UNITED STATES: War profiteers have a field day



Towards the end of Bill Clinton's presidency in 2000, the moaning and groaning of US "defence" contractors reached new heights — their profits were drying up as US military budgets shrank to a post-Cold War low. Following the September 11 terrorist attacks, everything has changed.

Exploiting the traumatic impact on public opinion, the Republican administration of President George Bush immediately secured US$40 billion of emergency funding to "fight terrorism".

In early February, Bush sought a further US$48 billion increase in the military budget for fiscal year 2003 (which starts October 1), pushing it to US$396 billion — its highest since 1954 (following the 1950-53 Korean War) and far exceeding the Cold War average annual spending of just under US$300 billion.

The US killing in Afghanistan has only whetted Bush's appetite. He made clear as early as December that he plans to make 2002 a "war year". Now he's got the money to carry that plan through.

In late October, Bush placed the biggest military order in history with Lockheed Martin, the world's biggest military contractor (US-owned of course). The US$200 billion contract is to develop a joint strike fighter (JSF). Britain also owns a small stake.

Not surprisingly, the share prices of US military corporations have risen significantly since September 11, in contrast to the general stock market and the diving airline and related stocks in particular.

Shares soar

The price of Alliant Techsystems shares, a top US maker of bullets, gunpowder, bombs and rocket-propulsion systems, soared almost 300% higher than its March quote within weeks of the terrorist attacks. Lockheed Martin's share price jumped almost 200% during the same period. Increases in the share prices of Raytheon and other key defence corporations were not far behind.

By the end of December, the "pure military plays" (those not dragged down by exposure to the sagging civilian airline business, like Boeing), according to Reuters, had more than made up for losses earlier in 2001, to register a 50% rise in market value for the year. That is a far cry from their performance in 1999, in which Lockheed Martin's share prices dropped 48%, Raytheon's fell 50% and Northrop Grumman's slid by 30%.

These share price gains are more than a bubble. The "investors" see big weapon-production contracts coming from Bush's war drive. Apart from the JSF, Lockheed Martin was awarded three contracts, worth a total of US$336 million, three days after Christmas. On the same day, Raytheon was also granted US$513 million worth of contracts for flight simulators and 434 Tomahawk missiles.

The profit outlook of US war companies has not been rosier for years. This is why United Defense Industries, owned by the Carlyle Group and to which George Bush senior and many top US politicians have close links, dared to offer its stocks for sale on the US stock market only weeks after September 11. Carlyle stocks were quickly snapped up.

Military stocks received a further boost after Bush's early February State of the Union speech which named Iran, Iraq and North Korea as the next targets for his "war on terrorism".

Weapon sales

Bush's war drive won't only bolster domestic military contracts. It also will boost overseas orders. For years, the US has exported more weapons than any other country by a significant margin. According to a report (the Grimmett Report) presented to US Congress last August, the US "market share" of global weaponry export agreements was as high as 59.1% in 1993. After hovering around 30-40%, the US share hit another high of 50.3% in 2000.

Russia's share of the arms market, in the eight years to 2000, ranged between 6.9% in 1993, to high of 28.3% in 1995, before settling at 20.9% in 2000. France and Britain hold third and fourth positions. The top four European weapon exporting countries had a collective share of 20-30% of the 1993-2000 global market, hitting an all-time high of 39.7% in 1998, but slipping to 16% in 2000.

In 1993-2000, the US made more than US$101 billion worth of weapons export agreements, far exceeding Russia ($36.3 billion), France ($31.8 billion), Germany ($14 billion), Britain ($13.8 billion) and China ($7.6 billion). With increased military funding, this gap has every likelihood of increasing.

The obvious fact is that US wars boost weapon sales and profits for military corporations. The Grimmett report subtly pointed out that the 1990-91 Gulf War "played a major role in further stimulating already high levels of arms transfer agreements with nations in the Near East [Middle East] region. The war created new demands by key purchasers such as Saudi Arabia, Kuwait, the United Arab Emirates (UAE), and other members of the Gulf Cooperation Council, for a variety of advanced weapons systems. The United States dominated arms transfer agreements with the Near East during the 1993-2000 period with 55.2% of their total value."

US 'market dominance'

According to the Grimmett Report, the "Near East" is the biggest arms market in the world, followed by Asia. In 1993-2000, Saudi Arabia topped the list of the world's "developing country" arms purchasers, importing US$24.5 billion worth of weapons. It was followed by the UAE ($19 billion), China ($12.6 billion), Egypt ($11.6 billion), India ($11.5 billion), Israel ($9.5 billion), South Korea ($8.1 billion), Kuwait ($6 billion), Pakistan ($5.3 billion) and South Africa ($4.7 billion). These top 10 usually accounted for 90% of all annual imports by "developing countries".

These findings should surprise no-one after a decade of continuous US-British bombing of Iraq and a much longer period of US hostility towards North Korea and China. The recent threats by Republican Party "hawks" in the US administration to settle Washington's "unfinished business" with Iraq's Saddam Hussein, combined with Bush's discovery of an "axis of evil" and his threats to deal with "terrorists" throughout the world will surely keep military tensions high and increase the demand for arms imports.

In fact, between 1993-2000, arms transfer agreements to the "developing nations" already accounted for 67.7% of all such agreements worldwide. That share increased to 69% in 2000.

"Stimulating" the Third World's demand for killing machines not only increases its dependency on First World governments, which must approve contracts, but also boosts First World arms suppliers' profits and funds the further improvement of the First World's economic and technological dominance over the Third World.

Many Third World arms importers fund their purchases by external borrowing, predominantly from the First World. These debts, in turn, reinforce the Third World's economic and political enslavement.

Even before the arrival of George Bush junior in the White House, Washington was notorious for starting and fanning wars around the world. The World Policy Institute reported last year that "the United States has supplied arms or military technology to parties to 39 of the 42 active conflicts worldwide". The WPI said that many 1999 US arms deliveries violated basic standards of the International Code of Conduct on Arm Sales.

From Green Left Weekly, March 6, 2002.

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