an important weapon. Carayon (2006) regrets the naivety of the French elites: beaucoup parmi les consultants de Kroll sont issus des services du renseignement angloame´ricains, et leurs dirigeants sont e´troitement lie´s a` l’administration fe´de´rale ame´ricaine. Cette socie´te´, a` l’instar de certains fonds d’investissements et de grandes entreprises ame´ricaines a toujours su attirer d’anciens dirigeants industriels et politiques e´trangers de premier plan.5

For example, Francis Mer, the former Minister of Finance (France), is employed by Marsh & McLennan Companies, Yves Galland, the former Secretary of Commerce and the foreign trade (France), is representative of Boeing in France.

Legislative Structure The American legislative arsenal in intelligence, and consequently in economic security, forms itself around two main trunk roads: on one hand, the commercial laws to force the foreign firms, on the other hand the security laws to collect the information. If of a theoretical point, the free trade is the best policy because it allows increasing of the well-being of all, as underlines it Paul Krugman, it lost its innocence. In the facts, although the multilateralism is lauded by the international authorities, the big nations in particular the US protect themselves from achievements on their national interest by one-sided practices. As such twice are important: the Trade Act (1974) and the Omnibus Trade and Competitiveness Act (1988). The importance of Trade Act is that it holds essentially the fact that contains the ‘‘section 301’’ (amended since, Chapter 19 of the American civil code, Section on 2411), thanks to which the president of the US, by his representative (USTR), can impose penalties on the countries among which the public actions, policies, and practices violate either affect the rights and the American commercial interests or restricts US commerce. In Section c, Scope of Authorized Retaliatory Action, means of action are defined. USTR is authorized to:

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Suspend, withdraw, or prevent the application of, benefits of trade agreement concessions to carry out a trade agreement; impose duties or other import restrictions on the goods; eliminate any burden or restriction on United States commerce resulting from such act, policy, or practice or provide the United States with compensatory trade benefitsy.6

Such policy is in total discord with the commitments taken by the US to the WTO. Amended in May, 2000 by ‘‘Carousel Retaliation’’, it requires henceforth the USTR to see again, completely or partially, every 180 days the list of the possessions being the object of reprisals. The Omnibus Trade and Competitiveness Act strengthens constraints exercised by the American administration by targeting some countries or products. ‘‘Super 301’’, adopted as in principle for two years in 1988 but reopened by President Clinton in 1994 then seen out, establishes a priority list of countries leading unfair practices against the American interests. It could lead to implementation of reprisals measures. ‘‘Super 301’’ is clearly a tool of the economic intelligence because it allowed the opening of the markets of satellites or supercomputers for the American companies. Then, ‘‘special 301’’ was established to improve the capacity of the US to negotiate the issues of intellectual property rights. Finally, Title VII of the Omnibus Trade and Competitiveness Act aims at forcing countries to respect their commitments in opening of procurement contracts, especially that of telecommunications. Other legal devices came to support the American economic intelligence, as the Torricelli, Helms-Burton, or D’Amato laws. About security laws to collect information, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Patriot Act) is very important. Legally, it is about measures exceptional from the common law strengthening the powers of the executive to the detriment of the judiciary and public liberties. Indeed, henceforth, it is not necessary more than a threat is clearly established for the Minister of Justice to give its agreement to the launch of the procedure. Now, the FBI can ask for a prescription to obtain files, papers, documents, and other elements within the framework of inquiries on terrorist activities or secret activities of piece of information. On the other hand, by virtue of the article 215, the FBI can ask for the files held by companies based in the US or of files in which companies based in the US have directly access, and to oblige firms to reveal these inquiries. Several parameters allow to put in relation between the Patriot Act and device of economic intelligence, because this last one insures the security of companies (any intervention non-authorized in a computer system can be likened to a ‘‘terrorist act’’), allows the compilation of information y. The ratification in 2002, of the Homeland

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Security Act completes the legislative American arsenal of surveillance. In November, 2003, by the Patriot Act II, also named Domestic Security Enhancement Act, the Congress has still increased the powers of the FBI. It is henceforth possible to obtain any sorts of personal information on the Internet users. While it was supposed to be a temporary measure, G. W. Bush asked the Congress to return permanent employee Patriot Act in January, 2004. Behind Patriot Act, the evident stake is the surveillance of telecommunications. Except Patriot Act, the US government has another undoubtable weapon. The system American Level, supervised by the National Security Agency (NSA), is the most powerful device of listening the world that can be used to fine servicemen, political or commercial. Unlike the SIGINT (SIGnals INTelligence) traditional, it would be used for the economic espionage. Legally, the NSA can pass on information only to addressees authorized by the government; she cannot pass on it directly to the American companies. However, according to Wayne Madsen, a former worker of the NSA, the economic data collection sees recognizing a really priority character within Level and his object consists in getting advantages to the American companies. We are in the US economic intelligence (Fig. 1).

ECONOMIC INTELLIGENCE AND NATIONAL SECURITY: FIRST MODEL We present a condensed version of Seiglie and Coissard (2007) that treats economic intelligence as impacting on national security in two ways. We begin by assuming that the national security of a country depends upon the levels of its military spending and its adversaries. It is increasing in ‘‘own’’ expenditures and decreasing in the adversary’s. More formally, if we denote national security by s, and military spending m and m, where m denotes the adversary’s and m own spending, then: s ¼ sðm; mn Þ

(1)

with ð@s=@mÞ40 and ð@s=@mn Þo0. For any countries, its level of military spending depends upon its level of output or gross domestic product. Therefore, if we denote each country’s output by y and y, respectively, we have:

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Fig. 1.

The US Economic Intelligence System. Source: Coissard, 2007. ‘‘Le syste`me ame´ricain d’intelligence e´conomique’’, ARES.

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m ¼ mð yÞ

(2)

mn ¼ mn ð yn Þ

(3)

For simplicity, we assume that defense spending is a linear function of output namely, m¼ay (20 ) mn ¼ an  yn

(30 )

In reality, countries do not know the levels of military spending precisely. This comes about in the above formulation because either a and/or y is stochastic. Therefore, countries have a probability distribution over these variables. Economic intelligence can reduce the variance of estimates for a and y, but obviously at a cost since gathering information is costly. We can see that national security can be enhanced by economic intelligence in two manners within this framework. For any given country, economic intelligence can not only allow for better information on the adversary’s level of a and y, but also it can enhance the economic prospects in the acquiring country by allowing it to better compete with others. This can come about in several ways. First, industrial espionage can increase the market power of the acquiring firms and country. Secondly, information on competitors’ strategy and product developments can also lead to greater competitive positions in the world for the acquiring country. In this case, national security is enhanced by allowing for an increase in y and therefore, greater defense spending. We present a formal framework to analyze these issues. First, let us look at the impact of economic intelligence on an adversary’s economic potential. Let a country’s utility function depend on its level of consumption, ct, and national security st. More formally, u ¼ uðct ; st Þ

(4)

National security in period t, st, is a function of military spending by the country mt and that of its adversary’s mnt , st ¼ st ðmt ; mnt Þ

(5)

with ð@st =@mt Þ40 and @st =@mnt o0, i.e., Security is increasing in own defense spending and decreasing in the adversary’s spending. Suppose that the level of the adversary’s output, y, is stochastic and more specifically normally distributed with mean of m and variance s2.

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In order to highlight the issues, let the utility function be given by uðct ; st Þ ¼ u1 ðct Þ þ u2 ðst Þ

(6) n

with u1 ðct Þ ¼ expðact Þ and u2 ðst Þ ¼ expðhdÞ  b expðrd Þ where a, h, and b are parameters, d represent defense spending and r is a parameter of constant absolute risk aversion. So, uðct ; st Þ ¼ expðact Þ þ expðhdÞ  b expðrd n Þ

(7)

Substituting Eq. (3u), this can be expressed as: u ¼ expðact Þ þ expðhdÞ  b expðran yn Þ

(70 )

The country is faced with the constraint that: ct þ d þ X ¼ y

(8)

where X represent the level of spending on economic intelligence. Since y* is stochastic the individual maximizes the expected utility function (EU):   1 EU ¼ expðact Þ þ expðhdÞ  b exp ran m þ r2 an2 s2 (9) 2 Note that for this country the increase in the variance of y reduces expected utility. We assume that intelligence, X, reduces the variance of y, namely, s2 ¼ s2 ðXÞ. Therefore, the country’s problem is to maximize expected utility subject to Eq. (8) by choosing how much to consume, c, spend in defense, d and on economic intelligence, X.

ECONOMIC INTELLIGENCE AS SOURCE OF ECONOMIC POWER: SECOND MODEL In this model, let us concentrate on economic intelligence which increases a country’s future income, ytþ1 , namely: ytþ1 ¼ ytþ1 ðX t Þ with @ytþ1 40 @X t

(11)

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and @2 ytþ1 o0 @X 2tþ1 Notice that economic intelligence increases future output but is assumed to do so at a diminishing rate. Utility is now a function of consumption today, ct, consumption in the future, ctþ1, and national security, st. u ¼ uðct ; ctþ1 ; st Þ

(110 )

Assuming the real interest rate is zero, the country’s budget constraint is given by: ct þ ctþ1 þ X t þ mt ¼ yt þ ytþ1

(12)

The country wants to maximize Eq. (11u) subject to Eq. (12). Setting up the constraint optimization: L ¼ uðct ; ctþ1 ; st Þ þ l½ yt þ ytþ1 ðX t Þ  ct  ctþ1  mt  The first-order conditions are: @L @u ¼ l¼0 @ct @ct

(13)

@L @u ¼ l¼0 @ctþ1 @ctþ1

(14)

@L @u @s ¼ l¼0 @mt @st @mt

(15)

  @ytþ1 @L ¼l 1 ¼0 (16) @X @X Eqs. (13) and (14) give that the optimum consumption plan must satisfy: @u @u ¼ @ct @ctþ1

(17)

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Economic Intelligence and National Security yt+1 X

1$ demand

X*

Fig. 2.

X

Optimum Level of Economic Intelligence Spending.

i.e., consumption must equalize marginal utility in each period and this must be equal to marginal utility obtained by security. Note that the optimum level of economic information must satisfy Eq. (16) where (Fig. 2) @ytþ1 ¼ 1; @X

(18)

that is, the country continues to spend on economic intelligence to the point where the marginal benefit in increasing future output is just equal to the cost of forgoing a unit of current consumption.

CONCLUSION The conflicts moved armed conflicts between nations in the sphere of economic conflicts inside which information is a key element, through the competitiveness but also as an essential factor of destabilization of the competitors. The US system of economic intelligence rests on the will power of the American government; a lot of public agencies are at the disposal of private interest. We concede that such system still has some difficulties but it has no competitor in the world and will lead to a strategic advantage to the US firms and economy. All the more since, a system of economic intelligence will increase economic power in the future and could provide national security.

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NOTES 1. The Department of Health and Human Services (DHHS), Agriculture (USDA), Commerce (DoC), Defense (DoD), Education (DoED), Energy (DoE), Homeland Security and Transportation (DoT), Environmental Protection Agency (EPA), National Aeronautics and Space Administration (NASA), and National Science Foundation (NSF). 2. Today, all the American companies of international technological rank practise the economic intelligence with a professionalism and a rigour unsuspected and underestimated in France. 3. Through a myriad of small real or imaginary consultancy firms. 4. First multinational of intelligence, a global private secret service. 5. Many among the consultants of Kroll arise from services of the English– American piece of information, and their leaders are strictly connected to the American federal administration. This company, following the example of certain investment funds and big American companies knew always how to attract former leading foreign industrial and political leaders. 6. www4.law.cornell.edu/uscode/html/uscode19/usc_sec_19_00002411——000-.html

REFERENCES Carayon, B. (2006). Patriotisme e´conomique: De la guerre a` la paix e´conomique (p. 238). Paris: Editions du Rocher. Coissard, S. (2007). Le syste`me d’intelligence e´conomique ame´ricain. ARES, (58). Dasquie, G. (1999). Secre`tes affaires – les services secrets infiltrent les enterprises (p. 323). Paris: Flammarion. Krugman, P. (1996). Pop internationalism (p. 237). Boston: MIT Press. Krugman, P. (2002). Crony capitalism, USA. New York Times, January 15. http://query. nytimes.com/gst/fullpage.html?res=9D05E6DD1538F936A25752C0A9649C8B6 Laı¨ di, A. (2004). Quelques exemples d’affrontements France – Etats-Unis. Proble`mes Economiques, 2864, 9–14, December 8th. Lizin, A.-M., & Van Parys, C. (2002). Rapport sur l’existence e´ventuelle d’un re´seau d’interception des communications, nomme´ ‘‘Echelon’’, Se´nat et Chambre des repre´sentants de Belgique, 25 fe´vrier (p. 70). Bruxelles. Seiglie, Carlos and Coissard, S. (2007). ‘‘Incorporating intelligence in models of national security.’’ Rutgers University, Department of Economics Working Paper #2007-17.

INTERNATIONAL SECURITY AND SUSTAINABLE DEVELOPMENT$ Jurgen Brauer INTRODUCTION: SECURITY, DEVELOPMENT, SUSTAINABILITY The subject matter of international security and sustainable development is extraordinarily wide-ranging and involves three crucial issues to be addressed in the twenty-first century: (a) how to live (i.e., questions of development), (b) how to live with each other (i.e., questions of security), and (c) how to live with nature (i.e., questions of sustainability). It is just not clear how the three issues hang together. For example, even if we lived in a perfectly safe and secure world, we would still need to deal with the topics of development and sustainability and even if we had both of these, we would still not necessarily be safe and secure from each other. It follows that the three issues of security, development, and sustainability can be, but need not be, causally related (see Fig. 1, and ignore the overlaps and arrows for now). Initially, they are three separate spheres of inquiry and policy. Simplifying somewhat, among scholars security is mostly debated by political scientists and international relations experts; development mostly by economists (and some sociologists and anthropologists); and

$

A version of this essay was presented at the Colloquium on Economics of International Security, University Pierre Mendez France, Grenoble, March 16–17, 2007.

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 249–266 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06015-3

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(1) (2) Development (2)

Security (1) (1) (2) (3)

(1) (3)

(2) (3)

Sustainability (3)

Fig. 1. Relations Between and Among Security, Development, and Sustainability.

sustainability mostly by biologists, ecologists, and environmental scientists (but including some economists).1 In terms of policy efforts at the United Nations level, the Palme Report (1982) addressed security issues, the Brandt Report (1980) addressed development, and, certainly from today’s perspective, the Intergovernmental Panel on Climate Change (IPCC) Assessment Reports (1990, 1995, 2001, 2007) address sustainability, climate change in particular.2 Each sphere comes with a complement of U.N. offices and agencies. In the security arena we have, for instance, the U.N. Department of Disarmament Affairs and the U.N. Department of Peacekeeping Operations; regarding development, we have outfits such as the U.N. Development Program (UNDP) and U.N. Conference on Trade and Development (UNCTAD); and with respect to sustainability, we have for example, the U.N. Environment Program (UNEP) and the Food and Agricultural Organization of the United Nations (FAO).3

SECURITY–DEVELOPMENT The three spheres of security, development, and sustainability have also been investigated in their bilateral relations. For example, the Thorsson Report (1981) addressed the overlapping of disarmament and development. This was a very popular topic in the 1970s and 1980s. The Thorsson Report

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posed and explored what was then called the ‘‘disarmament for development’’ thesis, the idea that if Western Europe in particular could be disarmed, especially of nuclear weapons, then funds would be available for development in the South. In Brauer (1990), I published a critique of that thesis in part because I was dubious that the direction of causality should run in only one direction (from disarmament to development; see the solid arrow in the figure), and in part because there was an automaticity to the thesis that I found incredible. The doubt seems to have been borne out; while the end of the Cold War brought an appreciable peace dividend to Western Europe and to North America, enormous conflagrations erupted in sub-Saharan Africa. There average life expectancy was 51 years in 1990; by 2000 this had dropped to 47 years of age. Granted, some of that decline has to do with Africa’s AIDS/ HIV crisis. But the adult literacy rate was 50% in 1990 and only 39% in 2000. And the under-5 mortality rate (per 1,000 births) was 160 in 1990 and 162 in 2000 (see Table 1). Massive wars plagued the continent in the 1990s: Angola, Liberia, Rwanda, Sierra Leone, Somalia, southern Sudan, and Zaire/Congo, to mention a few. Other, less publicized violent conflicts occurred in places such as the Central African Republic, Chad, the Niger Delta, Uganda, and Zimbabwe. In light of this failure of ‘‘disarmament for development,’’ and in light of the end of the Cold War in the late 1990s when world military expenditure began a steady rise again, interest shifted from state security to human security. After a 20 year lapse of attention, a United Nations General Assembly mandate of November 2002 led a Group of Governmental Experts on Disarmament and Development to convene in 2003, and two prominent economists, Nobelist Lawrence Klein and Sir Richard Jolly, presented a seminar to that group in March 2004 to remind them of prior work in this field.4 Nonetheless, the direction of causality is still conceived as going from security to development, and the possibility of reversing the causality is not raised often (see the dotted, reverse arrow in the figure).5 Table 1.

Development Indicators for Sub-Saharan Africa.

Life expectancy Adult literacy rate Under-5 mortality rate (per 1,000 births) Sources: World Development Reports (1992, 2003).

1990

2000

51 50 160

47 39 162

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That possibility – from development to conflict – lies, however, at the heart of concerns over China’s rise, since 1978, to world economic power. While China’s army of 2.3 million men and its equipment needs command a still modest amount of military expenditure – officially about $45 billion or around one percent of China’s GDP6 – it is a large amount for the east Asian region. Military expenditure is income-elastic, so that with China’s rise in GDP, military expenditure grows as well. This, some say, put pressure on India in the early 1990s to revamp its economy, so that it, too, would generate the resources needed to put into its military sector. Fortunately, the primary effect thus far is on development, not the military.7

SECURITY–SUSTAINABILITY I am not aware of any major U.N. report on the connection in the second bilateral relation in Fig. 1, namely that between security and sustainability. But the International Union for the Conservation of Nature and Natural Resources (IUCN, for short), which is an international body of governmental and non-governmental environmental organizations, has for some time now engaged in a sideline of work in which this connection is explored. Since the mid-1990s we also have a corresponding and growing academic literature regarding the effects of environmental deprivation and scarcity on the emergence of violent conflict.8 Again, on the whole I have not found that literature to be terribly convincing.9 For example, the ‘‘water-wars’’ thesis – the idea that fresh-water scarcity leads to violent international conflict – has by and large not been borne out empirically.10 Instead, conflict over freshwater sources tends to occur within state boundaries as water is mostly a local, rather than a regional, or even global good. Water being a contested commons, communities, research shows, frequently find nonviolent solutions to fresh-water problems.11 Moreover, among hydrologists, water systems engineers, and others who have studied fresh-water supply and demand, the foremost priority lies in proper water systems design and pricing to reduce if not eliminate water wastage. That alone would address many of the water stresses people currently do experience. One problem is that whereas fresh water is in fact reasonably plentiful, people’s location preferences (e.g., rising urbanization) make it difficult to deliver water. In natural resource economics, much revolves around private property rights but a problem with that is that property rights are not always lodged with those who need them to secure their survival but with those who use them to

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secure rents that finance their affluence.12 This may have security implications when people contest who is to acquire rights to what. Note, once more, however, the direction of causality goes from sustainability to security (solid arrow in Fig. 1). Almost no systematic work has been done on the question of how violent conflict affects the environment, that is, reversing the causality to have it go from security, or lack thereof, to sustainability (dotted arrow).13 This is a serious shortcoming, as there is clear evidence on the exploitation of natural resources to help finance armed conflict, for example in Myanmar (Burma). The driving force is the security situation that leads to the exploitation and possibly unsustainable degradation of the natural resource stock (in this case, tropical timber). Similarly, the environmental effects of herding huge numbers of refugees into areas with limited carrying capacity, for example, in eastern Congo (Rwandan refugees) in the 1990s or northwestern Pakistan (Afghan refugees) in the 2000s, is under-investigated, as is the unsustainable bush-meat hunting in Africa made possible by high-powered firearms such as the AK47 submachine gun introduced for reasons of armed conflict. Likewise, little systematic research has been carried out on unexpected oddities in the security–sustainability relation. For example, the exclusion zone between North and South Korea is a well-acknowledged haven for wildlife, and certain areas in Angola have become wildlife refuge areas as landmines are precluding human settlement and agricultural activity. In Nicaragua, during the Sandinista-Contra war of the 1980s, rebel groups had strong incentives to protect the forests into which they could withdraw when they were being attacked.14 Note the very different incentives that are at work in the examples just given. Resource exploitation – whether it be Burmese timber resources or ‘‘blood diamonds’’ from Africa – help finance war. The immediacy of the security situation leads to a possibly unsustainable drawdown of the natural resource stock. But in the Nicaraguan case, instead of cutting the forests it became important to protect them. In either case, there is an instrumentality to the use (or abuse) of natural resources that makes one wonder about how ingrained in our economic behavior are considerations of sustainability. The easy availability of the AK47 and similar weapons have been directly linked to the probable extinction of the red-necked ostrich in Niger, the neardisappearance of the lowland gorilla in Kahuzi-Biega National Park in the eastern Congo, and the decimation of various sub-species of elephants and rhinoceroses. (These are not just issues of poaching but of weaponry brought into these regions for purposes of war.) The incentive mechanism here is simply that hunting by firearm is cheaper than hunting by traps and

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snares. During the 1990s’ civil war in Liberia, the incentive system actually worked the other way around. I quote at length from an excerpt from correspondence I had in November 2000 with Karl Kranz, then Senior Vice President for Animal Affairs at the Philadelphia Zoological Garden: I returned to Liberia in October 1995. There was a pause in the fighting and many of us thought the civil war might be over. I was not able to leave Monrovia because the UN peace keeping troops didn’t want to have to protect us in the hinterlands. I used the opportunity to interview people about their experiences during the war. Many people in Sinoe county went into hiding in the [Sapo National] park. As a rule, most soldiers don’t like to go into the forest and so it is a relatively safer place. Essentially all hunting in and around the park with fire arms stopped. People were too afraid that the sound of guns might attract soldiers. People used pit falls and snares to catch duikers and other animals. Everyone commented that the wildlife was much more abundant than before the war. I concluded that many of the ungulates, especially the duikers, probably had a population eruption because of the decrease in hunting pressure. I also found out that hunters were seeing and killing animals around Monrovia that had not been seen in the region for many years.

Now that the war has been over for a few years the hunting pressure with fire arms has greatly increased over pre-civil war levels. There is now a great deal of market hunting for Monrovia in the hinterlands. I would imagine any gains that were made with wildlife during the civil war have already been lost or will soon be lost. To repeat, while a literature has developed that asserts causality from sustainability (or environmental scarcity) to security, the reverse causality – from war to nature – as illustrated with these examples is not wellinvestigated at all (see Brauer, forthcoming).

DEVELOPMENT–SUSTAINABILITY Regarding the remaining bilateral link – that between development and sustainability – in 1987, the World Commission on Environment and Development (WCED) issued what came to be known as the Brundtland Commission report. It offered this definition of sustainable development: it is development that meets ‘‘the needs of the present without compromising the ability of future generations to meet their own needs.’’15 In early 2007, Donald Kennedy, a Harvard-trained biologist, former president of Stanford University, and since June 1, 2000 the editor-in-chief of Science, wrote that ‘‘sustainability would require that a resource be technically managed in such a way that its contribution to human welfare is conserved or improved for succeeding generations’’ (Kennedy, 2007, p. 573). In economists’ language,

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sustainability would then refer to leaving an intergenerational bequest of natural resources such that an offspring generation can prosper as much as or more than its parent generation. The direction of causality (solid arrow) runs from sustainability to development: if we want our offspring to live well (development) then that is a consequence of what we cause, or fail to cause, to be true today (sustainability). That certainly is the way much of the current discussion regarding climate change is couched. I will return to the causality issue in a moment. For now, Kennedy himself develops three scenarios that indicate why sustainability – meaning sustainable development – is too large a term for its own good. (I am renumbering and rearranging his scenarios.) One scenario revolves around total and differential population sizes. If sustainability means maintenance of resource availability on a per-capita basis, then for certain classes of natural resources such as fresh water, arid South Africa will need to adopt different utilization rates than water-logged Canada. This goes toward issues of unequal resource distribution across spatially diverse populations where the resource in question is not a conventional tradable good. Water is primarily a local good, and the cost of fresh-water transportation is too high to think of it as a global resource. South Africa is water poor, Canada is water rich, and it is not conceivable, at current costs, to think of large-scale water movement across the face of the earth. Most people, it seems to me, think of sustainable development as managing and delivering resources to where people live (i.e., primarily urban and coastal areas). But perhaps we need not bring resources to people but people to resources. Thus, sustainability depends not just on population sizes and population growth but on population location, density, and migration. The causality still runs from sustainability to development, though, but with the possible consequence that with migration, especially, may come security issues. A second scenario revolves around intragenerational equity. If parent population P leaves resources of size R in time t to offspring generation O in time tþ1, but the top-fifth of O receives 80% of R whereas the bottom fourfifth receives only 20% of R, we could technically still have sustainability. This is not what most people seem to have in mind when they talk about sustainable development. Along with development, people always seem to have equity issues in mind as well. The phrase to use then should not be sustainable development but equitable sustainable development, so that the title of this chapter now becomes ‘‘international security and equitable sustainable development.’’ The causality however is still from sustainability to development, only with the requirement that development now be equitable.

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A third scenario speaks to intergenerational issues. Whatever resources the parent generation decides to draw defines the offspring generation’s upper limits either on well-being (R/O) or of its population size (O). Thus, if P draws resources down to R ¼ 100 and if O ¼ 100, then R/O ¼ 1. Let R/O ¼ 1 be defined as ‘‘sustainable development,’’ the minimum per-capita subsistence level in terms of resource needs. Thus, P by drawing down R to R ¼ 100 has defined the upper limit of well-being for O. The only way for O to increase its well-being is to cut its size; if O ¼ 50, then R/O ¼ 2. Resource availability per person has increased. The point of the exercise is not that Kennedy is overlooking that there are other options – he realizes that improved resource utilization by O will increase the effective bequest of R ¼ 100 by P – but rather that P can always claim, no matter what happens, to have managed resources sustainably. It is just that O will have to do the adjusting, rather than P. As a biologist and environmental scientist, Kennedy is familiar with population crashes in nonhuman species induced by resource constraints, which come about by inadequate resource management by the parent generation or some external trigger beyond the control of P. The problem is that sustainability becomes defined by what P leaves, (which is equivalent to what P decides O needs), rather than by what O may want, but of course we cannot know what O may want. This is another reason why the concept of sustainability is so hard to pin down because most people, it seems, would want to define sustainability also in terms of an altruistic rather than selfish bequest motive. So now the title of this chapter becomes ‘‘international security and equitable, altruistic sustainable development!’’ It is now apparent that the Brundtland Commissions’ definition of sustainable development meeting ‘‘the needs of the present without compromising the ability of future generations to meet their own needs’’ is not useful on an operational level. The problem with the concept, says Kennedy, ‘‘turns out not to be just about resource use, efficiency of utilization, and conservation. Instead, the term carries with it strong social, economic, and cultural attributes’’ (Kennedy, 2007, p. 573). In practice, approaches to dealing with sustainability therefore are likely to be highly diverse.16 One-way in which approaches to sustainability may be highly diverse is by reversing the causality (dotted arrow in Fig. 1). Thomas Schelling makes the point that investing in climate change abatement (sustainability) today amounts to an income transfer from parent to offspring generations, where the likelihood is that offspring generations will be richer than we are and could better afford that investment. The opportunity cost of an intergenerational income transfer is a limitation placed on our ability to

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effect an intergenerational income transfer today. Our generation’s investment in climate change abatement sets limits to income transfers from currently rich to currently poor people (development) (Schelling, 2006b, p. 58). But development is the very thing that can mitigate the effects of lack of sustainability. For example, Schelling says, malaria kills a million people a year, but not anymore in the United States where it used to be common. Measles kill a million children a year, but not in the developed countries. Singapore and Malaysia, he says, were nearly identical in development and in climate in the 1960s but now are equal in climate only. Developed countries are ‘‘substantially immune to climate,’’ as most of our economies, unlike those of developing nations, rely on the service sector, not on agriculture (Schelling, 2006a, pp. 34–35). Schelling is pointing to a tension in the ‘‘sustainable development’’ phrase in that we may be sacrificing the very development today that may help bring about sustainability in future. While there is an inter-temporal tradeoff as regards investment, there may not be an inter-temporal tradeoff between development and sustainability.17

ALL TOGETHER NOW: SECURITY, DEVELOPMENT, SUSTAINABILITY While Donald Kennedy is the editor-in-chief of Science, John P. Holdren is the President of the American Association for the Advancement of Science (AAAS), the publisher of the journal Science. When the Association held its annual meeting February 15–19, 2007, in San Francisco, the conference theme was ‘‘Science and Technology for Sustainable Well-Being.’’ The issue of Science just prior to the meeting contains a special section on the topic of energy and sustainability. Most of the contributions deal with replacement of current fossil fuel energy sources, and with a bit of revival of alternative fuels such as of biofuel, nuclear, and solar energy. There is not much said about environmentalists’ traditional three-R’s – reduce, reuse, recycle. The focus on replacement is actually quite appropriate for science and technology. These may help address long-term supply issues. But in the short-term, Holdren writes, energy is ‘‘tightly intertwined with national and international security [security] and with many of the most damaging and dangerous environmental problems [sustainability] y as well as with the capacity to meet basic human needs and fuel economic growth [development].’’

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So, there we are at the junction of security and sustainability and development, and no hint of directions of causality. All are just ‘‘tightly intertwined.’’18 The long-term historical rate of increasing energy efficiency is only about one percent per year, too little to cope with projected population growth and aspirations to higher per-capita energy use. With supply lacking, and lagging, and causing environmental, developmental, and security problems, there is therefore, John Holdren says, really not much of an option other than to reduce population growth and continue to try to increase ‘‘the efficiency of energy conversion and end use’’ to two percent or more (Holdren, 2007, p. 737). But the fossil fuel we have is mostly wasted. For the United States, for instance, calculations show that more than half of the energy content put into the system is lost by the time it gets to end-users (see Fig. 2). Much more needs to be done in research and in policy regarding energy conservation and conversion (in production, transport, storage, and usage). Like water, energy is wasted on a royal scale. But unlike water, we are not far from exhausting our fossil fuel resources,19 so that energy-related research and policy assume more immediate urgency. Thus, the admittedly pressing issue of addressing climate change and the associated need to reduce carbon emissions and to sequester carbon already emitted does not relieve us of the even more pressing need to find alternative energy sources. Meanwhile, by way of example, to maintain its economic development drive, China is diversifying its fossil fuel energy sources to Russia, Kazakhstan, the Middle East, and Africa. This carries at least two sets of implications. One is that China is vastly expanding its fleet of state-owned tankers as it does not wish to be wholly dependent on foreign-flagged carriers. By the year 2020, it hopes to carry 60–70% of its seaborne oil imports in state-owned vessels (Collins, 2006). This requires China to invest in a massive shipbuilding program that is expected to adversely affect its blue-water navy ambitions which, in turn, carries geopolitical consequences in relation to India, Taiwan, and the United States. Moreover, China’s oilrelated investments in Africa – Algeria, Angola, Chad, Equatorial Guinea, Gabon, Nigeria, the Republic of Congo, and Sudan – have already caused substantial security, environmental, and developmental concerns, not only in Africa itself, but for instance with regard to China’s behavior in the U.N. Security Council when questions concerning Sudan’s war in Darfur come up. While China works with many disreputable regimes, much the same can be said of the United States (e.g., Egypt, Pakistan, and Saudi Arabia) and other Western democracies. China is, at any rate, investing substantial amounts of money in Africa, supplying peacekeepers, and doling out foreign aid. It is Africa’s third largest trading partner and on the way to become its

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Fig. 2.

U.S. Energy Flow Trends in 2005 (Units in Quadrillion BTU). Source: PCAST, 2006, p. 5. 259

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number one investor, all-in-all a good example of how security, development, and sustainability inextricably hang together.20 The other set of implications concerns oil and gas pipelines from Russia and Kazakhstan to China. Needless to point out that given Russia’s recent oil-and-gas transport behavior with respect to Central Asia and Central and Western Europe, China has no interest in being held hostage to Russian pipelines. In fact the exact route of a new East-Siberia Pacific Ocean (ESPO) pipeline is still to be decided, as Japan and South Korea hanker for access to Russian oil and gas that does not involve China. Right there is a knot of security, environment, and development questions that has puzzled scholars, politicians, and activists to no end. China, at any rate, is not foolish enough to rely on Russian supplies, should they be forthcoming (the pipeline is many years away from completion), and, as it has invested in Africa, is investing in massive oil and gas pipeline projects from Kazakhstan to China. In both cases, however, the pipelines as currently envisioned are to run across environmentally, extremely sensitive terrain and through territory with ethnically highly diverse populations, whose participation in project planning and in the economic benefits the pipelines might bring is for the most part being ignored.21 And so we come to Kazakhstan, a country little known in the West.22 Apart from being oil and gas rich, it also holds about a fifth to a fourth of the world’s uranium resources, a critical ingredient for nuclear power generation. It is pursuing an ‘‘end-run’’ around Russia not only toward China but toward Western Europe via Caspian pipelines to involve Azerbaijan, Armenia, Georgia, and on to the Black Sea, and thence to Europe. Kazakhstan is also much in discussion, with other Central Asian producers, to build pipelines to Pakistan and India. I will not pursue this line of thought here but it is easy to see that, in Central Asia (and Africa), the Middle East is getting competition. But Central Asia might – just might – turn out to be even more volatile, once the money starts flowing in, than the Middle East, with China and Russia sitting right on its borders and no direct Western access to the region at all.

CONCLUSION To conclude, and to return to the issue of sustainability, let me quote from Kenneth Boulding, always a pleasure to read. In a four-decade old essay, he speaks of a ‘‘cowboy economy’’ and a ‘‘spaceman economy.’’

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In the cowboy economy, consumption is regarded as a good thing and production likewise; and the success of the economy is measured by the amount of the throughput from the ‘‘factors of production,’’ a part of which, at any rate, is extracted from the reservoirs of raw materials and noneconomic objects, and another part of which is output into the reservoirs of pollution. If there are infinite reservoirs from which material can be obtained and into which effluvia can be deposited, then the throughput [measured as GPD] is at least a plausible measure of the success of the economyy By contrast, in the spaceman economy, throughput is by no means a desideratum, and is indeed to be regarded as something to be minimized rather than maximized. The essential measure of the success of the economy is not production and consumption at all, but the nature, extent, quality, and complexity of the total capital stock y In the spaceman economy, what we are primarily concerned with is stock maintenance, and any technological change which results in the maintenance of a given total stock with a lessened throughput (that is, less production and consumption) is clearly a gain (Boulding, 1997 [1966], pp. 9–10).

The cowboy economy assumes an open system without constraints. The spaceman economy assumes a closed system, especially in regard to the law of energy conservation.23 If in the past humanity has behaved as if Earth were a cowboy economy, it appears that we have ridden our horses long and hard and far enough. We can now see the fences and realize that Earth really is a closed system. Sustainable development is a long-term issue inasmuch as it can be addressed only in time spans counted in decades. Although that long-run is coming ‘‘nearer,’’ international security issues – that is, shootouts with all the other riders around us – are even more immediate. We do know, however, that if the United States can spend one trillion dollars on a missile-defense system (Kaufman, 2003) and another three trillion or more dollars on the Afghan and Iraq wars (Bilmes & Stiglitz, 2008) that the constraint to addressing development, sustainability, and even security issues does not lie primarily with money but perhaps more with the quality of public sector decision making.24

NOTES 1. For example, in October 2006, the so-called Stern Review on the Economics of Climate Change was published by the U.K. Treasury. Sir Nicolas Stern is a prominent economist. See http://www.hm-treasury.gov.uk/independent_reviews/stern_review_ economics_climate_change/sternreview_index.cfm [accessed April 18, 2007]. 2. See Palme Report (1982) and Brandt Report (1980). The Intergovernmental Panel on Climate Change (IPCC) was established in1988 as a joint organization of the World Meteorological Organization (WMO) and the United Nations Environmental Program (UNEP). The first Assessment Report (AR) on climate change was published in 1990; the second in 1995; the third in 2001. See http://www.ipcc.ch/index.html

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[accessed March 2, 2007]. The fourth AR increased the range of forecast average temperature by 2100 from 1.4–5.81C in the 2001 report to 1.1–6.41C in the 2007 report. 3. For a U.N. organizational chart, see http://www.un.org/aboutun/chart.html [accessed March 6, 2007]. 4. See Klein (2004) and Jolly (2004). The Governmental Experts’ report is available at http://daccessdds.un.org/doc/UNDOC/GEN/N04/402/50/PDF/N0440 250.pdf?OpenElement [accessed March 5, 2007]. 5. Various initiatives have been undertaken by state and multi-state actors (e.g., the EU, World Bank) to ensure that development aid is not diverted into military expenditure. In practice, aid is fungible and few states seem to have been punished for an excess of military expenditure or armed conflict. The long-standing proposal to tax the international arms trade and divert the proceeds toward development has not taken off because limiting that trade through taxation causes a variety of unintended, counter-productive consequences. For example, higher prices (through taxation) encourage black arms markets; it also encourages the formation of indigenous arms production efforts; and it would likely cause higher arms import expenditure since the demand for arms imports is probably price-inelastic. See, for example, Brzoska, 2004. 6. The Wall Street Journal, March 5, 2007, p. A3. ‘‘China’s defense budget for this year amounts to nearly $45 billion. The U.S. defense budget for the 2007 fiscal year, which ends September 30, is expected to top $600 billion. China’s spending is equivalent to somewhat more than 1% of the country’s GDP. The U.S. spends about 4% of GDP on defense.’’ [accessed March 5, 2007] 7. On the whole, economic growth tends to raise the funds needed to expand the military sector. Rarely does the evidence point the other way – from military expenditure to economic growth – at least not in any substantial and sustained way. If anything, excessive military expenditure (in relation to the size of an economy) carries a substantial opportunity cost that limits economic growth and development. For example, Pakistan’s economy has not made much progress, even as huge sums have been spent on its military. 8. Environmental degradation generated through long-term resource abuse or through cataclysmic events (e.g., tidal waves) can result in massive migration by environmental refugees. This, in turn, can cause conflict with people in the areas these refugees move to. Note that transnational environmental refugees have no legal status in international law. If the migration is domestic only (e.g., Hurricane Katrina victims in the U.S.), then refugees are subject to domestic provisions. In either case, environmental insecurity is frequently coupled with legal insecurity. Transboundary pollution likewise can cause inter-state conflict. While some international law speaks to that, enforcement mechanisms are generally absent. I thank Albane Geslin for raising these points. 9. A classic reference is Homer-Dixon, 1994. For a critique of that literature, see, for example, Gleditsch, 1998. 10. See Mehta (2003) and also Pryor (2007), and articles in The Economics of Peace and Security Journal Vol. 2, No. 2 (July 2007). 11. For a critical discussion and literature see, for example, Mehta, 2003. 12. See Mehta, 2003. Also see the parable in Neher, 1990, pp. 349–350. 13. One exception is Westing (1976, 1980, 1985).

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14. These examples are drawn from Brauer (forthcoming). 15. See http://www.un.org/documents/ga/res/42/ares42-187.htm [accessed March 5, 2007]. This is from a U.N. General Assembly resolution that adopted the Commission’s definition. An internet copy of the Report is available at http:// www.ringofpeace.org/environment/brundtland.html [accessed 5 March 2007]. 16. But when Kennedy says that the concept of sustainability is not ‘‘just about resource use, efficiency of utilization, and conservation,’’ it is of course also about them. What is sustainable or not depends on as yet un-invented technology. Thomas Schelling, who has thought about these matters for many years, asks us ‘‘to image how we might have reacted y. if, say, eighty years ago global warming and attendant climate changes of the kind now being discussed had been seriously considered.’’ He goes on to say that: y if the climate change so predicted in 1925 had actually occurred by now, how might a farm boy of that time who stayed on the farm and lived to the present reflect on the changes that had occurred during his lifetime? Would the change in climate stand out? My guess is that the now-aged farmer would be more impressed with the disappearance of the horse; with the coming of electricity, telephone, and radio (let alone television); with hybrid corn, antibiotics, and pesticides; with still having most of his original teeth; and with having college-graduate grandchildren whom he could visit easily a thousand miles away. He might not notice milder winters; he has gloves and boots and parkas that didn’t exist when he was a boy; his car has a heater, and, in case his road isn’t plowed, he has snow tires (and air conditioning for the summer). His agricultural technology has changed so much he isn’t sure what difference any change in climate may have caused in agricultural productivity. Seventy years ago we didn’t have electronics, radioisotopes, nuclear energy, antibiotics, genetics, satellites, or even plastics – it was all silk, rayon, isinglass, and celluloid. How do we possibly foresee seventy years from now (Schelling, 2006a, pp. 33–34)?

If Keynes thought that in the long-run we are all dead, Schelling in this passage suggests that in the long-run we might all survive. For both of them, the crux of the matter of course lies in the short-run adjustment, in the transitional phase between any two arbitrarily chosen points in time. 17. Sustainability, especially climate change, is the current buzz-word. A few years back it was biodiversity. Biodiversity refers to the ‘‘variability among living organisms from all sources including, inter alia, terrestrial, marine, and other aquatic ecosystem and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems.’’ Biodiversity ‘‘sustains the productivity of ecosystems, enabling them to provide economically important local services such as the hydrological cycle – including flood control, water supply, waste assimilation, nutrient recycling, soil conservation and regeneration, and crop pollination.’’ (See Perrings & Gadgil, 2003) As for the case of climate change, there is no necessary tradeoff between development and conservation. To have one, the other need not be sacrificed. Likewise, causation is not one-way. It can be in that conservation induces development, but does not have to be in that many developed countries now have the means to do the conserving.

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An additional point is that resources in non-national regions, for example, mineral resources in international waters, are treated as a ‘‘common heritage of mankind’’ under the 1982 United Nations Convention on the Law of the Sea (LOS). These resources cannot simply be appropriated by states or natural or juridical persons and, if they are, are governed by contested rules of benefit distribution. See articles 136 and 137 at http://www.un.org/Depts/los/convention_agreements/texts/unclos/ closindx.htm [accessed April 18, 2007]. 18. The interplay of environmental, developmental, and security problems is also the main theme of a third Science writer, namely Rajendra K. Pachauri, who directs The Energy and Resources Institute in New Delhi, India, and, perhaps more importantly, is the chair of the Intergovernmental Panel on Climate Change (IPCC). Prof. Pachauri writes that ‘‘the current path of economic growth deviates from the objectives of sustainable development’’ (which he does not define) and that ‘‘threats to human life and global peace [security], disruptions in the delicate balance of Earth’s natural systems [sustainability], and the growing gap between rich and poor [development]’’ are among the ‘‘most critical impediments to the sustainable welfare of human society’’ (Pachauri, 2007, p. 913). 19. ‘‘At constant production and consumption, the presently known reserves of oil will last around 41 years, natural 64 years, and coal 155 years.’’ In 2004, however, oil, gas, and coal still accounted for over 80% of world total primary energy supplies. Quote and figures from Goldemberg, 2007, p. 808. 20. Information in this paragraph from Pan, 2007. Also see Economy and Monaghan, 2006. 21. See http://www.harrimaninstitute.org/research/energy-pipelines/events-past. html [accessed 7 March 2007] for papers and presentations made at a conference on Eurasian Pipelines at the Harriman Institute of the School for International and Public Affairs at Columbia University, New York, November 30/December 1, 2006. 22. Little is known apart from the successful film Borat. 23. Energy cannot be created, nor destroyed; only its form can be changed, for example, from potential to heat energy. 24. Deficit-financing of public goods can be a reasonable choice so long as there is an appropriate return-on-investment on the expenditure of taxpayer funds. Thus, few object to expenditure on transportation, education, health, and public safety infrastructure. Likewise, states already undertake considerable environment-related domestic expenditures. The key problem with the economics of climate change is to overcome free-rider behavior for the financing of a global public good. On this topic, see, for example, Kaul, Grunber, & Stern, 1999; Kaul, Conceic- a˜o, Le Goulven, & Mendoza, 2003.

ACKNOWLEDGMENTS For comments, a thanks is extended to the conference participants as well as Jean-Francois Ponsot and Albane Geslin. The usual disclaimer applies.

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REFERENCES Bilmes, L., & Stiglitz, J. (2008). The three trillion dollar war. New York: W.W. Norton. Boulding, K. E. (1997 [1966]). The economics of the coming spaceship earth. In: R. Costanza, C. Perrings & J. C. Cutler (Eds), The development of ecological economics (pp. 3–14). Cheltenham, U.K. and Lyme, NH: Elgar. [Originally published under the same title. In: H. Jarrett (Ed.), Environmental quality in a growing economy (pp. 3–14). Baltimore, MD: Resources for the Future/Johns Hopkins University Press.] Brandt Report. (1980). North-South: A program for survival. Cambridge, MA: The MIT Press. Brauer, J. (1990). Reviving or revamping the ‘disarmament-for-development’ thesis? Bulletin of Peace Proposals, 21(3), 307–319. Brauer, J. (forthcoming). War and nature: The environmental consequences of war in a globalized world. Lanham, MD: AltaMira Press. Brzoska, M. (2004). Taxation of the global arms trade? An overview of the issues. Kyklos, 57(2), 149–171. Collins, G. (2006). China seeks oil security with new tanker fleet. Oil & Gas Journal, 104(38), 9 October 2006. http://www.ogj.com/display_article/274229/7/ARCHI/none/none/China_ seeks_oil_security_with_new_tanker_fleet/] [accessed 20 November 2006]. Economy, E., & Monaghan, K. (2006). The Perils of Beijing’s Africa strategy. International Herald Tribune. 1 November 2006. http://www.iht.com/articles/2006/11/01/opinion/ edecon.php [accessed 7 March 2007]. Gleditsch, N. P. (1998). Armed conflict and the environment: A critique of the literature. Journal of Peace Research, 35(4), 381–400. Goldemberg, J. (2007). Ethanol for a sustainable energy future. Science, 315(5813), 808–810. Holdren, J. P. (2007). Energy and sustainability. Science, 315(5813), 737. Homer-Dixon, T. F. (1994). Environmental scarcities and violent conflict. International Security, 19(1), 5–40. Jolly, R. (2004). Disarmament and development: An overview (pp. 23–41). In: Symposium on the relationship between disarmament and development. New York: United Nations. Department for Disarmament Affairs. DDA Occasional Papers, No. 9 (November). http://disarmament.un.org/ddapublications/op9.htm [accessed 5 March 2007]. Kaufman, R. (Ed). (2003). The full costs of ballistic missile defense. Report by the Center for Arms Control and Non-Proliferation and Economists Allied for Arms Reduction. Available at http://www.armscontrolcenter.org/nmd/fullcost.pdf [accessed 12 March 2007]. Kaul, I., Conceic- a˜o, P., Le Goulven, K., & Mendoza, R. U. (Eds). (2003). Providing global public goods: Managing globalization. New York: Oxford University Press. Kaul, I., Grunber, I., & Stern, M. A. (Eds). (1999). Global public goods: International cooperation in the 21st century. New York: Oxford University Press. Kennedy, D. (2007). Sustainability. Science, 315(5812), 573. Klein, L. (2004). World peace and economic prosperity. pp. 1–10 in Symposium on the Relationship Between Disarmament and Development. New York: United Nations. Department for Disarmament Affairs. DDA Occasional Papers, No. 9 (November). http://disarmament.un.org/ddapublications/op9.htm [accessed 5 March 2007]. Mehta, L. (2003). Problems of publicness and access rights: Perspectives from the water domain. In: I. Kaul, P. Conceic- a˜o, K. Le Goulven & R. U. Mendoza (Eds), Providing

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global public goods: Managing globalization (pp. 556–575). New York: Oxford University Press. Neher, P. A. (1990). Natural resource economics: Conservation and exploitation. Cambridge: Cambridge University Press. Pachauri, R. K. (2007). Sustainable well-being. Science, 315(5814), 913. Palme Report. (1982). Common security: A blueprint for survival. The Independent Commission on Disarmament and Security Issues. New York: Simon and Schuster. Pan, E. (2007). Backgrounder: China, Africa, and Oil. Updated: 26 January 2007. New York: Council on Foreign Relations. http://www.cfr.org/publication/9557/ [accessed 7 March 2007]. PCAST. (2006). The energy imperative: Technology and the role of emerging companies. Washington, DC: The President’s Council of Advisers on Science and Technology. Report. November 2006. http://www.ostp.gov/pdf/pcast_energyimperative_final.pdf [accessed 20 July 2008]. Perrings, C., & Gadgil, M. (2003). Conserving biodiversity: Reconciling local and global public benefits. In: I. Kaul, P. Conceic- a˜o, K. Le Goulven & R. U. Mendoza (Eds), Providing global public goods: Managing globalization (pp. 532–555). New York: Oxford University Press. Pryor, F. L. (2007). Water stress and water wars. The Economics of Peace and Security Journal, 2(2), 7–18. Schelling, T. (2006a). What makes greenhouse sense? (pp. 27–44). In: Thomas Schelling, Strategies of commitment and other essays. Cambridge, MA: Harvard University Press. First published under the same title in Indiana Law Review, 38(3), (2005), 581–593. Schelling, T. (2006b). Intergenerational and international discounting. (pp. 51–59). In: Thomas Schelling, Strategies of commitment and other essays. Cambridge, MA: Harvard University Press. First published under the same title in Risk analysis: An international journal, 20(6), (2000), 833–839. Thorsson Report. (1981). United Nations. Study on the relationship between disarmament and development: Report of the Secretary-General. New York: United Nations. Document A/ 36/356 of 5 October 1981, available at http://disarmament2.un.org/cab/d&d.html (three parts and one correction) [accessed 12 March 2007]. Westing, A. (1976). Ecological consequences of the second Indo-China War. Stockholm: Almqvist & Wiksell. Westing, A. (1980). Warfare in a fragile world: Military impact on the human environment. London: Taylor & Francis. Westing, A. (Ed.) (1985). Explosive remnants of war: Mitigating the environmental effects. London: Taylor & Francis.

SECURING THE ENVIRONMENT AND SECURING STATES Urs Luterbacher and Carla Norrlo¨f INTRODUCTION Is conflict driven by environmental scarcities or an abundance of natural resources? For quite some time, this question has generated a lively academic debate. The theoretical literature and empirical evidence it offers are inconclusive. On the one hand, authors such as Homer-Dixon (1994) have emphasized the importance of resource scarcities in explaining conflict. On the other hand, scholars such as Collier and Hoeffler (1998) have tried to link conflict with a relative abundance of natural resources. We believe that the failure to provide a coherent explanation upon which rigorous predictions can be based is due to the neglect of institutions in understanding resource use. What we will try to highlight here is the importance of institutional settings to explain this apparent paradox. Ever since Hardin’s seminal article on ‘‘The Tragedy of the Commons,’’ the importance of property rights for preventing the overuse of natural assets has been widely acknowledged (Hardin, 1968). Whereas open access to resources leads to overexploitation and abuse, proper regulation generates efficiency and conservation. As a major corollary, the question of environmental scarcities cannot be reduced to exogenous ‘‘natural forces.’’ If overdrawn, an overabundance of unregulated resources can very quickly give way to scarcity. Similarly, a country blessed with a copious

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 267–296 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06016-5

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amount of precious resources may experience shortages after a military ruler or warlord seizes them to appropriate other scarce and unprotected resources. In other words, if overuse triggered the scarcity that provoked conflict, institutional deficiencies are at the root of conflict, even if such conflict emanates from the dearth of natural resources. Poor institutions may also contribute to conflict when attempts are made to capture a precious good (such as minerals or timber) that exists in plenty in a particular area. Using force to control that particular resource can then facilitate violent appropriation of other scarce assets within a society. In either case, a society incapable of instituting a proper regulatory framework will see the eruption of resource conflict. Environment-related conflicts are but one way to think about connections between the environment and organization and power structures within and between societies. A regulatory scheme is necessary to ensure both environmentally sustainable and well-organized, well-run societies. The power to enforce property rights often requires coercion both to deter predatory moves within, just as importantly between, states. A wellmanaged society requires regular means to maintain a coercive apparatus. Enforceable property rights are essential to economic activity, and it is necessary to maintain a production base in order to raise the taxes to fund a coercive apparatus capable of enforcing such rights (North, 1981). This connection between spheres of production and protection also has important implications for international relations. Efficient resource use, which ultimately is tied to property rights definitions, determines international structures much more generally. We develop a stylized model of society that provides a private good for production purposes and collective good for defense purposes. We examine its characteristics first as a single (autarchic) society and then as an entity of an international system. We will show in particular how the taxation base of a society, as well as some other basic parameters related to defense and military technology, is paramount in determining its military posture toward other societies. Whereas technological factors are exogenously determined, two phenomena largely influence the taxation base and domestic policies. First is the extent to which a society is able to organize itself efficiently, i.e., in more technical terms to reach Pareto optimality. This is in our view another metaphor for well-defined regulatory schemes and property rights structures. The second important factor enhancing the taxation base is the existence of a significant amount of transaction both within and among societies. In fact, these two aspects reinforce each other: an efficient (Pareto optimal) organization encourages transactions within a

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society, which then can lead to additional transactions between societies in the form of trade. Our model is based on a modified version of the theory on the optimal use of exhaustible and slowly renewable resources advanced by Dasgupta and Heal (1979). We have made adjustments to take into account variations in returns to scale in production and protection, as well as in the transformation rate between these activities, and for the possibility that actors may be risk preferring in their consumption and production attitudes and decision making more generally (Fishburn & Kochenberger, 1979; Kahneman & Tversky, 1979; Dacey, 1998). These changes are necessary to generate the kind of relationships outlined above. They reflect our criticism of alternative conceptions of the relationship between production and protection, in particular, the Konrad–Skaperdas conception, which is based on a burgeoning literature on the origin of power structures and the market to protect property rights (cf. Grossman, 1991; Hirshleifer, 1988, 1989, 1995; Usher, 1989). The Konrad–Skaperdas approach is an examination of simple agricultural-type productive structures that are threatened by raids of ‘‘bandits.’’ According to their analysis, the need for protection can generate one of four power structures: Anarchy, an equilibrium in which peasants rely on individual protection against bandits; Self-governance in which peasants organize a common protection force against bandits; Leviathan in which an individual ruler takes a ‘‘cut’’ from peasant revenue in exchange for protection; and Competing Lords who each take a cut from peasant revenue in exchange for protection.1 Since these will end up fighting each other in the competition for protection, the equilibrium situation they generate is sub-optimal and referred to as the ‘‘tragedy of coercion.’’ Which power structure eventually prevails, in this model, is determined by changes in the relative costs between private and collective protection. Anarchy results if the difference between private and collective protection is low. Otherwise some form of state structure – Leviathan, Self-governance, or a society of Competing Lords – is bound to emerge. The cost of protection – specifically changes in the unit cost of soldiers – faced by the ‘‘Leviathan’’ ruler or ‘‘Competing Lords’’ is also decisive. Whenever wages for soldiers are lower than peasants, a Leviathan regime will materialize at first, then one of Competing Lords, but never one of Selfgovernance. The Konrad–Skaperdas conception is not only based on the assumption of diminishing returns to agricultural production, but also on the general notion that major trade-offs exist between productive and protective activities and between private and collective defense. All these assumptions

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are debatable. First, even though agricultural production is subject to diminishing returns in the long-term, intensifying production or opening new lands through the adoption of irrigation techniques or more aggressive cultivation methods can increase relative yields. Second, coercive methods almost always have been used to open up new land for cultivation and herding, underlining the strong complementarities between protection and agricultural production. Over time, it will also become rational to invest in training and weaponry. At some point, a militia capable of protecting productive activities from predatory bandits and power hungry lords will appear. Finally at some level of production, trade in agricultural products and later in manufactured goods will begin.

Collective Action and Dual Strategy The main drawback of the Konrad–Skaperdas model of society is that it is mainly driven by the relative costs of private versus collective protection and thus mostly by the evolution of military technology. Other scholars adopting similar perspectives, such as Hirshleifer’s, adopt similar assumptions.2 There is either very little qualitative or quantitative evidence suggesting that the possession of more advanced military technology ultimately carries the day except in situations of extreme asymmetries such as the conquest of Central and South America by Spain or the colonial wars of the nineteenth century. Rockets and bombs did not prevent the Mongolian conquest of China, and the Byzantine Empire continued to decline even after the invention of Grecian fire. We suggest, rather, that the interactions between production and protection are essential in determining the characteristics of states and state systems. Moreover, these are not recent developments but date far back in human history. Archeologists tell us that the first states were established to solve certain types of resource problems related to the adoption of large-scale agricultural technologies and the promotion and protection of trade routes.3 Increasing returns to scale could be achieved by investments in massive collective works like irrigation networks, which also necessitated the building of canals, dams, and reservoirs. This required an organization of production and labor that went beyond the local level. Moreover, if a surplus was achieved, storage facilities were needed. These new activities required coordination and supervision. At the same time, the surplus and infrastructures attracted outsiders. Management and protection of agricultural production led ultimately to the creation of specialized armed units. In time, these forces

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might try to gain a larger share of the surplus by repressing locals, by conquering new land, or by protecting trade routes and distant colonies. Since benefits can be made from raiding other states’ resource reserves, specialized raiding states with appropriate armed forces will emerge. One can also imagine the creation of states that specialize in the protection of others and reap benefit from this, for example Sparta or Rome. As history has shown, such systems easily evolve into hegemonic ones. Typically, the organization of one collective good – new agricultural technologies or irrigation – therefore results in other collective goods – defense, armed forces, and organized trade. This stylized presentation clarifies the connection among different collective goods linked to statebuilding and makes it abundantly clear that states have dual strategic goals. On the one hand, they must constantly tend to their resource base, and on the other hand, they must protect that resource base in order to ensure its long-term viability. To present a state uniquely as a security seeker is thus a gross misrepresentation of its fundamental aspects.4 Although a state is usually characterized as a particular kind of collective good, previous work has focused largely on the difficulties of ‘‘purchasing’’ the collective good, group size, and free rider effects (Olson, 1965, 1982; Sandler, 1992). The link between property rights and collective goods, socalled commons, has also been analyzed widely (Hardin, 1968; Ostrom, 1990). But the pervasive links between protection and production that exist within society and the way these ‘‘dual strategies’’ shape patterns of interaction at the international level largely have been ignored. A notable exception here is Gilpin’s War and Change in World Politics (Gilpin, 1981). In order to show how change occurs in the international system, Gilpin uses an S-curve to model the expansion of a particular country and argues for the importance of property rights protection in determining the international distribution of wealth, but he does not provide a framework that connects property rights protection with military protection within a society and therefore cannot tell us how the relationship between property rights protection and military protection shapes interactions between states. In this study, we are interested precisely in the domestic and systemic effects of balancing private and public goods. The main defining feature of a collective good is ‘‘jointness of supply’’ – once supplied to one actor, the good is supplied to all. The ability of a particular actor to use the collective good cannot be attributed exclusively and will depend on group size (how many others are attempting to do the same). A perfect jointness implies how much one actor consumes will not affect others’ level of consumption; although, jointness is often so imperfect that some rivalry is involved. By contrast,

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a private good is not characterized by jointness and can be excluded. Therefore, an individual’s utility level is uniquely affected by its own consumption. But whenever the good in question is collective, jointness is often imperfect and exclusion prohibitively costly. How much others consume therefore affects the individual utility levels. In their classical work Economic Theory and Exhaustible Resources, Dasgupta and Heal show that ‘‘jointness’’ is derived from a general theory of externalities, which can either be positive or negative. The theory of externalities they presented is based on the simplifying assumption of the availability or production of two goods, one private and one collective, within a socio-economic system. This could also represent a political structure composed of a productive (private good) sector assuring subsistence and a government with a defense organization. As we will show, this theory of externalities is remarkable in its ability to give meaning to a wide range of social phenomena as part of one theoretical construction. The establishment of a formal theory of externalities should help clarify collective good and property rights issues and correct some of the weaknesses in the literature on ‘‘conflict and exchange.’’

THE MODEL The formal theory of externalities assumes that for N individuals (or households) in a particular social group g, xi represents the quantity of the private good consumed by individual i and g1, g2, g3, y, gi, y, gN, the amounts of the collective good used by individuals 1, y, i, y, N (Dasgupta & Heal, 1979). ui ¼ ui ðxi ; g1 ; . . . ; gi ; . . . ; gN Þ ui ¼ ui x i ;

N X

(1)

! gi

(2)

j¼1

The expression (2) is a special case of (1) in which individual (or household) i’s utility depends on the total quantity of the collective good consumed, purchased, or produced by everyone (Dasgupta & Heal, 1979). Let us further assume that either all individuals are identical or very similar in their preferences or agent i represents a median decision maker that sets the tone for what is happening in society. A crucial assumption resides now in the definition and specification of ui. Standard assumptions about rational behavior contradict empirical evidence by assuming that most

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preference schemes, whether individual or collective, can be described as either risk neutral or averse. These premises are established usually for mathematical convenience to simplify complex issues and reduce them to simple linear ones. Experimental psychologists and even observers of animal behavior have noticed that risk preference often follows risk aversion in situations where decision makers are faced with the prospect of loss (Stephens, 1990). Risk aversion and preference are usually seen together, and various attempts have been made to explain their joint appearance. The principal analyzes of hybrid risk attitudes are given by Battalio, Kagel, and Jiranyakul (1990), Battalio, Kagel, and MacDonald (1985), Camerer (1989), Fishburn and Kochenberger (1979), and Kahneman and Tversky (1979).5 In particular, Fishburn and Kochenberger (1979) show that the majority of individuals have everywhere an increasing utility function u(x), where x is a measure of gains and losses that increases more than proportionally for small or negative x and eventually increases less than proportionally for relatively high values of x. Most individuals are thus risk-averse over gains and risk preferring over losses. This notion can serve as a theoretical justification for the contention elaborated by Hirshleifer (1991a) that the poor have a comparative advantage in appropriation, obviously a more risky way to acquire wealth than capital accumulation through savings. A natural extension of these considerations is to represent an average decision maker’s utility function by an everywhere increasing S-curve in x, which adequately expresses the mix of risk aversion under gains and preference over losses.6 An S-curved utility function does not just obtain as a result of psychological analysis. It may also result from the following: we can imagine a locally non-satiated representative agent as the only producer and consumer in a competitive economy, and all relative prices are supposed positive, the aggregate demand for every variety of the commodity must equal its aggregate supply. Since we postulate only one representative agent, S S we get: cD i ¼ ci , where ci is the produced (and supplied) amount of commodity i. R Thus, the representative agent has the following utility n D function: u ¼ i¼1 cD i dc, where ci is the demanded amount of a variety of the only consumption good. We can further postulate that the utility function is strictly monotonic in all varieties of consumption good and the agent basically consumes what he produces. We can thus, in our analysis, focus exclusively on the production function of the goods. In order to maximize his utility, our agent simply maximizes production. This production function can exhibit at first increasing then decreasing returns with respect to its arguments.

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Suppose that there is only one variable factor of production and one commodity is produced. This production function expresses the plausible assumption that initial increases in the level of productive activity will generate more than proportional returns in the production good cSi , but then eventually, with further increases in inputs, less than proportional output will appear. Clearly, in this case as well, the agent’s utility function can be expressed by an S-shaped curve located somewhat differently in the utilityvalued item plane than the one resulting from the psychological approach: The minimum level of the S-curve is then clearly located at the origin. If we then conceive of several agents, each of them living originally in autarchy, we can again imagine conflict and bargaining processes between these as they either cooperate with each other (trade) or fight over resources. Without loss of generality, we can then present the following risk averse/risk preferring (S-shaped) utility curve, closer to the production–protection logic. As can be seen in Fig. 1, the function expða  1=f ðxÞÞ has the S-curve characteristics explained above. Consistent with this hypothesis, ui can be rewritten along the lines of expression (3) below: ! ! N X 1 1 gi ¼ exp a   N gi ui x i ; (3) xi Sj¼1 j¼1

F(x) = exp(a-1/x)

x

Fig. 1.

The Supply of Private and Collective Goods with Hybrid Risk Preferences.

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Both private and collective goods are essential for the utility of agent i. If the value of one of the goods goes to zero, the value of the whole utility function goes to zero; private goods can never be completely substituted for collective goods or vice versa. Moreover, as we will show below, the S-curve perspective (and thus the risk averse/risk preferring representation) also has an important implication in terms of the provision of collective goods; namely, the rate of conversion of private into collective goods becomes an important determinant of its supply. Initially, individuals have one unit of private good xi and none of collective good gi (Dasgupta & Heal, 1979, p. 41). Agents however are able to convert the private good into collective good at the rate ps. If s ¼ 1, the private good can be transformed into collective good with constant returns to scale; if so1, the conversion takes place with increasing returns to scale; if sW1 with decreasing returns to scale. With the collective good gi, representing national defense, s represents a measure of society’s ability to mobilize resources for war. The lower s is, the greater are the prospects for a society to mobilize resources. Anarchic Equilibrium Agent i in society g maximizes ui as defined in Eq. (3) subject to the following budget constraint: p s g i þ xi  1

(4)

If all agents in society maximize utility in the same way i does, based upon some expectation of the amount of the collective good produced or purchased by every other agent, a particular kind of Nash equilibrium obtained for the society in question. Dasgupta and Heal call this a society market or anarchic equilibrium. It is characterized by a pure competitive equilibrium for private goods and a non-competitive but decentralized one for collective goods. Between societies, this leads to an international equilibrium in which only some societies are able to organize themselves in terms of Pareto optimal Nash equilibrium. The ability to form Pareto optimal societies can be interpreted as an ability to enforce property rights and, if need be, to mobilize against other societies. As such, it is one of the main determinants of the international distribution of power. In this sense, the choice of equilibrium strategy bears directly on the structure of the international system.7 We will return later to the question of how to organize a society in a Pareto optimal way.

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In the anarchic equilibrium, every agent is ready to produce or purchase the following bundle of private and collective goods (see appendix for (A.1) and (A.2)): N 1 pffiffiffiffi and g^ ¼ pffiffiffiffis x^ ¼ pffiffiffiffis p þN p þ N ps

(5)

When N is large and ps relatively close or equal to one, every agent keeps most of its endowment in private goods with only a small fraction devoted to the collective good.8 We however are able to point to circumstances in which the collective good is voluntarily provided despite a large N and an abundance of private goods.9 We do so by establishing a relationship between the conversion rate ps and the amount of both the private and collective good that actors are willing to purchase or produce. It is entirely possible for the good to be provided through voluntary contributions in the presence of many actors and despite decreasing returns to scale (i.e., when ps is relatively large). Moreover, under increasing returns to scale (when the conversion rate ps is relatively low) the purchase or production of the collective good is relatively cheap and thus allows for a relatively large g per agent even if high amounts of the private good x are produced and consumed. Societies that are capable of reaping increasing returns to scale and producing high levels of private and collective goods are better equipped to compete for power and wealth at the international level. The anarchic equilibrium is not Pareto optimal.10 To demonstrate this, one can compute the whole exponent of the exponential function (3) at this equilibrium in terms of expression (5) which gives: pffiffiffiffi pffiffiffiffi  ps þ 1 ps þ N N To compute a Pareto optimal outcome, one has to treat g as if it were a private good. As a result, agent i maximizes the following expression as if he were alone:   1 1 exp a  þ subject to the same budget constraint ps g þ x  1 x Ng ~ gÞ ~ can be readily found as: The Pareto optimal solution ðx; pffiffiffiffi N 1 x~ x~ ¼ pffiffiffiffi pffiffiffiffi ; g~ ¼ pffiffiffiffi pffiffiffiffipffiffiffiffi and thus; g~ ¼ pffiffiffiffipffiffiffiffi s s s p þ N p þ N p N ps

(6)

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Again the value or the exponent of function (3) then can be computed and is: pffiffiffiffi  pffiffiffiffi pffiffiffiffi2 pffiffiffiffis p þN ps þ 1 ps þ N ðfor more details refer to the appendixÞ o N N The fact that the anarchic equilibrium is not Pareto optimal reflects the ‘‘tragedy of the commons’’ outcome where the absence or minimal provision of the collective good (here regulation) leads to a socially undesirable outcome. In fact, the difference between the anarchic equilibrium and Pareto optimal value is:11 pffiffiffiffipffiffiffiffi  pffiffiffiffi 1 þ N N  2 s b¼ p 40 for all N41 (7) N pffiffiffiffi  pffiffiffiffi  ps þ 1 =N and ps þ N where b=bmaxbmin and obviously b max ¼ pffiffiffiffi pffiffiffiffi2 bmin ¼ ps þ N =N. Expression (7) tells us that the anarchic equilibrium is identical with the Pareto optimal outcome whenever N ¼ 1 as one would expect since it corresponds to the case where there is just one member of society or in terms of property rights one owner, who therefore has optimal provision incentives. The expression (7) above shows that the amount b measures how far a society is from achieving Pareto optimality. It also represents the degree to which a society has managed to establish a working property rights system through regulation in order to prevent open access to scarce resources. As we show elsewhere, this gap can have a significant impact on inter-regional trade patterns. Unless an efficient market can be established that includes all externalities, Pareto optimality cannot be achieved within this anarchic structure. The creation of such a market implies, at least initially, an organization, i.e., a collective good, to define, protect, and guarantee Pareto optimality (Luterbacher, 1994). A collective endeavor, capable of concentrating coercive powers and enforcing rights, absolutely is crucial for sustaining Pareto optimal societies. Although some scholars have seen the absence of private property rights at the domestic (Demsetz, 1967) or international level (Conybeare, 1980) as creating Pareto inefficiencies, the privatization of coercion is bound to create inefficiencies of its own. In terms of enforcing order internally, private property rights are by no means the only possible or always the most efficient form of resource management; indeed common property is often the best way to capture the increasing returns to scale and manage the

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transition to decreasing returns (Bromley & Feeny, 1992; Ostrom, 1990; Stevenson, 1991). This is borne out through ethnographic and historical research (Netting, 1981; Wiegandt, 1977). For centuries, warlords and governments have treated the means of coercion as a strictly private good and used force to extract rents from society. From the time when mercenaries racketed the Carthaginians or Roman soldiers and Barbarian armies did the same in the late stages of the Western Roman Empire through to our own time, past and present provide ample examples of why privatizing as means of coercion is bound to fail. Since it is impossible to get around an initial organization for the provision of a collective good, taxation has often been used to induce or force societies to maintain collective goods with regular mandatory contributions. This is the case with tax equilibrium when societies agree or are forced to maintain collective goods with regular mandatory contributions (Dasgupta & Heal, 1979, p. 54). State Formation Acquiring and maintaining the power to tax, however, is far from obvious. It depends on several factors: the consent of at least some of society’s members, existence of relatively important levels of transactions in some form of ‘‘numeraire’’ that actually can be taxed, and the capability to punish recalcitrant individuals within the group. Unless a subset of society agrees to be taxed in exchange for the collective good, political entrepreneurs have to rely on their own private source of revenue.12 Even in this case though, the collective good is likely to be supplied at a sub-optimal level, at least initially. A significant reduction in the number of taxable transactions is much more difficult to overcome and requires, if possible at all, a complete reorganization of the social order. In one of the great transformations of Europe, the Moslem raids of the eighth century AD on the Mediterranean coastline dramatically reduced domestic and ‘‘international’’ trade, brought down the Frankish Merovingian dynasty, replaced it with the Carolingian dynasty, and ushered in a feudal order through further invasions and even lower levels of transactions.13 As long as the tax is explicitly meant to correct for the Pareto inferior outcome represented by the anarchic equilibrium – in other words as long as it is ‘‘Pigouvian’’ – it can compensate for the failure of the anarchic equilibrium to generate a Pareto optimal outcome.14 In some cases, however, the tax authority will be tempted to impose a levy that is higher than what is required to attain the Pareto superior equilibrium; in others it will be too weak to extract the full Pigouvian amount.

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We now assume that an authority offers a subsidy t on the purchase or production of a unit of the collective good by agent i and t, a tax (lumpsum) on i in terms of the private good.15 This allows us to arrive at the Pareto optimal outcome in which total expenditures or subsidies for the collective good are identical (see appendix for (A.3)–(A.5)): pffiffiffiffi N ðN  1Þps ðN  1Þ ps ~ ¼ Nt ¼ pffiffiffiffi pffiffiffiffipffiffiffiffi N gt ¼ pffiffiffiffi pffiffiffiffi N ps þ N ps þ N ps

(8)

Under Pigouvian taxation principles, total expenditures equal total revenues. Consequently, the budget is balanced for the collective good and is Pareto optimal. Expression (8) can be used to compute the optimal size in terms of N, the coalition required to arrive at the Pareto optimal tax equilibrium (see appendix). With N as a function of ps increasing either exponentially (if sW1, Fig. 2) or logarithmically (if so1), we see the coalition required to establish the collective good (see appendix). If the transformation rate from a private to a collective good can be done more than proportionally, supply of it can occur despite small numbers. Coalitions with a few large actors that enjoy increasing returns to scale can supply collective goods to many small actors in the international system experiencing decreasing returns to scale, resulting in the well known tendency for the ‘‘small to exploit the large’’ (cf., Olson, 1982) (Fig. 3).

1250 1000 750 500 250 0 1.25 2.5

Fig. 2.

3.75

5

6.25 7.5

Coalition Size: Decreasing Returns in the Production of the Collective Good (s ¼ 2.8o1).

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N

ps

Fig. 3. Coalition Size: Increasing Returns in the Production of the Collective Good (s ¼ 0.6o1).

State Structures and the International System In our model, the international distribution of power is determined by the respective size of the interacting societies’ defense sectors. To predominate in the international system, states must outclass competitors in two distinct ways. Internally, enforcement powers must secure property rights, and externally they must prevent a country’s land and possessions from seizure by an external aggressor. If other elements impinging upon the relations between societies such as trade are ignored, one can measure the defense sectors by the equilibrium size of the collective goods established in the preceding section and their associated expenditures. To arrive at an international equilibrium, these defense sectors must be evaluated with respect to each other. Bearing in mind that Ngi represents the defense sector of society g, then assuming a two society world, the combination of factors that a society g needs in order to overcome a society q of M members, i.e., the defense sector of Mq, will be given by a specific combination of parameters reflecting defense and offense technology. The ratio Ng over Mq therefore must exceed a certain value determined by the military technologies mastered by society g and q. Extending this logic a bit further, we can say that a given combination of defense–offense technology and training parameters constitute a constraint for the maximization of the utility function ui for our representative agent i. This constraint can be

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represented as: Ngi 4Lg Mqi

(9)

where Lg stands for a linear combination of minimal ratios between the forces of g and q in all the relevant aspects of military power. Dimensions that include land, naval, air power, and the ability to concentrate and disperse, which must be superseded by g’s overall defense capabilities if g is to acquire dominance in combat.16 The utility function for agent i must be redefined in terms of the ‘‘threat’’ of a foreign armed force. If we assume that foreign forces have to be countered with a targeted amount of domestic forces corresponding to Ngi , the amount Ngi will have a positive effect on the utility function of agent i. The utility function will then take the following form: ! ! N X 1 1 1 ui x i gi ¼ exp a   N  (10) xi Sja1 gj þ gi Ng j¼1 i This utility function is maximized subject to the already established budget and defense constraint given by relation (9), namely, Ngi =Mqi 4Lg . This eventually (see appendix for (A.6)–(A.13) and Eq. (11)) leads to the following expression if Pareto optimality is assumed:  

Lg T 1=2 1 1 1 1 a  exp   (11) ¼ Ngi mps 2 xi Ngi Mqi Among other things, expression (11) thus determines the optimal reaction of society g in terms of its defense sector Ngi with respect to Mqi, the defense sector of society q. As can be seen here, the level of Ngi can increase under the influence of five factors: (1) Level of taxation T. (2) Importance of military technology represented by the L ratios, which can also be interpreted as a probability of military victory in the battlefield. (3) Low m, the shadow price of ‘‘defense.’’ (4) Low ps, which is the rate of transformation from the private into collective (defense good). (5) Large threat as represented by Mq, the foreign defense good.

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In the present terminology, the size of the defense sector of country g (Ng) is related to the size of the defense sector of country q (Mq) via an S-shaped reaction function. In expression (11), the sum of the two fractions is ð1=xi þ 1=Ngi Þ properly recalibrated is practically equivalent to the sum of the civilian and non-civilian sectors of an economy, thus its GDP. Moreover, expression (11) also tells us that the taxation levels, technological weapon characteristics (Dg), conversion ratio from private (civilian) to defense goods (ps), and shadow price of defense (m), all play a role in determining armament outlays in a particular country. And since expression (11) can be thought as symmetric in the other society q, we end up with: "

Lq T q mq psq

#1=2 exp



1 1 1 1 aq    ¼ Ngi 2 yi Mqi Ngi

(12)

Competition for military superiority can thus be described by the two optimal reaction curves (11) and (12). Depending on marginal propensities to react, our model predicts a wide array of situations discussed in the literature on international relations and conflict and exchange. At the international level, three scenarios are obtained. The most desirable, Pareto optimal outcome, is one where states do not react strongly toward each other. Instead, they coexist peacefully in a stable international equilibrium (see Fig. 4). A second situation exists when states are susceptible to changes in the opponents’ military capabilities, producing a stable arms race. This leads to a competition for military superiority and a situation in which all societies eventually reach a limit to the military resources they are able to mobilize without jeopardizing their resource and taxation bases. If they stay at the level of this limit, a balance of power emerges because no society has the capability to overcome the others. However, such a balance is not necessarily stable and can degenerate into the tragedy of coercion imagined by Konrad and Skaperdas. If all other factors are held constant, a given society could ratchet up the level of taxation T and thus increase its military power. This will cause the utility level ui to drop (see (A.3) in the appendix), tighten the budget constraint, and lower the utility function (see Eq. (10)), resulting in Pareto inefficiencies. Feedback effects in the international system place a limit on states’ ability to increase taxes in order to increase security and can lead to the tragedy of coercion. The third possibility

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Reaction Curve of q Ngi

Reaction Curve of g

Mqi

O

Fig. 4.

A Stable Peace.

is a hybrid situation in which some societies increase their military capacities, whereas others only do so marginally. There are two explanations for why some actors remain relatively passive: they are simply less pre-disposed to react, and thus more risk-averse, or they do not have sufficient capability. The advantage of this theoretical framework is readily apparent. It can both explain how an actor becomes a ‘‘Leviathan,’’ in the sense evoked by Konrad and Skaperdas, as well as the ‘‘paradox of power’’ described by Hirshleifer (Hirshleifer, 1991a, 1991b; Konrad & Skaperdas, 1997). On the one hand, we can imagine an equilibrium where society g is quickly able to supersede the level of military capability controlled by society q. Having reached the limit of its defense capabilities, society q can no longer compete with society g militarily. What this suggests is that society g has in effect become a hegemon, if it can impose itself on all other societies in a similar way, as a ‘‘Leviathan.’’ On the other hand, ‘‘the initially disadvantaged group is typically rationally motivated to fight harder’’ according to the ‘‘paradox of power,’’ which in our model corresponds to a situation in which a society with a less prominent defense sector has a greater marginal propensity to react and is more risk preferring than the stronger actor (Hirshleifer, 1991a, p. 178). In this case, a more disadvantaged society can overcome a stronger one that is slower to react and is more risk-averse.17 Vietnam and Iraq come to mind.

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Private Goods and Institutions With the help of our model, we have established that producing private goods in the absence of state structures generates Pareto sub-optimal outcomes and whatever resource is used in the production process will be overdrawn. The tendency of rulers to use more resources than are needed for an optimal system of defense, the ‘‘tragedy of coercion,’’ has an immediate counterpart in the tendency of producers to use more resources than what is economically sustainable, i.e., the ‘‘tragedy of the commons’’ (Hardin, 1968). Producers do not take into account the negative externality they impose on others when using a resource. By maximizing average instead of marginal return, they tend to over-exhaust the resource (Dasgupta & Heal, 1979). Not all collective goods are ‘‘open access’’ however. Grouping peasants into villages is a deterrent for bandits and raiders who face a larger threat if a sufficient number of individuals manage to band together. Clearly in this case, each peasant provides a positive externality to other peasants in the community. The medieval city, whose not only size, but also walls and defense organization served to deter brigands and thugs, is a prime example. Eventually, however, negative externalities are bound to appear. If the city becomes densely populated and certain forms of disease start to spread, prospects for collective action will look bleak again. It is thus entirely possible, indeed quite common that a society moves from a situation of increasing to one of diminishing returns to scale, as shown by the S-shaped production curve in Fig. 5 where Fv(Nx) is first positive, then negative. The fundamental problem of collective action is the problem of persuading actors to contribute to the collective good before output starts to exceed costs (i.e., before point A in Fig. 5). For production to become profitable in traditional societies, peasants must deter raids; whereas, more advanced societies must establish institutions that will be sufficiently robust to enforce property rights and thereby dissuade other forms of piracy. The logic of sustainability is illustrated in Fig. 5. After point A, average product is higher than marginal product and output greater than costs. A maximum surplus is reached at B, where the slope of the output curve is equal to the slope of the marginal cost curve. Proceeding past point B is not viable. At point C the surplus is completely dissipated resulting in the ‘‘tragedy of the commons.’’ The slide to inefficiency is clearly evident, and the collaborative effort transformed from one of soliciting adequate contributions to restricting access. Ensuring that cooperation remains optimal is difficult in a decentralized system. Often the solution is for a dictator, social planner, or hegemon to internalize costs and benefits associated with output in order

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Output curve

F"Nx)

C B ‘Pigouvian’ tax A Cost curve Npx

Nx

Fig. 5.

A Collective Good with Increasing and Decreasing Returns to Scale.

to maximize the surplus at B. Another strategy is to delegate authority over a specific domain in a way that gives each actor an incentive to internalize the constraints of the output curve. Some members of a coalition could, for instance, specialize in military operations and others in diplomatic and humanitarian efforts, all of which would be necessary, to enhance the effectiveness of a security alliance (cf., Boyer, 1989). To secure the viability of agricultural activity, a tract of land could be divided into plots administered by each producer. Finally, Pareto optimality can be attained by introducing a ‘‘Pigouvian tax’’ parallel to the cost curve and tangent to point B (see Fig. 5). All of these three solutions are ‘‘institutional solutions.’’ Implicitly, they assume the provision of a prior collective good in the form of these very institutions. Institutions are thus an inescapable consequence of collaborative efforts that seek to protect society from external encroachment and moreover are central to sustaining a system of production capable of financing defense structures. Even hegemonic provision will at some point involve an institutional setup of some sort to solicit contributions to the good. Whatever type of institution emerges can be characterized by the degree of coercion involved in sustaining cooperation. Cooperation can occur through relatively open and inexpensive formal structures, which often

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involve in some form of dispute settlement mechanism. Their function is to preserve and consolidate widespread retaliatory powers and ensure the existence of an S-core. The existence of an S-core, in ‘‘prisoner’s dilemma,’’ e.g., guarantees the absence of competition for first move.18 If institutional solutions can be found that substitute for an empty S-core that endows participants with a credible threat to sustain cooperation, there is no reason why conflict and coercion should be pervasive either domestically or internationally. Authoritarian arrangements will not emerge at the domestic level, and at the international level there is no longer the unpleasant choice between an exploitative hegemon and the ‘‘tragedy of coercion’’ that arises in its absence. Our analysis confronts and contradicts major conclusions of neo-realists who predict that states are programmed to compete with each other on security matters and incapable states will ‘‘disappear.’’ We show that this is but one possibility among others (cf., Waltz, 1979). Neo-realists also downgrade the role of economic relationships, but in fact the particular production structure underlying the state matters greatly. States, like firms, occupy particular niches, which promote oligopolistic competition or incentives for trade. Created to provide collective goods, states emerge in environments characterized by external returns to scale (cf., Helpman & Krugman, 1985). Focused on providing collective goods, contiguous societies expend fewer resources fighting each other. As a result, the reduced costs associated with providing the good occurs at the system level. While competition among states may persist, the least competitive ones are not ‘‘eliminated,’’ especially when the long-term benefits of conquest are lower than the rewards from other sources of revenue such as trade. In principle therefore, states can coexist with each other and reap the benefits of mutually advantageous trade and a relatively stable international system. Limitations of the neo-realist approach are thus readily apparent. Contrary to neorealism, which is unable to predict situations in which mutually reinforcing structures for production and protection give way to peace, we are able to derive a theoretically grounded ‘‘stable peace,’’ as shown in Fig. 4. The literature on conflict and exchange, while providing a more sophisticated perspective on the relationship between production and protection, ultimately falls into the same theoretical trap. Its models of society are essentially driven by the relative costs of private versus collective protection and thus primarily by the evolution of military technology (Hirshleifer, 1988, 1989, 1991b; Konrad & Skaperdas, 1997). Both camps have tended to downgrade productive structures. Rather than seeing them as important in their own right, they have almost exclusively viewed them as

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instrumental in expanding the state’s dominion. This pessimism has led to a neglect of stable peace; whereas, the optimistic view taken by liberals has obscured the continuity of different forms of protection. The concentration of power, which is a prerequisite to the enforcement of property rights, is also required to enforce territorial bounds and can under certain circumstances lead to international conflict. Motives for conquest can be found by looking more closely inside the state. As soon as one acknowledges that the viability of the state hinges upon securing economic activity, one is confronted with the non-trivial problem of how to fund and sustain institutions that protect production. A central authority can finance the common good by eliciting payments through taxes or fees – which can be raised on transactions in numeraire or as the right to labor or to a portion of the good produced – or else by distributing new property rights. In the not-so-distant and remote past, this numeraire often took the form of precious metal. But unless commercial ties are pervasive and transactions monetized, payment for the collective good will most likely be in the goods produced or labor. It is not difficult to see that there are strong incentives on both sides, on the part of the ruled and ruler, to prolong such an arrangement. The authority will try to gain a longterm source of financing by rewarding ‘‘loyal’’ individuals with ‘‘permanent use rights,’’ which will be enthusiastically coveted since such rights make it possible to invest and expand production. In the absence of monetized transactions that bring in direct cash payments or institutions that enable rulers to use property as collateral, and thus to borrow, this process creates an incentive for more and more land acquisition (Pirenne, 1970). If conquest is difficult, rulers will eventually lose all source of income, both in the form of short- and long-term payments, to assure defense tasks. According to the famous ‘‘Pirenne thesis,’’ this was how the Frankish rulers lost their taxation base and the command of their realm, a decline that was triggered by the interruption of trade in the wake of the Islamic conquests of the seventh and eighth centuries (Pirenne 1925).19 This logic of decay can also be extended to our own time. Today, societies with weak state structures are ones that are too poor to tax. Often such societies remain ‘‘under-developed’’ because the wider population cannot convert savings into capital without proper institutions that define and protect the right to property against which borrowing can be secured (Soto, 2000). Under these circumstances, states have stronger incentives to provide private goods to a few ‘‘wellendowed’’ individuals rather than collective goods to an impoverished mass (Bueno De Mesquita, Smith, Siverson, & Morrow, 2003). The vicious circle is apparent.

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CONCLUSION This chapter points at the close connection between environmental sustainability, state structure, and coercive power. Our first conclusion is that whether a state is equipped with institutions able to define and enforce property rights is a stronger predictor of the potential for conflict within a society than relative resource abundance. This reconciles two seemingly contradictory positions in the literature on how the size of a country’s resource base relates to conflict. Our second finding is that a state that does not strive for Pareto optimality will become weaker and unable to play a significant role at the international level. The power to enforce efficient resource use requires coercive means, which can be used not only to protect resources within states, but also defend and conquer territory from other states. The military power necessary to safeguard and expand a state’s resource base requires funding, ideally by taxing productive activity, which brings us back to the importance of optimizing resource use. The collapse of the Soviet Union was due to inefficient property rights protection, inadequate environmental and resource management it implied, and hollowing of the productive base that was supposed to fund its deadly competition with the United States. Although China is at present flush with cash and has for the last two decades increased defense spending, there are already signs it will face major challenges securing the environment. Furthermore, Pareto optimality at the national level can only be completely achieved whenever tragedies of coercion and international arms competition are superseded. As we indicated earlier, this will only occur when incentives to conquer and dominate disappear. Societies will reach their utmost productive potential when states and political groupings realize that more wealth can be generated by fostering and maintaining trade and other international transactions than by violent appropriation.

NOTES 1. Competing lords would, however, also have to fight each other and seek to dominate as many peasants as possible. This can lead to what Konrad and Skaperdas call a ‘‘Tragedy of Coercion,’’ a sub-optimal Nash equilibrium outcome, where resources are wasted in the mutual fights for the control of peasants. 2. Hirshleifer’s perspective is even more driven by military technology. See for instance his decisiveness function (Hirshleifer, 1988, 1989, 1991b). Even though, Hirshleifer, Konrad, and Skaperdas and others bring very new and interesting insights into the international conflict and cooperation literature, their fundamental assumptions are very close to the ones of neo-realism.

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3. cf. Johnson and Earle (2000) and to some extent Diamond (1997). 4. For a significant departure and criticism of the realist position, the image of the international world it projects, and for an emphasis upon trade, see the interesting book by Rosecrance (1986). 5. Friedman and Savage (1948) use a perspective on their utility function in their article that differs markedly from ours. 6. The S-curve analysis and its application to conflict was initiated by Dacey (1996a, 1996b, 1996c, 1998) and Dacey and Gallant (1997). The formulation used here below for the critical risk ratio is based on losses, whereas the formulation used in Dacey is on gains. These formulations are logically equivalent. The S-curve hypothesis is just another illustration that attitudes toward risk are implicitly included in any representation of a utility function because they are implied in its particular curvature. Even a linear (flat) utility function results in risk neutrality. What we are saying here is that the shape of the utility curve implies different behavioral consequences. The choice of a representation in terms of risk neutrality (a flat curve) or risk aversion or a mix of both such as the one we are presenting here is thus not a matter of theoretical debate but ultimately an empirical question. It seems that empirical results are still contested despite the cogency of the psychological literature that we are citing. But even if the ultimate empirical test on this issue has not yet been presented, the validity of the mixed approach at the theoretical level in our view is indisputably a promising formulation that leads to richer behavioral consequences than classical (risk neutral or risk averse) notions. Some of the results presented here could be obtained with a more classical utility function, as in Dasgupta and Heal (1979), 41 but are not as rich as the ones we obtain. 7. From different premises, evolutionary game theorists arrive at the same conclusion, cf., Binmore (1998), Chapter 2, particularly pp. 204–211. 8. This is also true for the utility function used by Dasgupta and Heal (1979). 9. Ibid., p. 43 do not establish any such link. 10. Ibid., p. 44–52. 11. Provided only positive values for the terms under the square root signs are considered. 12. See Tilly (1992) in particular emphasizes this point. 13. This point is made by Pirenne (1925). 14. After the British economist Pigou (1932). 15. If tio0, the subsidy is in fact a tax, and if to0, the lump-sum tax becomes a subsidy. Dasgupta and Heal (1979). 16. Such minimal ratios can be interpreted as Lanchester (1916) combat ratios (see appendix). 17. All these statements can be supported rigorously within the model. Since we are not focusing here on armament and arms race questions, we refer the reader to the appendix. 18. Formally, an S-core is non-empty if each agent can reach a utility level at least as great as the one reached by moving second in an asymmetric Nash equilibrium such as the Chicken or Stackelberg equilibrium, cf. Moulin (1986). 19. For a critical view see McCormick (2002). Although according to Greif (1993) even in the eleventh century, commercial contacts between the Jewish merchants in the Moslem and the Christian regions were non-existent, suggesting that Pirenne was right.

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ACKNOWLEDGMENTS We would like to thank Steven Bernstein, Lars-Erik Cederman, Xinyuan Dai, James Morrow, Martin Osborne, Peter Rosendorff, and Duncan Snidal for their helpful comments.

REFERENCES Battalio, R. C., Kagel, J. H., & Jiranyakul, K. (1990). Testing between alternative models of choice under uncertainty: Some initial results. Journal of Risk and Uncertainty, 3, 25–50. Battalio, R. C., Kagel, J. H., & MacDonald, D. N. (1985). Animals’ choices over uncertain outcomes: Some initial experimental results. American Economic Review, 75, 597–613. Binmore, K. (1998). Game theory and the social contract: Just playing (Vol. II). Cambridge: MIT Press. Boyer, M. A. (1989). Trading public goods in the western alliance system. The Journal of Conflict Resolution, 33(4), 700–727. Bromley, D. W., & Feeny, D. (1992). Making the commons work: Theory, practice, and policy. San Francisco: ICS Press. Bueno De Mesquita, B., Smith, A., Siverson, R. M., & Morrow, J. D. (2003). The logic of political survival. Cambridge: The MIT Press. Camerer, C. F. (1989). An experimental test of several generalized utility theories. Journal of Risk and Uncertainty, 2, 61–104. Collier, P., & Hoeffler, A. (1998). On economic causes of civil war. Oxford Economic Papers, 50, 563–573. Conybeare, J. (1980). International organization and property rights. International Organization, 34(3), 307–334. Dacey, R. (1996a). Dissatisfaction and the illicit response. Paper presented at the Fifth world peace science society congress. Amsterdam. Dacey, R. (1996b). Dissatisfaction and the illicit response. Paper presented at the Peace science society. Houston. Dacey, R. (1996c). The maintenance of authority: Risk attitude and the deterrence of civil disobedience. Paper presented at the American economic association. San Francisco. Dacey, R. (1998). Risk attitude, punishment, and the Intifada. Conflict Management and Peace Science, 16, 77–88. Dacey, R., & Gallant, K. (1997). Crime control and harassment of the innocent. Journal of Criminal Justice, 25, 325–334. Dasgupta, P., & Heal, G. (1979). Economic theory and exhaustible resources. Cambridge: Cambridge University Press. Demsetz, H. (1967). Toward a theory of property rights. American Economic Review, 57(2), 347–359. Diamond, J. (1997). Guns, germs, and steel. New York: Random House. Fishburn, P. C., & Kochenberger, G. (1979). Two-piece von Neumann-Morgenstern utility functions. Decision Sciences, 10, 503–518.

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Friedman, M., & Savage, L. J. (1948). The utility analysis of choices involving risk. Journal of Political Economy, 56, 279–304. Gilpin, R. (1981). War and change in world politics. Cambridge: Cambridge University Press. Greif, A. (1993). Contract enforceability and economic institutions in early trade: The Maghribi traders’ coalition. American Economic Review, 83(3), 525–548. Grossman, H. (1991). A general equilibrium model of insurrections. American Economic Review, 81(4), 919–921. Hardin, G. (1968). The tragedy of the commons. Science, 162, 1243–1248. Helpman, E., & Krugman, P. R. (1985). Market structure and foreign trade: Increasing returns, imperfect competition, and the international economy. Cambridge: MIT Press. Hirshleifer, J. (1988). The analytics of continuing conflict. Synthese, 76, 201–233. Hirshleifer, J. (1989). Conflict and rent-seeking success functions: Ratio vs. difference models of relative success. Public Choice, 63, 101–112. Hirshleifer, J. (1991a). The paradox of power. Economics and Politics, 3(3), 177–200. Hirshleifer, J. (1991b). The technology of conflict as an economic activity. American Economic Review, 81(2), 130–134. Hirshleifer, J. (1995). Anarchy and its breakdown. Journal of Political Economy, 103(11), 26–50. Homer-Dixon, T. (1994). Environmental scarcities and violent conflict: Evidence from cases. International Security, 19(1), 5–40. Johnson, A. W., & Earle, T. (2000). The evolution of human societies. Stanford: Stanford University Press. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decisions under risk. Econometrica, 47, 263–291. Konrad, K. A., & Skaperdas, S. (1997). The market for protection and the origin of the state. Irvine: Free University of Berlin. Lanchester, F. W. (1916). Aircraft in warfare, the dawn of the fourth arm. London: Constable. Luterbacher, Urs. (1994). International cooperation: The problem of the commons and the special case of the Antarctic region. Synthese, 100, 413–440. McCormick, M. (2002). Origins of the European economy: Communications and commerce, Ad 300–900. New York: Cambridge University Press. Moulin, H. (1986). Game theory for the social sciences. 2nd and rev. edition, Studies in game theory and mathematical economics. New York: New York University Press. Netting, R. McC. (1981). Balancing on an Alp. Cambridge: Cambridge University Press. North, D. C. (1981). Structures and change in economic history. New York: W.W. Norton. Olson, M. (1965). The logic of collective action. Cambridge: Harvard University Press. Olson, M. (1982). The rise and decline of nations. New Haven: Yale University Press. Ostrom, E. (1990). Governing the commons: The evolution of institutions for collective action. Cambridge: Cambridge University Press. Pigou, A. C. (1932). The economics of welfare. London: Macmillan. Pirenne, H. (1925). Medieval cities: Their origins and the revival of trade. Princeton: Princeton University Press. Pirenne, H. (1970). Mohomet et Charlemagne. Paris: Presses Universitaires de France. Rosecrance, R. (1986). The rise of the trading state. New York: Basic Books. Sandler, T. (1992). Collective action: Theory and applications. Ann Arbor: University of Michigan Press. Soto, H. de. (2000). The mystery of capital. London: Random House.

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Stephens, D. W. (1990). Risk and incomplete information in behavioral ecology. In: C. Elizabeth (Ed.), Risk and uncertainty in tribal and peasant economies. Boulder: Westview. Stevenson, G. G. (1991). Common property economics. Cambridge: Cambridge University Press. Tilly, C. (1992). Coercion, capital, and European states, Ad 990–1992. Cambridge: Basil Blackwell. Usher, D. (1989). The dynastic cycle and the stationary state. American Economic Review, 79, 1031–1044. Waltz, K. N. (1979). Theory of international politics. Reading: Addison-Wesley. Wiegandt, E. (1977). Inheritance and demography in the Swiss Alps. Ethnohistory, 24(2).

APPENDIX. TECHNICAL APPENDIX The Society Market or Anarchic Equilibrium ^ þ li ð1  ps gi  Optimization yields: Maxfexpfa  1=xi  1=½gi þ ðN  1Þgg xi Þg Thus first-order conditions will be:   1 1 1 exp a  þ (A.1) ¼ li ^ xi ½gi þ ðN  1Þg x2i 1



1 1  2 exp a  þ ^ x ½g þ ðN  1Þg i i gi þ ðN  1Þg^



¼ li ps

(A.2)

For agent i, the problem is to maximize: expfa  1=xi  1=½gi þ ðN  ^ by choosing xi and gi subject to the budget constraint Eq. (4). The 1Þgg necessary (and eventually sufficient since the utility function will after being initially convex become concave) conditions for an optimum will be:     1 1 Max exp a   þ li ð1  ps gi  xi Þ ^ xi ½gi þ ðN  1Þg ^ At the anarchic equilibrium, one can assume that gi ¼ g^ and thus xi ¼ x. pffiffiffiffi ^ ps which From the first-order conditions, we therefore have, N g^ ¼ x= using the budget constraint Eq. (4), gives for x^ and g^ (see Eq. (5))

Comparative Statics: Anarchic and Pareto Optimal Equilibrium To answer the question of whether the anarchic equilibrium is Pareto efficient one has to treat g as if it were another kind of private good and

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considered by agent i as if she was alone and thus maximizes: expfa  1=x  1=N g g subject to the budget constraint ps g þ x  1:4. ~ gÞ ~ can be found readily as in Eq. (6). The Pareto optimal solution ðx; Quite clearly, the anarchic equilibrium is not Pareto optimal. To show that the anarchic equilibrium is sub-optimal, one has to compare the exponents in the utility function expfa  1=x  1=Ngg. The higher the expression within the parenthesis (inside the curly bracket), the lower is the value of the utility function expfa  1=x  1=Ngg. Therefore, the value ~ gÞ ~ should be superior to of the function with the Pareto optimal solution ðx; the anarchic solution and thus the exponent value within the parenthesis inside the curly bracket of the exponent is lower than the one for the anarchic solution, which is indeed the case. To see that the value of the ~ gÞ ~ is superior to the anarchic function with the Pareto optimal solution ðx; solution compare: pffiffiffiffi pffiffiffiffi2 ps þ N the Pareto optimal value N pffiffiffiffi pffiffiffiffi  ps þ N ps þ 1 ðthe anarchic solution valueÞ; for all N41 o N Pareto Optimal Equilibrium: Taxation Agent i in the absence of any market for externalities maximizes: ! N X 1 1 ui xi ; gi ¼ expða  þ N subject to ðps  tÞgi þ xi  1  ti x S g þ g i i ja1 j j¼1 (A.3) and where of course agent i chooses only xi and gi. By analogy with the previous results, we get at equilibrium, assuming that ps ¼ ps  t: x (A.4) Ng ¼ pffiffiffiffis p pffiffiffiffipffiffiffiffi ~ To get to the Pareto optimal result (6) with, g~ ¼ x= N ps , the net price s s p that an agent must pay for the externality should be p ¼ ps =N ¼ Nps =N 2 . Indeed, introducing this expression into (A.3) leads to the Pareto optimal value (6) restated above. Thus the authority must set the per unit subsidy of the collective good at t ¼ ðN  1Þps =N. The authority must also set a lumpsum tax on each agent again with the purpose to reach Pareto optimality as

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defined by the values of x~ and g~ in (6). This lump sum tax t, is thus: pffiffiffiffis p ðN  1Þ t ¼ pffiffiffiffi pffiffiffiffi (A.5) N ps þ N On this basis, one is now able to compute the total authority expenditures and revenues. Total expenditures or subsidies for the collective good are identical (see expression Eq. (8))

Coalition Size The optimal size is given by:  pffiffiffiffi pffiffiffiffi pffiffiffiffi ðN  1Þ ps = ps þ N @Nt ¼@ ¼0 @N @N The solution (for a maximum) eventually leads to: pffiffiffiffi pffiffiffiffipffiffiffiffiffiffiffi pffiffiffiffi pffiffiffiffipffiffiffiffiffiffiffi ps ps 1  1 or 2 ps ps ps 1  1 N ¼ 2 ps with the second solution leading to higher values.

Optimal Reaction Functions pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi Recall that Ngi is determined by ðNgi Þ=ða ðkg =kq Þ þ bðrg =rq ÞÞ  Mqi , where Mqj represents the total size of the other society’s q’s defense sector, in utility function (10). Mqi can thus directly be included in the utility function of i, which can be written as: ! ! N X 1 1 1 gi ; ¼ exp a   N  ui xi ; (A.6) xi Sja1 gj þ gi Mqi j¼1 This utility function has to be maximized subject to: sffiffiffiffiffi ! kg rg s Mqi þb ðp  tÞgi þ xi  1  ti and Ngi  a kq rq Ngi or qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi      Mqi a kg =kq þ b rg =rq

(A.7)

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which leads to the following expression to be maximized:

 1 1 1  exp a   þ 1  t  xi  gi ðps  tÞ xi Ngi Mqi 2 3 Ngi 6 7 l þ 4 qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi      Mqi 5m a kg =kq þ b rg =rq

(A.8)

where l and m are the two Lagrange multipliers associated with the constraints. These multipliers can also be interpreted as the respective shadow prices associated with (1) the internal budget constraint (l) and (2) the defense effort with respect to society q (m). One gets the equations:

1 1 1 1 exp a    l ¼0 (A.9) xi Ngi Mqi x2i 2 3

1 1 1 1 mN 6 7 exp a     ½ps  tl þ 4 qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi 5 ¼ 0     2 x Ng Mq Ngi i i i a kg =kq þ b rg =rq (A.10) Replacing l by its value from (A.8), one gets: #  

" 1 ps  t 1 1 1 mN  ¼0  2 exp a    þ  pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi xi Ngi Mqi Ng2i xi a ðkg =kq Þ þ bðrg =rq Þ (A.11) Rearranging terms and remembering that m is by definition an arbitrary constant:

1 1 1  exp a   xi Ngi Mqi " # mN x2i Ng2i  ¼   pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi (A.12) a ðkg =kq Þ þ bðrg =rq Þ Ng2i ps þ Ng2i t þ x2i pffiffiffiffipffiffiffiffi ~ N ps and If xi is given its Pareto optimal value in terms of gi, g~ ¼ x= pffiffiffiffipffiffiffiffi thus xi ¼ N ps gi , and if t is taken as a taxt ¼ T rather then a subsidy, (a possibility evoked when defining t and t) which makes more sense in

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terms of explaining expenditures on the collective defense good, then Eq. (A.12) reduces to:  pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi 

a ðkg =kq Þ þ bðrg =rq Þ T 1 1 1 exp a    (A.13) ¼ N 2 g2i mps xi Ngi Mqi or if only positive roots are taken: " pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi  #1=2

a ðkg =kq Þ þ bðrg =rq Þ T 1 1 1 1 a  exp  ¼ Ngi (A.14) mps 2 xi Ngi Mqi Expression (A.14) determines thus, among other things the optimal reaction of society g in terms of its defense sector Ngi with respect to Mqi, the defense sector of society q, which for simplicity can be expressed as expression Eq. (11).

DOES THE EUROPEAN DEFENCE BURDEN-SHARING MATTER? Martial Foucault INTRODUCTION Since December 1998, the European Union (EU) has institutionalized its defence policy by implementing the European Security and Defence Policy (ESDP) and realizing major improvements by way of a bigger investment of EU members. Nevertheless, since national capabilities are different and the incentives to contribute voluntarily are still weak, not all countries have followed the same pattern in financing the ESDP. Thus, what are the budgetary stakes for an effective and efficient ESDP? Before responding to this question, it seems important to provide an accurate definition of ESDP by putting forward the expected goals and the institutional design to achieve them. As Howorth (2007) notes, a flow of misleading allegations surrounds the ESDP. Among them, the idea that the ESDP corresponds to a European Army is very frequent in the press, when in fact, ‘‘each military or civilian mission mounted by ESDP has had its own terms of reference, its own volunteers from a range of EU members States (and indeed from a range of non-EU members states as well), its own logistics and command arrangements, and its own lifetime. When the mission is terminated, the resources, both human and material, initially assigned to it, revert to their national owners’’ (Howorth, 2007, p. 40).

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 297–314 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06017-7

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Such a separation of EU-members’ roles summarizes quite well the dilemma that the EU has to face. Between complementarity (as currently practiced) and subsidiarity (in the case of a fully integrated policy), expenditures for operations with military or defence implications remain pooled mainly in the budget of the Common Foreign Security Policy (CFSP) and sometimes overflow to another heading of the EU budget (Missiroli, 2003, pp. 6–9). As a consequence, the budgetary process for financing the ESDP remains unclear and subject mainly to the gross national income (GNI) rule leaving it to EU officials and to a lesser degree EU PMs to define the size of the cake, but not necessarily the size of the cake’s parts. As for EU claims about being a global and military actor (Larsen, 2002), it implies that each EU member is a partial global and military actor according to their piece of this famous cake. Since the emergence of an abundant literature on the theory of alliances in both political science and economics, focusing on the ESDP with such theoretical tools could improve our understanding of the logic of individual contributions in providing an international public good, that is, the security of Europe. As the seminal work of Olson and Zeckhauser (1966) on burdensharing has been applied to NATO alliance, it remains a relevant indicator for any common institutional structure or organization where heterogeneous actors have to deal with common decisions based on individual contributions. To a certain extent, we aim at demonstrating that such an approach brings a better understanding of the basic differences between fiscal mutualization and solidarity in defence issues within an intergovernmental framework. The ESDP follows one military objective: to enable the EU to have at its disposal real (credible) operational capabilities to lead international operations of peacekeeping and crisis management. In the same perspective, military expenditures must finance an autonomous capacity of action and share some costs linked to military force deployment decided by the EU. Military expenditures within the EU are bigger than national military expenditures available for the ESDP. In a sense, this situation is not surprising since ESDP is crafted under the principle of intergovernmentalism either in public decision-making or in financing missions. Indeed, national governments are the only important actors to decide, to finance, and to bargain within or outside the EU. Existing tensions on the grounds of fiscal contribution for ESDP functioning have not been focused on by scholars. This chapter tackles this issue by demonstrating that different military burden-sharing criteria, especially ‘‘fair’’ burden-sharing, are useful to explain both the friction for financing and incentives for an expected free-riding. However, after performing a statistical analysis, the

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famous exploitation thesis (richer countries provide a disproportionate share of common security compared to other countries) is not valid, suggesting that rational strategies of each EU country do not matter in the context of the defence of Europe.

ESDP: The Fiscal Drip? In 2006 with an amount of 332 billion Euros, the EU filled the fiscal gap that was initiated at the beginning of the nineties (Fig. 1) when all the defence budgets of EU countries were decreasing, as justified by a new period of world stability. From 2001 till date, the rise of transnational terrorism in developed countries is likely to reverse the cutbacks in defence. How can we explain such a European trend during 15 years? There are two driving forces. Firstly, in 1991, the EU was composed of only 12 countries, and the then average contribution by each country was higher than that in 2006. This means that the enlargement of the EU has not offset the decreasing trend of defence spending. Secondly, the inflexion point starting in 2002 reveals the change of defence and foreign strategy of leading EU countries in facing new international threats (such as terrorism or biological threats). As a

Fig. 1.

European Military Expenditures (1988–2006). Source: SIPRI and Author’s Calculations.

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consequence, the rearmament policy replaced the short period of peace dividends, regardless of the partisan government in office. Between 2002 and 2006, the average EU defence budget increased by 3% each year. But in 2006, a downturn is observed and confirmed in 2007 as European countries had to face fiscal constraints set by EU convergence criteria, decided to limit their intervention (whatever the public policy) in the economy, and preferred to invest relatively more in domestic security than in external security1. The European pattern does not necessarily reflect the behaviour of all EU countries, especially for non-leading countries in defence matters. A basic premise of our analysis is that (national) defence budget allocations provide a reasonable snapshot of the distribution of military power among EU members. Table 1 confirms the emergence of three countries as main defence producers (in real terms). Indeed, the UK, France, and Germany combined Table 1.

Share of Military Spending (in %) in Overall EU.

Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden UK Source: SIPRI and Eurostat.

1995

2000

2006

1.15 2.03 0.11 0.60 1.59 0.03 0.90 23.36 17.95 2.23 0.42 0.43 12.62 0.04 0.02 0.07 n.a. 3.84 1.79 1.42 0.37 n.a. 4.50 3.14 24.78

1.25 2.07 0.12 0.63 1.55 0.05 1.01 21.89 18.22 3.22 0.52 0.44 14.51 0.05 0.10 0.08 n.a. 3.87 2.05 1.43 0.22 n.a. 4.53 3.15 22.80

1.14 1.80 0.10 0.59 1.69 0.08 1.23 22.12 16.35 3.49 0.45 0.44 12.01 0.13 0.13 0.13 n.a. 3.90 2.58 1.57 0.30 n.a. 4.62 2.49 27.01

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devote about 66% of the overall budgetary capacity for defence issues in Europe. Despite the collapse of the Berlin Wall and the end of the bipolar world, the UK, France, and Germany maintained a huge share of the defence budget. They have also promoted the development of their defence industries by accompanying their consolidation and pursuing a leading role in export markets, especially in France and UK. Nevertheless, this first view is not the only and the most appropriate interpretation of the EU defence budget allocation.

Financing ESDP Missions: Solidarity vs. Cost-Sharing Up to now, European military expenditures have mainly been envisaged from a minimalist perspective. The first initiatives for building a European defence were undertaken outside the strict political framework of the EU under the form of cooperation between member States (e.g., Eurocorps; gendarmerie europe´enne). A few years after the signature of the Treaty of Amsterdam, a first but limited effort to finance the implementation and the functioning of the ESDP was realized (35 millions of Euros in 2006). Still, the share of ESDP budget in the overall CFSP budget is relatively weak despite an increasing CFSP budget (from 43 million Euros in 2003 to 102.6 million Euros in 2006)2. Among regular expenditures, the ESDP finances administrative costs dedicated to the organization of military command structures (EU military Staff and EU military committee) and the evaluation of defence equipment devoted to the European Defence Agency (EDA) (with an annual budget of 32 million Euros in 2006). Another source of spending concerns civilian, police, and military operations. Since the EU countries set the Helsinki Headline Goal, they are supposed to be able to deploy a 60,000-strong military force in 1 year. Article 28 of the Treaty on European Union (TEU) sets the principles for the financing of civilian and military crisis management operations. Under that provision, expenditures related to the Common Foreign and Security Policy (CFSP) shall be charged to the budget of the European Community, except for such expenditures arising from operations having military or defence implications and cases where the Council unanimously decides otherwise. The rise of financial investment in external operations was not necessarily distributed equally between member States. For instance, the overall cost for completed operations as Concordia (in the former Yugoslav Republic of Macedonia) and Arte´mis (in the Democratic Republic of Congo) were financed according to the principle that ‘‘costs lie where they

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fall’’. This principle does not come into force for civilian crisis-management operations since they are funded from the CFSP budget, which is established following the budgetary procedure laid down for the EU budget. At the opposite end, operations with military implications or defence operations could not be financed from Community funds until 2004. Since this date, a special mechanism called ATHENA has been established by the Council of the EU to cover the common incremental costs of such operations3. Even if the needed period to find an agreement on what will be included in such a mechanism (storage, exercises, forces wages, lodging, transport) takes a long time, the ratio of costs financed in common to total incremental costs for an operation remains small (less than 10%). The remainder of the expenditure is financed directly by member States on the basis of the ‘‘costs lie where they fall’’ principle.4 For instance, the military operation EUFOR-Althea in Bosnia and Herzegovina is currently covered up to 33 million Euros (2007) by Athena. Table 2 presents the calculus of GNI criteria to each country’s Athena contribution. We have only 26 countries as Denmark has opted out from actions with defence implications under the EU Treaty. As demonstrated by scholars (Le Cacheux, 2004), Germany remains the first European net contributor for the Athena mechanism even though Germany was not a leader in ESDP implementation. In a sense, such a solidarity system conceals the real preferences of EU countries and shapes a biased collective preference on defence issues because such a system does not express the real value on which an efficient mechanism of financing could be designed. Does the ESDP suffer from a lack of cost-sharing for enhanced intervention? The inception of the Athena mechanism is expected to reduce the costs of some countries and incite others to contribute more generously. By summing ESDP and CFSP finances (102,6 million Euros), EDA budget (32 million Euros), and civilo-military operations (68 million Euros), the overall budget for defence and security actions accounts for about 200 million Euros, which corresponds modestly to about 0.06 per cent of the sum of military spending of the 25 (15) EU members. Between solidarity characterized by the Athena mechanism and alliance defined by the current intergovernmental financing system, the EU has now finally built a mixed system by distinguishing both civil and military missions. But such a design does not respond directly to the nature of military burden-sharing. The measure of burden-sharing cannot just rest on the budgetary contribution of each country because it provides no information on the real capacities to contribute or the level of individual preferences for security and defence issues.

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European Defence Burden-Sharing Matter Table 2. Member State Belgium Bulgaria Czech Republic Germany Estonia Greece Spain France Ireland Italy Cyprus Latvia Lithuania Luxemburg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden UK

GNI Scale (in %) Used for Contributions to ATHENA. 2005

2006

2007

2.83

2.88

0.80 21.46 0.08 1.69 8.05 16.13 1.21 13.36 0.12 0.10 0.18 0.23 0.80 0.04 4.53 2.29 1.86 1.33 – 0.26 0.33 1.48 2.76 18.07

0.91 20.97 0.09 1.74 8.28 16.19 1.30 13.29 0.12 0.12 0.19 0.24 0.83 0.04 4.47 2.28 2.21 1.31 – 0.27 0.36 1.48 2.83 17.57

2.83 0.22 0.96 20.18 0.11 1.77 8.78 16.08 1.36 12.80 0.13 0.14 0.21 0.23 0.77 0.04 4.66 2.29 2.30 1.35 0.90 0.27 0.39 1.47 2.72 17.01

Source: EU Council Secretariat, June 2007, Financing of ESDP Operations.

Alternative Measures of Military Burden-Sharing The main literature on burden-sharing for military and defence issues is derived from the focus on NATO. The political implications were to define as accurately as possible who was bearing the ‘‘unfairly’’ high burden in collective security. In this perspective, the United States needed to know how to calculate the fair contribution of each country and then convince, especially in enlargement waves, weaker contributors to increase their investment for collective security. The conventional wisdom for measuring military burden-sharing consists in dividing the level of defence expenditures by the level of the gross domestic product. A series of empirical studies (Olson & Zeckhauser, 1966;

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Sandler & Hartley, 2001; Oneal, 1990a, 1990b; Hartley & Sandler, 1999; Hirofumi & Sandler, 2002) have demonstrated that some countries can decide to under-provide the supply of a public good as other countries are certain to provide it. Consequently, the burden for the provision of public goods is disproportionate and favours the strategy of free-riders in which the logic is, not, to not contribute but rather to contribute at a level proportionally weaker than what is needed to satisfy a Pareto-optimality. This result is common in the public goods literature and rests on a basic calculus of an uneven burden. Among limitations that suggests such an indicator, Hartley and Sandler (1999, p. 169) advocate that ‘‘nations can differ in their definitions of defence spending (e.g., pensions, defence R&D), and some countries rely on conscript forces so that their defence budgets underestimate their defence burdens (as reflected in opportunity costs)’’. Indeed, the data we used for describing the share of military spending in the country’s GDP contains some differences in what is called ‘‘defence expenditures’’ (Table 3). For instance, France includes in its defence budget both the operating and capital costs of a homeland security force, Gendarmerie Nationale, while other EU countries include such forces into the budget of the Ministry of (civil) Security or the Ministry of the Interior. Another difference in definitional issues concerns the labour force. Between professional armies and conscription forces, the fiscal value of each labour unit is not necessarily reflected in a defence budget. Further burden-sharing measures are available for equipment, defence R&D, the arms trade, and external missions. Equipment measure (Hartley & Sandler, 1999) is another way for measuring burden-sharing in Europe once the EDA will be able to launch common armament programs. To date, only countries belonging to the Organisation Conjointe de Coope´ration en matie`re d’ARmement (OCCAR) such as the UK, France, Italy, Spain, Belgium, and Germany could be assessed in terms of burden-sharing for some existing and future collaborative armament programs. Defence spending relative to GDP combines an interesting indicator of defence effort with an accurate indicator of ability to contribute. As a result, it is the most widely used indicator of burden-sharing efforts. However, this indicator should not be viewed in isolation from other national contributions to shared security objectives. Also, this measure does not take into account efforts that are not directly reflected in defence budgets, nor does it give credit to those countries that are able to make more effective use of their defence resources.

305

European Defence Burden-Sharing Matter Table 3.

Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden UK EU

Share of Military Spending (in %) in Terms of GDP. 1995

2000

2006

1.02 1.50 2.17 1.72 1.71 0.97 1.40 3.03 1.56 3.41 1.59 1.05 1.89 0.88 0.36 0.66 n.a. 1.82 2.04 2.31 3.22 n.a. 1.42 2.26 3.00 2.15

0.99 1.38 2.04 1.71 1.49 1.39 1.28 2.55 1.48 4.29 1.67 0.70 2.04 0.89 1.41 0.63 n.a. 1.55 1.85 1.96 1.68 n.a. 1.21 1.98 2.43 1.92

0.85 1.12 1.35 1.31 1.53 1.42 1.36 2.41 1.30 3.73 1.17 0.53 1.66 1.63 1.17 0.78 n.a. 1.48 1.96 2.11 1.70 n.a. 1.04 1.37 2.57 2.17

Source: SIPRI (Military Spending) and Eurostat (GDP and Implicit Price Deflator).

Fair Military Spending Burden-Sharing The second step consists in identifying some alternative burden-sharing measures as the previous (Defence Expenditures/GDP) ratio does not provide information on the size of the EU member’s economy within the EU. That is why, accordingly to Linsdro¨m (2005), we use the concept of a ‘‘fair’’ burden-sharing criteria that focuses on the fair share of a defence contribution. Such a ‘‘fair’’ criteria integrates an EU country’s ability to contribute or provide security. The fair burden-sharing is built by dividing the country’s contribution by the country’s ability to contribute. As the numerator, the country’s contribution means the share (in terms of defence spending) of total contributions of all EU countries. As the denominator, the country’s ability to contribute (in terms of GDP) means the total share

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of all EU countries. Consequently, a fair share corresponds to the equality (or a ratio equal to 1) between the country’s contribution and its ability to contribute. The more the ratio is under 1, the lower a country’s burden. Fair burden-sharing for all EU countries between 1995 and 2006 is calculated and reproduced in Table 4. We maintain the score for countries that became members of the EU in 2005 in order to verify whether they changed their position since their membership. By comparison with Table 3, the value of the fair military burden-sharing indicates that the main defence contributors in terms of GDP bear a huge defence burden. It means, too, that the economic conditions of countries are a good indicator of the ability to provide defence allocation.

Table 4.

Fair Burden-Sharing in Military Spending. 1995

2000

2006

Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden UK

0.48 0.70 1.02 0.80 0.80 0.45 0.66 1.41 0.73 1.59 0.74 0.49 0.88 0.41 0.17 0.31 – 0.85 0.95 1.08 1.50 – 0.66 1.05 1.40

0.52 0.72 1.06 0.89 0.78 0.72 0.66 1.32 0.77 2.23 0.87 0.36 1.06 0.46 0.73 0.33 – 0.81 0.96 1.02 0.87 – 0.63 1.03 1.26

0.47 0.63 0.76 0.73 0.86 0.80 0.76 1.35 0.73 2.08 0.65 0.30 0.93 0.91 0.66 0.43 – 0.83 1.09 1.18 0.95 – 0.58 0.77 1.44

EU-25

0.83

0.87

0.87

Source: SIPRI and Eurostat.

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Results are quite different from the study of Lindstrom, as he found no countries with a ‘‘fair’’ burden-sharing superior to 1. The first reason is linked to the statistical data that we used, coming from SIPRI and not IISS. Only Greece, France, UK, Portugal, and Poland record a fair burdensharing’s score superior to 1. With regard to Greece, only its conflict relationship with Turkey explains such a level of military expenditures. France and UK confirm that they contribute not only more than the European mean but also more than the unitary fairness threshold. According to the economic wealth of these countries, a score superior to 1 means that public spending of other countries are not oriented to defence concerns. Among them, 15 countries out of 23 do less than the European average, and 18 out of 23 contributed unfairly in 2006; that is, the latter are likely to adopt free-riding behaviour. From a dynamic perspective, only Sweden, Slovakia, and Cyprus have decreased their individual share since 1993 while Poland has followed an opposite pattern. The construction of fair military burden-sharing cannot be limited to a unique public finance dimension. A Fair Military Forces Burden-Sharing According to the Helsinki Headline Goal, the capacity to deploy military forces represents a major stake for the defence of Europe. The number of military forces has been halved between 1990 and 2006 (Table 5) for the EU15, and this has created a high pressure to reach the headline goal, even before considering equipment capabilities for deployment (transport). Small countries have maintained their relative level of military forces only because they were not highly involved in the Cold War. To measure military forces burden-sharing, we have taken into consideration the range of military forces according to the active population (Table 6). As a consequence, we observe two interesting results validating the lack of human capacity within the ESDP framework. Firstly, most European countries were net contributors to a virtual European army in 1993. Thirteen years later, the fair burden-sharing ratio collapsed to 0.60 with some disparities between countries, especially for Belgium, Spain, Italy, and France who reduced their military labour forces more severely. Secondly, Greece (for some exceptional geopolitical reasons) draws up the average ratio and leaves other countries under this ratio. It is interesting to observe that the military labour market suffers from a supply deficit while for the same period most European countries had faced unemployment. Such economic conditions combined with enlistment difficulties make the decision to send troops for military and civilian ESDP missions complex

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MARTIAL FOUCAULT Table 5.

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom EU-15

Active Military Forces.

1980

1990

2000

2006

44,000 85,450 29,400 31,800 453,100 476,300 158,500 86,500 361,400 800 101,400 61,800 257,400 63,000 300,100

42,500 92,000 31,700 31,000 461,250 469,000 162,500 13,000 389,600 800 102,600 68,000 274,500 64,500 306,000

35,500 39,250 21,810 31,700 294,430 321,000 159,170 11,460 250,600 899 51,940 44,650 166,050 52,700 212,450

39,900 36,950 21,180 28,300 254,895 284,500 163,850 10,460 191,152 900 53,130 44,900 147,255 27,600 216,800

2,512,930

2,510,940

1,695,609

1,523,778

Source: IISS (Military Balance) 1980–2006.

Table 6.

Fair Burden-Sharing in Terms of Military Forces. 1993

2000

2006

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK

n.a. 1.48 0.74 0.82 1.23 0.79 2.62 0.62 1.13 0.31 0.95 0.92 1.19 0.96 0.71

0.60 0.59 0.51 0.81 0.75 0.54 2.27 0.43 0.70 0.32 0.42 0.56 0.62 0.77 0.49

0.63 0.52 0.48 0.70 0.61 0.46 2.21 0.32 0.51 0.29 0.41 0.53 0.45 0.38 0.48

EU-15

1.03

0.69

0.60

Source: IISS (Military Balance) 1980–2006 and Eurostat (Active Population).

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because countries above the average fair ratio (0.60) can be incited to support the individual operational costs to other countries as the latter (naturally) under-provide military forces. A Fair Public Finance Burden-Sharing The last measure of military burden-sharing consists of combining public finance and military spending. Rather than adopting a wealth approach in terms of GDP, public finances in Europe inform us of the budgetary capacity or constraint for allocating military resources. According to the Wagner Law, the richer a country is the more national, social needs (education, transport, health, security) increase. On the other hand, no empirical studies (Gemmell, 1990; Holsey & Borcherding, 1997) confirm that public finance law for Europe in a recent period. That is why we construct another fair ratio by dividing the share of defence spending (on all EU countries) on a country’s ability to contribute (in terms of government spending). Table 7 provides an interesting result that puts forward a counter-intuitive capacity of European countries to finance public spending, especially military spending. In other words, countries such as France and UK display a weak fair public finance military burden-sharing, 0.87 and 0.67 respectively, because they face a strong budget constraint that forces them to make some fiscal choices among different policy options. Security and defence issues seem to lead them to an overstretching problem while a majority of European countries (such as, Germany) are better able to find fiscal resources to finance the military burden. Among all these measures of burden-sharing, the existence of free-riding countries is not demonstrated but only assumed according to the difference between the individual contribution of each EU country and the fair burden-sharing ratio (at least superior to 1). To test this suspicious opportunist behaviour, we propose in the next section a simple statistical method to evaluate the robustness of the free-rider hypothesis in the defence of Europe.

The Logic of Defence Collective Action: A Rationalist Approach Since the seminal paper of Olson and Zeckhauser (1966), it is largely accepted that smaller countries involved in an international alliance are more likely to contribute less than larger countries for providing a public good. Branded as the exploitation hypothesis, it was empirically tested for

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MARTIAL FOUCAULT Table 7.

Fair Military Burden-Sharing in Terms of Public Finance. 2000

2005

Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden UK

2.26 1.54 0.69 1.22 1.43 0.95 1.66 0.85 1.35 0.46 1.09 1.92 1.00 1.36 n.a. 1.98 0.00 1.20 n.a. 0.91 n.a. 0.06 1.35 1.25 0.69

2.28 1.78 1.27 1.29 1.60 0.90 1.45 0.87 1.38 0.46 1.39 2.42 1.02 0.84 1.13 2.13 0.00 1.20 0.90 0.84 0.86 0.05 1.47 1.47 0.67

EU-25

1.15

1.19

Source: SIPRI and Eurostat.

different periods with the NATO alliance and even in the triple alliance and cordial Entente (Conybeare & Sandler, 1990). To ascertain such a hypothesis, it must be assumed that larger countries of an alliance must devote larger percentages of their national income to defence than smaller countries (hypothesis 1). The subsequent basic idea means that the benefits received from a collective good (external security) are higher for countries that contribute less, that is, involving a no cost process. By analogy with NATO, we can assume that European security is theoretically provided by EU members through a summation process (Samuelson, 1954) in such a way that the final security output is derived from the individual contributions of each EU member. Evidently, we then assume that each EU country has the same common preferences for this security good5.

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The exploitation hypothesis can be defined as followed: In Europe, there will be a significant positive correlation between the size of an EU member’s national income and the percentage of its national income spent on defence. Following the same methodology recently developed by Sandler and Murdoch (2000) and adopted for European countries by Foucault (2008)6 for a longer period (1981–2002), we test such a hypothesis with European data between 1995 and 2006. Based on a calculation of Spearman rank correlation coefficient (r), it tests non-parametrically7 the rank correlation of two variables. A significant positive sign means that wealthier countries bear an uneven burden of defence spending. Specifically, ‘‘a partial coefficient measures the correlation of the residuals of two regressions: the first set comes from a regression of defence burden ranks on (say) exposed borders, while the second comes from a regression on GDP and exposed borders. With the partial correlation coefficient, we thus remove any explanatory power of the confounding variable before computing the statistic’’ (Sandler & Murdoch, 2000, p. 310). Table 8 indicates that coefficients are positive but insignificant, which means that there is not a significant correlation between countries’ GDP and their defence contribution. Consequently, the exploitation hypothesis is not verified even if a positive sign is observed. In other words, even if the rich EU countries seem to carry the defence burden of the (economically speaking) small EU partners for the past 12 years, no free-riding attitude is

Table 8. Year

Spearman Correlation (1995–2006). EU-15 rshare,

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

GDP

0.400 0.417 0.328 0.385 0.396 0.439 0.367 0.367 0.407 0.328 0.357 0.307

Note: No coefficient is significantly different from 0.

EU-25 rshare,

GDP

– – – – – – – – – – 0.180 0.181

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revealed. Thus, European security as a public good is not confronted necessarily with under-provision due to rationalist strategies but rather nonsuitable criteria of Pareto-optimality. Indeed, some countries will still keep a small contribution of defence spending according to their collective preferences. At the same time, the existing voluntary process to contribute enables EU countries to adopt a status quo strengthened by the principle of intergovernmentalism. This result confirms that the visible military burdensharing is not sufficient to conclude that some EU countries defect from providing European security through the ESDP.

CONCLUSIONS AND FUTURE RESEARCH AGENDA From a historical perspective, it is undeniable that the European security and defence policy makes some substantial progress, sometimes even in big steps, but the hesitation to involve more spending or fair contribution is revealing considerable fractures in this domain. The statistical analysis of the European military burden-sharing reveals that the fear of free-riding cannot be considered as a reliable threat as EU countries richer in terms of GDP (and public finance) do not bear an uneven defence burden. This result is important because it implies that European security is not a pure public good (Cornes & Sandler, 1996) characterized by under-provision due to free-riding. As demonstrated by recent debates on the design of financial mechanisms for military operations outside the EU, the European security and defence policy presents both some collective and ‘‘private’’ components of a public good. A future research agenda could be designed in two distinct ways. Firstly, the European security provision process appeals to a functional distinction on what is defence spending. Operating and capital expenditures are no longer sufficient to capture some ‘‘strategic’’ or ‘‘complement’’ behaviour. A more significant distinction between research and development spending and military labour spending, internal vs. external security, could lead to a better understanding of fiscal choices within the EU. Secondly and narrowly linked to the preceding point, European security as an (impure) collective good raised some new theoretical perspectives on the ground of European integration and public decision-making. Indeed, fiscal federalism (Oates, 1972) is a theory to determine which collective goods should be provided by which level of government. As European security affects all European citizens, the theory of fiscal federalism suggests delegating the provision of such a good at the supranational level to reduce the negative effects of

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spillovers. That is why a fruitful avenue of research should be dedicated to evaluating under which conditions the delegation process, here a ‘‘supranationalization’’, could ensure an optimal provision of security while respecting the collective preferences of 27 EU countries. The existence of a European security as an impure public good (since some defence components of the ESDP are not commonly shared) implies bypassing the myth of the free-rider in Europe and moving on determining the institutional design that can guarantee an optimal provision and a common financing system for ESDP missions.

NOTES 1. Moreover, the participation of the UK in the Iraq conflict substantially reduced its defence capabilities. 2. Among the EU budget of External Relations (3.45 billion Euros), only 75 million Euros are devoted to conflict resolution, verification, support for the peace process and stabilization, 13 million Euros to non-proliferation and disarmament, and 3.5 million Euros to conflict prevention and crisis management. 3. Annexes I, II, III, and IV of Council Decision 2007/384/CFSP. 4. 18 Member States have participated in the provisional financing scheme, and ATHENA is endowed with provisional appropriations exceeding 10 million Euros. In addition, each of the 18 member States may decide individually that its contribution to the provisional appropriations (up to 50%) can be used for an operation other than Rapid Response (EU Council, 2007). 5. In the opposite case, some alternative provision technologies could be more appropriate. Hirschleifer (1983) argued that best-shot or weakest-link technologies enable us to take into consideration the quantity of public goods according to the valuation made by countries through voting mechanisms. 6. Foucault (2008) concludes to the existence of a free-riding behaviour among some European countries before the fall of the Berlin Wall and not after this date. 7. The non-parametric properties are useful for our statistical analysis since the distribution of military burdens in Malta or Ireland is not identical to those of France or UK.

REFERENCES Conybeare, J., & Sandler, T. (1990). The triple entente and the triple alliance, 1880–1914: A collective goods approach. American Political Science Review, 84, 1197–1206. Cornes, R., & Sandler, T. (1996). The theory of externalities, public goods, and club goods (2nd edn.). Cambridge: Cambridge University Press. Foucault, M. (2008). Political economy of European defence expenditures (forthcoming). Amsterdam: Elsevier Publishing.

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Gemmell, N. (1990). Wagner’s law, relative prices and the size of the public sector. Manchester School of Economic and Social Studies, 58, 361–377. Hartley, K., & Sandler, T. (1999). NATO burden-sharing: Past and future. Journal of Peace Research, 36(6), 665–680. Hirofumi, S., & Sandler, T. (2002). Peacekeeping and burden-sharing, 1994–2000. Journal of Peace Research, 39(11), 651–668. Hirschleifer, J. (1983). From weakest-link to best shot: The voluntary provision of public goods. Public Choice, 41(3), 371–386. Holsey, C. M., & Borcherding, T. E. (1997). Why does government’s share of national income grow? An assessment of the recent literature on the US experience. In: D. C. Mueller (Ed.), Perspectives on public choice (pp. 562–589). New York: Cambridge University Press. Howorth, J. (2007). Security and defence policy in the European Union. London: Palgrave Macmillan. Larsen, H. (2002). The EU: A global military actor? Cooperation and Conflict, 37(3), 283–302. Le Cacheux, J. (2004). Negotiating the medium-term financial perspectives for the enlarged EU: The future of the European budget. Revue de l’OFCE, 91(April), 175–189. Linsdro¨m, G. (2005). EU–US burden-sharing: Who does what? Chaillot Paper 82, EU Institute for Security Studies, Paris. Missiroli, A. (2003). Euros for ESDP: Financing EU operations. Occasional Papers 45, EU Institute for Security Studies, Paris. Oates, W. E. (1972). Fiscal federalism. New York: Harcourt Brace Jovanovich. Olson, M., & Zeckhauser, R. (1966). An economic theory of alliances. Review of Economics and Statistics, 48, 266–279. Oneal, J. R. (1990a). Testing the theory of collective action. Journal of Conflict Resolution, 34(3), 426–448. Oneal, J. R. (1990b). The theory of collective action and burden-sharing in NATO. International Organization, 44(3), 379–402. Samuelson, P. A. (1954). The pure theory of public expenditure. The Review of Economics and Statistics, 36, 387–389. Sandler, T., & Hartley, K. (2001). Economics of alliances: The lessons for collective action. Journal of Economic Literature, 39, 869–896. Sandler, T., & Murdoch, J. C. (2000). On sharing NATO defence burdens in the 1990s and beyond. Fiscal Studies, 21(3), 297–327.

RACE VERSUS CULTURE IN POLITICS AND WAR: IMPLICATIONS FOR AFRICA$ Ali A. Mazrui Let me begin with the most famous of all predictions made by W. E. B. DuBois, the great African-American leader. At the beginning of the twentieth century, W. E. B. DuBois predicted that the central problem of the twentieth century was going to be the problem of the color line. DuBois saw that the century is engulfed by racism, lynching, the white man’s burden, and what came to be known as apartheid. The twentieth century was overwhelmed by refugees on the run from racially and nationalistically instigated conflicts.1 Now that we are in the twenty-first century, the question has arisen whether the central problem of the twenty-first century was going to be the problem of the culture line. Has a transition occurred between a clash of identities (such as races) to a clash of values (such as cultural norms in conflict)? Are refugees of the twenty-first century already disproportionately cultural refugees? $

An earlier and shorter version of this paper was presented as the fifth lecture of the Africa Centre, Dublin, Ireland. It was delivered by satellite transmission from the Institute of Global Cultural Studies in Binghamton, New York, to an audience in Dublin, Ireland, June 19, 2007. The lecture was dedicated to the World Refugee Day, which was the next day, 2007. The lecture for Dublin was entitled ‘‘Cultural Forces in World Politics: Implications for Africa.’’

War, Peace and Security Contributions to Conflict Management, Peace Economics and Development, Volume 6, 315–331 Copyright r 2008 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1572-8323/doi:10.1016/S1572-8323(08)06018-9

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Samuel Huntington is not, of course, a latter-day W. E. B. DuBois, but on the eve of the twenty-first century Huntington’s forecasts that the twentyfirst century was headed for a clash of civilizations. He argued that now that the Cold War was over, future conflicts in the world would be less and less between states and ideological blocs and more between civilizations and cultural coalitions. Huntington launched this debate with his article in Foreign Affairs, New York, in 1993 – an article that reverberated the world. He followed this up with a major book on the same subject.2 While another African-American distinguished scholar at the University of Chicago, William Julian Wilson, had predicted earlier the declining significance of race (see Wilson, 1978), as race was increasingly overshadowed by class and economics, Huntington predicted the rising salience of culture, overshadowing both race and class. This Chicago professor, an African-American, has since also moved to Harvard. Worldwide there was evidence in the last years of the twentieth century that the salience of race was on the decline. There was also evidence that the salience of culture was on the rise. Overt discrimination was ending in Africa and the West; Black folks have had the vote and influenced outcomes. In the United States, the House of Representatives has had multiple Black members, but the Senate has had only five Black members in 200 years.3 Yet the new Black Senator – Barack Obama – has become a superstar and is widely regarded as a potential President of the United States. Under George W. Bush, the United States has had two Black secretaries of state in a row – one male, one female.4 Old style race-based European colonialism has ended in Africa. Political apartheid has collapsed in South Africa. Overt racism is on the defensive. But if Black people are liberated from the inhibiting constraint of racism, why are Black societies still stagnant and are left behind by Asian countries that were also formally colonized? In 1957, Ghana and South Korea were reported to have had a comparable per capita income. Today South Korea may be the thirteenth industrial power in the world – while Ghana is still an underdeveloped postcolonial country.5 It is more rational to attribute Black economic retardation to cultural problems rather than to the genes of race. Even when economically troubled, the Asian countries like Malaysia, Singapore, Thailand, and Hong Kong were leaving Africa’s Kenya and Uganda far behind. Nigeria is no match for India, in spite of allowing for difference in size. The salience of culture is rising.

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Another major area of the salience of culture is the confrontation between political Islam on one side, and the United States and its ‘‘coalition of the willing’’ on the other. Since the end of the Cold War and the collapse of apartheid, far more Muslims than Blacks have perished in conflicts with white folks. The natural enemy of the white man is now perceived to be less and less a person with a different skin color and more and more a person with a different religion and values. The salience of culture continues to rise. Inter-racial wars of Black versus White have almost disappeared. But inter-cultural and inter-religious wars are raging in Iraq, Afghanistan, Kosovo, Chechnya, and between Israelis and Palestinians – and between Al-Qaeda and its enemies in Africa and the world. On the whole, these conflicts are producing cultural refugees – rather than racial asylum seekers. The worst terrorist acts in sub-Saharan Africa in recent years have not been between races but civilizations. These include the 1998 bombing of the United States Embassies in Nairobi and Dar es Salaam and the 2002 suicide bombing of the Israeli-owned hotel in Mombasa, Kenya. In order to kill 12 Americans, Arab militants killed over 200 Kenyans in the embassy atrocity in Nairobi. The Kenyans were caught in the crossfire in 1998.6 And the number of Kenyans who were killed at the Paradise Hotel in Mombasa was three times the number of Israeli casualties (Potter, 2002). In confrontations between antagonistic cultures, many cultural bystanders are often annihilated by default. The jails of the United States are still full of Black people in disproportionate numbers.7 But Black prisoners have been convicted for violating the civil code and are in jail for such alleged offenses as robbery, rape, murder, assault, and drug abuse.8 But the overwhelming political prisoners under American jurisdiction are culturally distinct. They are Muslims suspected of terrorist intent – whether the suspicions are validated or not.9 The most remarkable salience of culture in the United States concerns Arab-Americans. Not many people realize that the U.S. Congress has had Arab members. Before the 2006 elections, the following Arab–Americans were in the U.S. Congress: 1. Representative Nick Joe Rahall II (West Virginia) 2. Representative Ray LaHood (Illinois) 3. Representative Charles Boustany (Louisiana)

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4. Representative Darrell Issa (California) 5. Senator John E. Sununu (New Hampshire).10 How come there have been Arabs in the U.S. Congress? Because an Arab can rise high in the United States, provided the Arab is not a Muslim. In the presidential elections of 2000 and 2004, there was even an Arab-American who was a serious third candidate for the Presidency – Ralph Nader. High ranking Arab-American state officials include Governors Mitchell Daniels of Indiana and John Baldacci of Maine. The Bush administration earlier had also appointed Spencer Abraham as Energy Secretary. But, so far, there has been no Arab-American who has been elected to Congress as a Muslim. In the apartheid days in South Africa, Japanese were accepted as white, provided they were rich. In the United States, Arab-Americans can be accepted as white, provided they are Christian. Once again, this has been an issue of culture rather than race. After the congressional election of 2006 in the United States we have the first Muslim congressman. He is not Arab but an African-American. He ran in the election bearing a western name, rather than a Muslim one. Keith Ellison of Minnesota is the first U.S. congressman to take his oath upon the Qur’an.11 The particular Qur’an he used was once owned by Thomas Jefferson, author of the American Declaration of Independence and later the third President of the United States.12 We have known for some time that in America an Arab could be elected to Congress provided he was not a Muslim. Now that Minnesota has elected an African-American Muslim, should we assume that a Muslim can be elected to the U.S. Congress, provided he or she is not an Arab? Is this a case where cultural and racial criteria in a minority intermingle? With the collapse of political apartheid in South Africa in 1994, the danger of white racial domination of South Africa receded.

COMPARATIVE IMPERIALISM: EUROPEAN AND AMERICAN The shift from color-consciousness to culture-consciousness in world politics has coincided in part with a shift from the legacy of European colonialism to the new global pressure of the American imperium. The old European empires in Africa were ultimately based on doctrines of racial

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gradation, hence the concept of ‘‘the white man’s burden’’. The new American imperium is ultimately based on a presumed clash between democratic and antidemocratic political systems. During the Cold War, Pax Americana took the form of a clash between communism and the values of ‘‘the free world’’. After the Cold War, political Islam replaced communism as the normative ‘‘Other’’ to what is now euphemistically called ‘‘the international community.’’ Another major difference between European colonization and the new American imperium is that European empires took the form of territorial annexation; whereas, the American imperium prefers dominant control without territorial annexation.13 When Saddam Hussein’s Baghdad fell to the American forces in 2003, a couple of over enthusiastic American soldiers tried to fly the American flag where the statute of Saddam Hussein had recently stood. It was an attempt to repeat the flag-heroism of Iwo Jima. But higher U.S. authorities rapidly ordered the removal of the stars-and-stripes from the center of Baghdad. The America imperium is so anxious to avoid the appearance of annexation that it even denies the concept of ‘‘occupying’’ Iraq. Hence the elaborate charade of manufacturing ‘‘a sovereign Iraqi government’’ in the green zone of Baghdad in spite of the massive American military occupation of the rest of the country.14 A third difference between the European legacy and the American hegemony is that European imperialism was polycentric, based in London, Paris, Brussels, Lisbon, Rome, etc. European powers engaged in competitive imperialism, partly manifested in the scramble for Africa. The United States, on the other hand, is engaged in the imperial monopoly of a single superpower. So monopolistic does American hegemony aspire to be that it is currently nervous about the growing Chinese economic competition in Africa.15 European colonization was based on the economy of force. Relatively limited British military presence in India or Nigeria was often enough to earn the obedience and compliance of millions of colonized peoples. Only an economy of force could have made it possible for such an island nation as England to build and control an empire of global scale. The American imperium, on the other hand, is predicated on the threat of massive military force. Indeed, the American military is now of such a scale that it is the equivalent to the total military prowess of the next 10 countries added together.16

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V. I. Lenin used to argue that modern imperialism was a monopoly stage of capitalism. But Lenin should have added that the European imperialism was also a monopoly stage of warfare. Like the state in Weberian terms, European imperialism asserted an absolute monopoly of the use of force within the territories it occupied, hence Britain’s slogan of Pax Britannica. The American imperium, on the other hand, asserts not a monopoly of physical force but of weapons of mass destruction (WMD). Implicitly, there is a doctrine that nuclear and chemical weapons are not for ‘‘Muslims, Africans, and children under sixteen’’. During the era of the European colonialism, military conflicts between the Northern and Southern hemispheres were waged almost entirely in the South. The Mau Mau War in colonial Kenya in the 1950s was to some extent a racial war between black and white. There were both European and African casualties. But all the blood-letting was on Kenyan soil. London, Liverpool, and Manchester were quite safe from Mau Mau. The anti-colonial wars in the Portuguese colonies of Angola, Mozambique, and Guinea-Bissau were also, in part, inter-racial wars. Again, all the spilling of blood was on African soil. There were no anti-colonial bombs in the streets of Lisbon. The Vietnam War (both French phase and subsequent American phase) was also in part a racial war. Literally, millions of Vietnamese were killed and some 60,000 French and American troops. But once again the bloodletting between the Vietnamese and the Western powers was waged all on the soil of Indo-China – almost never in the streets of either Paris or Washington, DC. In that era of racialized North-South conflicts, only the South was militarily vulnerable. Western capitals just read in newspapers about their troops engaged in warfare in distant lands. However, in this new era of nascent clashes of civilizations, military vulnerability between North and South has become mutual. For the first time in centuries, two major cities in the Northern hemisphere (New York and Washington, DC) were hit by Southerners in a single September morning in 2001, killing nearly 3,000 people and injuring thousands of others. Since then, other Northern cities (London underground, Madrid railway station, Glasgow Airport) have all felt threats from militants associated with the Southern hemisphere (Arab world and South Asia). Inter-racial wars in the era of European colonialism were conducted in the South and spared the North. But inter-cultural wars in the era of the American imperium have at last brought western chickens home to roost. Civilizations of the South can now militarily target the North in ways that oppressed races of the South had previously failed to do. In the era of

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European dominance, the battlefields between Europeans and people of color were all in the South. In this new era of American hegemony, the battlefields between Westerners and non-Westerners are no longer one sided. The battlefields can be on either side of the divide – for better or for worse! Since the European colonization had once consisted of annexation of the territory of the colonies, the imperial powers assumed sovereignty over the colonies. One advantage of the British flag (the Union Jack) flying over colonial Kenya was Britain’s acceptance of responsibility if anything went wrong in the colony. For example, when about a dozen of African detainees were whipped to death in the 1950s in a place called Hola in colonial Kenya, there was a huge uproar in the House of Commons in London. It was regarded as ‘‘unacceptable’’ that any ‘‘subjects of Her Majesty the Queen, white or non-white’’, should be beaten to death under British jurisdiction.17 Under the American occupation of Iraq since 2003, close to 600,000 Iraqis have been killed.18 There has not been a single debate in the U.S. Congress addressing to the problem of civilian Iraqi casualties in American-occupied Iraq. The American imperium is far less accountable for what goes wrong in their unofficial empire than the British were in their flag-waving official empire. As compared with European styles of colonization in the twentieth century, the American imperium is legally irresponsible in this new millennium. There is one irony about the nature of inter-racial conflict in the era of European colonialism. The term ‘‘civilization’’ was indeed a major part of European racism – but not in the Huntingtonian sense of ‘‘clash of civilizations’’. In this new era of American hegemony, Samuel Huntington has regarded both sides of emerging global conflict as being ‘‘civilized ’’. The West is seen as being up against the rival civilizations of Islam and China. During the European imperial era, on the other hand, civilization was monopolized by the West. Indeed, ‘‘the white man’s burden’’ was the burden of the civilized to look after those folks who were barbarians: Take up the White Man’s burden, Send forth the best ye breed— Go bind your sons to exile, To serve your captives’ need; To wait in heavy harness, On flattered folk and wild— Your new caught sullen peoples, Half-devil and half-child.

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Take up the White Man’s burden— The savage wars of peace, Fill full the mouth of famine, And bid the sickness cease. Take up the White Man’s burden— No tawdry rule of kings, But toil of serf and sweeper— The tale of common things. The ports ye shall not enter, The roads ye shall not tread, Go make them with your living, And mark them with your dead.19

Just as European imperialism had not only monopolized the legitimate use of physical force in their colonies, but also the term ‘‘civilization’’ for their own way of life. The American imperium, on the other hand, does not monopolize the term ‘‘civilization’’ for its own culture alone. What it does monopolize is the term ‘‘democracy’’ to its own system of government. While Europeans had conquered others partly in the name of European version of ‘‘civilization’’, the Americans have more recently conquered others partly in the name of their own sense of American ‘‘democracy’’.20 As we mentioned earlier, the imperial legacy of Europe also gave birth to apartheid in South Africa, the most institutionalized form of racism in human history. These were the tensions of identity. But has the new imperialism of cultures given rise to its own version of apartheid? Are we witnessing the tensions of values? Let us look more closely at normative apartheid, national and global.

COMPARATIVE APARTHEID: CULTURAL AND RACIAL Has the risk of South Africa being dominated by white values increased? When South Africa devised the most liberal constitution in the world, it was on its way toward embracing the West through its own civilization. South Africa had abolished the death penalty long before the United States. And South African gays and lesbians have received more civil rights than the rest of the world.21 If racism had previously been the ugly face of Western civilization in South Africa, the open society is now the more attractive legacy of the West.

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And now the South African Parliament has passed legislation legalizing same sex civil unions for male homosexuals and lesbians. South Africa is the first African country to do so – but fifth in the world after the Western countries of Belgium, Canada, the Netherlands, and Spain (see Nullis, 2006). The dictatorship of the white man has ended in South Africa, but has the dictatorship of the white values triumphed? In reality, apartheid as a system has moved from South Africa to the global level (see Mazrui, 1993). At the global level, countries are ranked by development rather than race. And development is either fostered or inhibited by culture.22 The rank order of the world is now based less on ‘‘who owns what’’ and more on the new principle of ‘‘who knows what’’. The latter imperative is the imperative of skill rather than income. Petro-rich Arabs have much bigger incomes than Israelis. But in one war after another, Arabs have been out-skilled by Israelis. The skills are partly products of culture. For decades the White South Africans dominated millions of Blacks, mainly because the Whites out-skilled Blacks. White culture was organizationally more efficient. In the global system of apartheid, the main economic casualties are still Africans and Black people generally. African peoples have been slow to respond positively to globalization. The politics of identity are still inhibiting black folks. However, the main military victims of global apartheid are Muslims. Hundreds of thousands of Muslims have been killed in recent years by the Westerners in Iraq, Kuwait, Palestine, Afghanistan, and even Libya. There was also a civilian Iranian airliner that was shot down by an American battleship. In the current war in Iraq, civilian fatalities have already reached 600,000 if not three quarters of a million. The politics of cultural differentiation is now more deadly than racial segregation. Even Darfur poses the question of whether it is a cultural civil war or a racial one. Both sides of the Darfur conflict are in fact Black, and both are Muslim. Ironically, the difference between the two sides is a linguistic one. The Darfurians are not native speakers of the Arabic language, whereas their tormentors are. Are Darfurian refugees cultural or racial?23 The North-South civil war in Sudan had been more clearly a racial war at least partially – but that particular conflict has now virtually ended.24 On the other hand, the Darfur civil war is still raging – and the two sides are divided by language and rivalry over resources.

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The case of Somalia poses other cultural variations. In the pre-colonial period, governance among the Somali was based on rules rather than rulers. This was characterized as ordered anarchy. Then colonial rule came under the Italians, the British, and the French. The Somalis fell under imperial control. On attainment of independence in 1960, the Somali Republic experimented with what was called a ‘‘pastoral democracy.’’ Although the pastoralists loved liberty and were free-spirited, they were not good in operating a democratic system. The pastoral democracy collapsed and was replaced by an arbitrary military regime. In Siad Barre, the Somalis had a ruler, but almost no rules. Military arbitrariness prevailed. When Siad Barre was overthrown in 1991, the former Italian Somaliland descended into anarchy without the pre-colonial order. Former Italian Somaliland became devoid of both rulers and rules.25 But former British Somaliland seceded into a separate country – much more stable internally than the former Italian Somaliland, but much less recognized internationally.26 Then the Islamic Courts came into the anarchic part of greater Somalia. Under the Islamic Courts, the capital Mogadishu was gradually finding its way back to its pre-colonial state of rules without rulers. The concept of courts emphasized this distinction of rules and laws instead of Sultans and Emirs. The Islamic Courts were potentially a stabilizing force for the country as a whole. Contrary to the American propaganda, those courts were not the equivalent to the Taliban.27 Nor were the Somali women the equivalent of the more submissive Afghan women. On the contrary, in the 1980s and 1990s Somali women even served in the armed forces – carrying guns and wearing uniforms. This was a very different history from that of the Afghan women. But the Somali Courts have now been destroyed by the proxy war waged by the United States in the Horn of Africa in a de facto alliance with Ethiopia (Mazetti, 2006). Conflict between Ethiopians and the Somali people, both within Ethiopia and in Somalia, is not racial but ethno-cultural (see McCrummen, 2007). Conflicts in the Middle East have often spilled over into Eastern Africa. Militarized global apartheid is inevitably intercontinental. The hottest is the conflict between Al-Qaeda and the U.S. allies. Similarly, moral debates in the western world have often spilled over into Africa. The oldest is the debate on women’s rights and female empowerment. Does Al-Qaeda break the code of a just war? Does feminism break the code of African tradition? Al-Qaeda represents a clash of civilizations; the role of women represents a

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clash of cultures. Once again, Africa is caught in the crossfire all the way from Mogadishu to Maiduguri, from Cape Town to Port Said. With regard to Al-Qaeda, one of the issues of the debate is whether their kind of warfare is illegitimate. If the United States can unleash a war that has cost close to 600,000 Iraqis and still avoid being called a terrorist power, why should non-state actors be pursued as terrorists for killing 3,000 lives in the United States? Part of the issue is whether the killers who wear uniforms as representatives of the state have a more solid license to kill than the underground killers like Al-Qaeda and Islamic Jihad? A related question is whether killing innocent civilians in the vicinity of a suspect is more defensible than killing innocent civilians on the assumption that a number of them are probably collaborators. When the United States targeted southern Somali villages by an air raid in January 2007 on the assumption that there were three Al-Qaeda suspects,28 was that really different from the Hamas targeting an Israeli bus on the assumption that the bus includes Israeli soldiers out of uniform? Finally, a word about two plays by William Shakespeare – Othello and the Merchant of Venice, both plays are set in Venice. It is arguable that there is more anti-Semitism in the Merchant of Venice than color prejudice in Othello.29 On the contrary, Othello as a character emerges as a tragic hero in spite of his marrying a white woman and killing her.30 In the centuries that followed Shakespeare, inter-racial sexual mating became repugnant to mainstream British and Anglo-Saxon culture. It culminated in Jim Crow and apartheid. Yet in Othello, we have a Black man addressed as ‘‘My Lord’’ by a white woman in the bedroom. We see him kissing her after murdering her. Yet the play’s villain is Iago, a scheming white man who succeeded in transforming Othello’s tender love for Desdemona into a murderous jealous rage. This became Shakespeare’s most memorable portrayal of domestic violence. Yet we pity Othello rather than hate him. And we admire his decisiveness when he kills himself as soon as he discovers his monumental injustice to Desdemona. He says to her dead body: I kissed thee ere I killed thee. No way but this, Killing myself, to die upon a kiss.

Before he dies, Othello also calls upon the rest of us: When you shall these unlucky deeds relate, Speak of me as I am. Nothing extenuate.

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Nor set down ought in malice. Then must you speak, Of one that loved not wisely, but too well. [Act V, Scene II]

Shakespeare even makes Othello more prejudiced against another culture than against another race. Here is a Black man who is not against white people, but against Muslims. In Shakespeare’s day, Islam was almost equated with the Ottoman Empire. The words ‘‘Turk’’ and ‘‘Muslim’’ were almost interchangeable. The last words uttered by Othello before he stabs himself are essentially Islamophobic. Othello tells us about a man he killed in Aleppo (Syria). He described the victim as a ‘‘turbaned Turk.’’ Othello also knew Muslims were circumcised. He used even the circumcision as a term of Islamophobic abuse: yin Aleppo once, where a malignant and turbaned Turk Beat a Venetian and traduced the state, I took him by th’ throat the circumcised dog And smote him—thus [Othello stabs himself.]

Othello is clearly much more culture conscious than color conscious. The skin of the Turk was probably white, but Othello is more offended by the Turk’s culture – turban, circumcision, and all. We are back to the Shakespearean rank order of prejudice. We are witnessing culture prejudice in Othello rather than color bias. In contrast to this sympathetic treatment of the Moor of Venice, Othello, Shakespeare is fundamentally unsympathetic to the Jew of Venice, Shylock. He is portrayed stereotypically as a greedy Jewish money-lender constantly worried about ducats rather than dignity. Ducats were the Venetian bottom line in Shakespeare’s day. Shylock is also portrayed literally as almost blood-thirsty as he insists on getting the literal pound of flesh from a fellow human being. Demanding a literal pound of flesh is horrid, but as a crime it is far less horrid than Othello’s strangulation of his innocent wife. Yet Othello emerges as, at worst, a foolish but a tragic hero – whereas Shylock is obsessed with gruesome greed. Once again, we see in Shakespeare a greater aversion to a man from a different culture (Shylock) than to a man of a different color (Othello). But does not Shakespeare assign to Shylock great lines of defense of racial and cultural equality? Was Shakespeare ambivalent about the Jew? Was he torn between the apartheid of color and culture?

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It is indeed true that one of the great speeches in the Merchant of Venice is Shylock’s eloquent assertion that Jews were no less human than Christians. Julius K. Nyerere of Tanzania loved that speech when he was translating it into Kiswahili for publication by Oxford University Press in the 1960s: yI am a Jew. Hath not a Jew eyes? Hath not a Jew hands, organs, dimensions, senses, affections, passions?—fed with the same food, hurt with the same weapons, subject to the same diseases, healed by the same means, warmed and cooled by the same winter and summer, as a Christian? If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die?

But Shylock soon disappoints us about his real motives. As Shylock continues, it becomes clear that he is not using a shared humanity as a reason for tolerance but as a reason for revenge. When wronged by somebody else, a Christian may at least consider turning the other cheek. But Shylock says instead: And if you wrong us, shall we not revenge?yIf a Christian wrongs a Jew, what should his sufferance be by Christian example? Why revenge! The villainy you teach me, I will executey31

The conclusion to be drawn regarding Shylock and Othello is that in Shakespeare’s era culture prejudice (such as anti-Semitism) was much stronger than color prejudice (such as Negrophobia). The apartheid of norms overshadowed the apartheid of race. However, in the succeeding centuries the English people and their overseas descendants became more and more averse to blackness and less and less hostile to Jewishness. Anglo-Saxon prejudices, color eventually overshadowed culture decisively for several centuries.

CONCLUSION The question, which our own twenty-first century now poses, is whether we are returning to a kind of Shakespearean scale of values. Of course, color racism is still alive and well, but is it losing in salience in human behavior? Culture conflict goes back to the Crusades and further back to the tribal societies, but are we witnessing a resurgence of cultural belligerence in human affairs? W. E. B. DuBois was right about the vital significance of the color line for the twentieth century. But in this twenty-first century, culture is once again

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overshadowing color and civilization is overshadowing race – for better or worse. Is Shylock back as culture-prejudice incarnate?

NOTES 1. There are more than 20 million asylum seekers, refugees, and others of concern to the UNHCR (over five million are in Africa) according to the UNHCR website http:// www.unhcr.org/cgi-bin /texis/vtx /basics/opendoc.htm?tbl = BASICS&id=3b028097c, as of January 1, 2006 in the world. 2. For the relevant article and early responses, see Huntington (1993). The book-length expansion of Huntington’s argument may be found in The Clash of Civilizations and the Remaking of World Order (1996). 3. Blacks who have served (or are serving) as Senators include Hiram Revels and Blanche Bruce (both from Mississippi), Edward Brooke (Massachusetts), Carol Moseley Braun, and Barack Obama (both from Illinois). 4. General Colin Powell and Condoleeza Rice are among the few prominent black Republicans who have served under both President George H. W. Bush and President George W. Bush. 5. Herbert H. Werlin has laid out a interesting but disheartening comparison of the Ghanian and South Korean progress in his Werlin (1994) 6. Reports lamenting the end of the African ‘‘safe haven,’’ may be found in New African, 367 (October 1998), pp. 16–17 as also ‘‘Now for Africa,’’ The Economist (July 5, 2003), p. 9. 7. According to the National Urban League’s State of Black America 2007 report, black men are nearly seven times more likely to be jailed than white men; see ‘‘State of Black America,’’ The Washington Post (April 21, 2007). 8. There is an epidemic of black-on-black violence. A study by the Bureau of Justice Statistics, found that almost half the people murdered in the United States annually were black; between 2001 and 2005, 9 of 10 black murder victims were killed by other blacks; and blacks – who comprise 13 percent of the population – were victims in 15 percent of nonfatal violent crimes. For a report, see Eggen (2007). 9. For instance, even an insider – Lt. Col. Stephen E. Abraham of the Army Reserve – who had been involved with the military hearings at Guantanomo to determine if the detainees were ‘‘enemy combatants’’ has called some of the evidence at these hearings ‘‘garbage’’ in testimony to Congress; see Glaberson (2007). 10. The first Senator of Arab-American descent was James George Abourezk (Democrat, South Dakota), and other former Senators of Arab-American descent include James Abdnor (Republican, South Dakota) George Mitchell (Democrat, Maine) and Spencer Abraham (Republican, Maine). 11. For a profile of the first Muslim in Congress, see MacFarquhar (2006). 12. Ellison’s announced plan to use the Qur’an led to some controversy and criticism from some individuals; see The Reliable Source column by Amy Argetsinger and Roxanne Roberts, The Washington Post (January 3, 2007). 13. For some critical discussions on the American empire for instance, see Johnson (2001) and Parenti (1995).

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14. Americans are not comfortable admitting that the United States is an imperial power; see Simes (2003, November-December). 15. Africans do have mixed feelings about the Chinese involvement; for an example of current involvement by the Chinese in a poor African country, see French and Polgreen (2007). 16. See Baker (2003, October). For lists of countries with United States military presence, see Priest (2003, 2005). 17. Eleven died and more were maimed; see Time (1959). 18. Understandably, in the dangerous environment of Iraq these numbers are only estimates. Nevertheless, there is reasonable certainty (95 percent) that the numbers range between 400,000 and 900,000, as Eugene Robinson has pointed out in (see Robinson, 2006). 19. Rudyard Kipling, ‘‘White Man’s Burden’’ (1899). See Snyder (1962). 20. The record of the selective application of democracy promotion under the Bush administration is assessed by Baker (2006). 21. South Africa’s constitution is the first in the world to protect the rights of homosexuals, as Mark F. Massoud points out in his study (see Massoud, 2003). 22. For discussions on the linkage between culture and development, see, for instance, Bornschier (2005), Rao and Walton (2004), Harrison and Huntington’s Culture Matters: How Values Shape Human Progress, and Landes (1998). 23. On the various dimensions of the Darfur conflict, see Mamdani (2007), Flint (2006), Dealey (2004), and Anderson (2004). 24. See Johnson (2003), and Jendia (2002), for recent overviews of the Sudan conflicts. Also see Wai (1981) and Beshir (1968). 25. An overview of Somalia’s history may be found in Brons (2001). 26. See relatedly Bradbury, Abokor, and Yusuf (2003) and Huliaras (2002, July). 27. See, for instance, the report by Gettleman (2006). 28. A report on the strikes may be found in Gordon and Mazetti (2007). 29. For discussions of anti-Semitism in Shakespeare’s plays, see, for instance, Cartelli (1988), and Perret (1988). 30. Shakespeare’s treatment of the racial aspects of Othello is discussed in, for example, Adelman (1997, Summer), and Neill (1989, Winter). 31. The Merchant of Venice, Act III, Scene 1.

REFERENCES Adelman, J. (1997). Iago’s alter ego: Race as projection in ‘Othello’. Shakespeare Quarterly, 48(2), 125–144. Anderson, S. (2004, October 17). How did Darfur happen? New York Times Magazine. Baker, K. (2003). We’re all in the army now: The G. O. P.’s plan to militarize our culture. Harper’s Magazine, 307(1841), 43. Baker, P. (2006). The realities of exporting democracy. Washington Post, January 25. Beshir, M. O. (1968). The southern Sudan: Background to conflict. New York: C. Hurst and Company. Bornschier, V. (2005). Culture and politics in economic development. London: Routledge.

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Bradbury, M., Abokor, A. Y., & Yusuf, H. A. (2003). Somaliland: Choosing politics over violence. Review of African Political Economy, 30(97), 455–478. Brons, M. H. (2001). Society, security, sovereignty and the state in Somalia: From statelessness to statelessness? Utrecht: International Books. Cartelli, T. (1988). Shakespeare’s merchant, Marlowe’s Jew: The problem of cultural difference. Shakespeare Studies, 20, 255–260. Dealey, S. (2004). Misreading the truth in Sudan. New York Times, August 8. Eggen, D. (2007). Study: Almost half of murder victims black. Washington Post, August 10. Flint, J. (2006).The Arabs are victims too. Washington Post, November 19. French, H., & Polgreen, L. (2007). China, filling a void, drills for riches in Chad. New York Times, August 13. Gettleman, J. (2006). Islamists calm Somali capital with restraint. New York Times, September 24. Glaberson, W. (2007). Critic and ex-boss testify on Guanta´namo hearings. New York Times, July 27. Gordon, M. R., & Mazetti, M. (2007). U.S. used base in Ethiopia to hunt Al Qaeda. New York Times, February 23. Harrison, L. E., & Huntington, S. P. (Eds). (2000). Culture matters: How values shape human progress (pp. xvi–xxxiv). New York: Basic Books. Huliaras, A. (2002). The viability of Somaliland: Internal constraints and regional geopolitics. Journal of Contemporary African Studies, 20(2), 157–182. Huntington’s, S. P. (1996). Argument may be found in the clash of civilizations and the remaking of world order. New York: Simon & Schuster. Huntington, S. P. (1993). The clash of civilizations: The debate. New York: Foreign Affairs. Jendia, C. (2002). The Sudanese civil conflict, 1969–1985. New York: Peter Lang. Johnson, C. (2001). Blowback: The costs and consequences of American empire (1st Owl Books edition.). New York: Henry Holt. Johnson, D. H. (2003). The root causes of Sudan’s civil wars. Oxford: James Currey Publishers. Landes, D. S. (1998). The wealth and poverty of nations: Why some are so rich and some so poor. New York: W.W. Norton. MacFarquhar, N. (2006). Democrat poised to become first Muslim in Congress. New York Times, October 8. Mamdani, M. (2007). The politics of naming: Genocide, civil war, insurgency. London Review of Books, 29(5). Massoud, M. F. (2003). The evolution of gay rights in South Africa. Peace Review, 15(3), 301. Mazetti, M. (2006). U.S. signals backing for Ethiopian incursion into Somalia. New York Times, December 27. Mazrui, A. A. (1993). Global Apartheid? Race and religion in the new world order, chapter commissioned by the Nobel Foundation (Oslo, Norway). In: G. Lundestad & O. A. Westad (Eds), Beyond the Cold War: New dimensions in International Relations (pp. 85–98). Stockholm: Scandinavian University Press. McCrummen, S. (2007). Ethiopia finds itself ensnared in Somalia. Washington Post, April 27. Neill, M. (1989). Unproper beds: Race, adultery and the hideous in ‘Othello’. Shakespeare Quarterly, 40(4), 383–412. Nullis, C. (2006). (Associated Press Writer), Same-sex marriage law takes effect in S. Africa. Washington Post, December 1. Parenti, M. (1995). Against empire. San Francisco: City Lights Books.

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Perret, M. D. (1988). Shakespeare’s Jew: Preconception and performance. Shakespeare Studies, 20, 261–268. Potter, B. (2002, December 9). No vacation from terror’s reach, U.S. News & World Report. Priest, D. (2003). The mission: Waging war and keeping peace with America’s military (p. 187). New York: W. W. Norton. Priest, D. (2005). The military balance, 2004–2005 (p. 17). London: Institute for Strategic Studies, Taylor & Francis. Rao, V., & Walton, M. (Eds). (2004). Culture and public action. Stanford: Stanford University Press. Robinson, E. (2006). Counting the Iraqi dead. Washington Post, October 13. Simes, D. K. (2003). America’s imperial dilemma. Foreign Affairs, 82(6), 93. Snyder, L. L. (Ed.) (1962). The imperialism reader: Documents and readings on modern expansionism (pp. 87–88). Princeton: Van Nostrand. Time. (1959, June 8). The Hola scandal. Wai, D. M. (1981). The African-Arab conflict in the Sudan. New York: Africana Publishing Co. Werlin, H. H. (1994). Ghana and South Korea: Explaining development disparities. Journal of African and Asian Studies, 29(3–4), 205–225. Wilson, W. J. (1978). The declining significance of race: Blacks and changing American institutions. Chicago: University of Chicago Press.

SUBJECT INDEX Cooperation, 40, 53–54, 60, 63–66, 74, 108, 111–112, 114–115, 117, 120, 122–123, 129, 133–134, 142–143, 146, 149–152, 169–171, 173, 284–286, 288, 301

Alliance, 55, 94, 96, 98, 128–129, 134–135, 141–143, 186, 224, 227–228, 232, 285, 298, 302, 309–310, 324 Apartheid, 6, 315–318, 322–327 Armaments industry, 10, 22, 72, 120, 125, 129–130 Arms exports, 10, 45, 68, 78, 113–115, 117 Arms race models, 4, 17, 126

Defence firms, 83–89, 91–93, 95, 97, 99–101 Defense economics, 32 Defense industrial policy, 84, 94, 96, 98 Defense industry, 9–10, 26, 105–107, 109, 113, 121 Defense Ministry, 110, 169 Determinants of military expenditures, 8, 42, 125, 127, 129, 131 Disarmament, 2–3, 6–7, 9, 12, 55, 61–62, 68–73, 75, 130, 208, 219–220, 230, 232, 250–251, 313 Dividend of peace, 70, 130 Domination, 2, 4–7, 79, 132, 161, 193, 196, 206, 218, 220, 228, 318

Capitalism, 2–3, 7, 12, 14–16, 18–20, 29, 68, 76, 126, 161, 218, 237, 320 CIA, 41, 150, 167, 236–237, 239–240 Civilization, 47, 64, 66, 218, 321–322, 328 Cold War, 8, 16–17, 19, 22, 24, 27, 30, 38, 42–43, 53, 55–56, 58, 65, 68–71, 75–77, 79, 83–84, 89, 121, 125, 127, 130, 145, 165, 173, 178, 218–219, 227, 235, 251, 307, 316–317, 319 Concentration, 10, 55, 74, 77, 117–119, 128, 287 Conflict, 1–2, 6, 11, 13–18, 22–24, 26–33, 37–40, 46, 48, 53–54, 56, 58–59, 61, 67, 77, 83, 105, 125–126, 133–134, 142–143, 146, 149–152, 161, 173–176, 183–184, 186–187, 189, 191, 193, 195, 197–203, 205, 207–209, 215, 220–221, 223, 227, 235, 249, 252–253, 262, 267–268, 272, 274, 282, 286–289, 297, 307, 313, 315, 321, 323–324, 327, 329 Conversion, 7, 9, 30, 44, 65, 70, 72–74, 76, 78, 97, 107, 112, 119–121, 176, 258, 275–276, 282

Economic competition, 7, 20, 22, 46, 219–220, 319 Economic development, 6, 12, 14–15, 38, 40, 50, 67, 80, 108, 112, 174, 180, 203, 218–219, 221, 229, 231, 258 Economic intelligence, 12, 15, 38, 76, 131, 170, 235–239, 241–248 Economic wars, 4 Economics of conflicts, 7 Economics of security, 8, 14, 16, 31 Economists for Peace and Security, 4–5, 62 333

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European defense, 9 European security, 297, 310, 312–313

International trade, 3, 14–15, 132–137, 148, 151, 229

Firms Concentrations, 74

Joint venture, 74–75, 85, 89, 119–120

GDP, 28, 43–44, 110, 143, 146, 149, 221, 230, 252, 262, 282, 304–306, 309, 311–312 Gender, 11, 189–195, 197–201, 203, 205–210 Geoeconomy, 10 Geopolitics, 48, 236 Globalization, 3, 6, 8–9, 11, 50, 53, 55, 60, 68–69, 75–78, 127–128, 161, 164, 187, 216, 219–220, 228–229, 235, 323 Global security, 8, 53–55, 57–61, 63–66, 177 Gravity model, 10, 133, 136–137, 142, 145–146, 148, 152

Keynes or Keynesian analysis, 8, 14, 18, 24, 61, 69, 263

Hegemony, 2, 6–7, 9, 15–16, 21, 78, 80, 319, 321 Humanitarian missions, 215, 217 Human needs, 12, 217, 219, 257 Human rights, 8, 11, 32, 50, 54, 59, 77, 190, 203, 216, 221–223, 226–228, 230–231 Human security, 8, 53–55, 57, 59, 61, 63, 65–66, 251 Imperfect markets, 92 Imperialism, 2, 15, 29, 319 Industrial base, 9–10, 30, 84–86, 91, 94, 96, 98–99, 101–103 Information technology, 32 Innovation, 11, 25–26, 78–79, 88, 168–169, 171, 237 International security, 8–9, 12–15, 17, 19, 21–23, 25, 27, 29–31, 33, 37–39, 41, 43, 45–47, 49, 55, 83, 129, 133, 166, 169, 173–174, 179–180, 182–183, 186, 191, 200, 215–216, 219, 231, 249, 251, 253, 255–257, 259, 261, 263

Liberalism, 14–16, 46, 55, 76, 218–219 Marxist analysis, 21 Mercantilism, 3, 14, 46 Military industrial Complex (MIC), 18–19, 22, 29, 70–72, 74, 78–79 Militarism, 14, 18–20, 68 Military budgets, 43 Military expenditures, 4, 7–8, 10, 16, 38, 41–42, 55, 58, 67, 69, 71, 76, 80, 105, 108, 125–132, 186, 222, 225, 298–299, 301, 307 Military forces, 32, 135, 223, 307–309 Military intervention, 180, 182, 221–223, 227, 232 Military power, 9, 18, 24, 38, 68–69, 75, 78, 135, 281, 283, 288, 300 Military R&D, 10, 68, 78, 126, 128, 130–131 Military technology, 24–25, 45, 70, 268, 270, 281, 286, 288 National security, 4, 8–9, 12–15, 17, 19, 21–23, 25, 27, 29–31, 33, 37–43, 45–47, 49, 54–55, 57–58, 75, 83, 93, 102, 126, 129, 132–133, 166–167, 169–171, 173–174, 179–180, 182–183, 186, 191, 200, 215–216, 219, 229, 231, 235, 237, 239, 241–249, 251, 253, 255–257, 259, 261, 263 NATO, 32–33, 49, 70, 80, 105, 128–129, 185–187, 220, 224–225, 228, 232, 298, 303, 310 Neoclassic analysis or theories, 8, 14, 16

Subject Index Non–Governmental Organization (NGO), 60, 62, 198, 223 Nuclear weapons, 41, 55–56, 58, 66, 68, 70, 100, 165, 251 Peace building, 200–202, 205–207, 211, 223 Peace economy, 1, 13, 37, 53, 67, 83, 105, 125, 133, 161, 173, 189, 215, 235, 249, 267, 297, 315 Peacekeeping, 11, 29, 31, 77, 169, 173–187, 190, 198–201, 216, 222, 224–226, 228, 250, 298 Political economy, 2, 11–12, 14, 27, 143, 148, 215–217, 219, 221, 223, 225, 227, 229, 231 Poverty, 7, 12, 38, 59, 76, 149, 164–165, 173, 180, 203, 207, 209–210, 217, 229, 231 Power of Nation State, 48 Privatisation, 16, 84–85 Public goods, 7, 129, 264, 271, 304, 313 Rearmament, 55, 69–70, 125, 300 Reconstruction, 13, 23–24, 29–30, 190, 192, 223 Reorganization of armament industries, 9 Revolution in Military Affairs, 24, 31 Russia, 10, 59, 62–63, 66, 71–74, 80, 105–109, 111, 113–117, 119–123, 146, 149, 224, 228, 230, 258, 260 Russian defense–industrial complex, 10, 110, 113 SIPRI, 71, 73, 77, 86–88, 97, 109, 113–114, 121, 299–300, 305–307, 310

335 Science, 8, 13, 17, 63–65, 128, 152, 169, 248, 254, 257, 264, 298 Soviet Union, 4, 42, 44, 50, 56, 68, 73, 126, 130, 148, 220, 288 Sustainability, 12, 221, 249–250, 252–258, 260–261, 263–264, 284, 288 Technological progress, 9, 20, 75, 78 Technology transfers, 78, 115 Terrorism, 8, 10–11, 23, 38, 43, 54–56, 58–59, 66, 68, 80, 100, 105, 128, 132, 161–171, 179, 216, 221, 231, 241, 299 Threats, 8, 10, 24, 32, 38, 41–43, 46, 53–54, 56, 58–66, 70, 75–76, 80, 91, 100, 105–106, 128, 169, 202, 216–217, 231, 264, 299, 320 Underconsumptionist theory, 18 UK, 31–32, 41, 43, 63, 71, 73, 84, 86–89, 91–95, 97, 99–103, 149, 261, 300–301, 303–310, 313 UN system, 8, 53–54, 60–61, 63, 66 USA, 38, 41, 71, 73, 97, 106, 108–109, 114–115, 121, 125, 127, 185–187 War economics, 12, 19, 24, 28–29 Wassenaar Arrangement, 49 weapons of mass destruction, 57, 73, 162, 320 world economic system, 132 World peace, 9, 53–54, 58, 75, 132, 220 World Trade Organization (WTO), 47, 49, 62, 68, 144, 237, 241