The international trade in arms has an important economic dimension which this paper attempts to examine. After reviewing the evolution of demand and supply, the implications of the current market structure for price and revenue are examined. This suggests that, in purely commercial terms, the promotion of arms exports by a country is not a profitable proposition. Given this, we consider why governments in supplier countries have nonetheless heavily promoted arms exports. It appears that the initial momentum was provided by strategic and political objectives but that the growing dependence of particular interests on arms exports created a powerful economic lobby, despite the lack of commercial logic. In fact these economic pressures tend to undermine the political and strategic objectives. This contradictory relationship is examined by regression analysis of time-series for five countries. Although the estimates suffer severe limitations, a dynamic model suggests that a country's military expenditure has conflicting positive and negative effects on its arms exports.

This survey reviews the literature on the economic determinants of military expenditure and the economic foundations of armament and disarmament. It considers the main economic effects of military expenditure and disarmament in developed and developing countries, including impact on consumption, investment, growth, employment, inflation and the balance of payment. It concludes that the main dividend of disarmament is peace itself and that disarmament without development is not synonymous of a durable peace. Disarmament by a reduction of defence spending constraints will not be decided by a rule of proportionality and should be progressive and gradual. It implies controls of military technology, R&D and international trade. Finally, it is useful to bear in mind the costs of peace as well as the investment for peace.

In the post-Cold War context of decreasing military expenditures and arms-market crisis, France has redefined its defence policy, giving up the model of protected arms production and exports while reasserting its military and strategic ambitions. But does the country still have the means of its ambitions? The analysis of statistical data since 1990 may show that the independent policy of security has been clearly replaced by a real dependency on armaments and strategies, in the context of higher budgetary constraints. Military expenditures now seem to be more an economic burden than a driving force. The study of the defence budget compared with the general state budget shows that military expenditures are often used as variables of economic adjustment and that inertia effects are important. Several aspects of the French defence policy are underlined, notably the weakness of French military research and development, the declining share of capital expenditures in the defence budget and the decreasing investment in the nuclear field. In addition, the French arms industry suffers from a too-belated restructuring and from the continuing compartimentalization of European markets.French defence policy, Defence budget, Defence industrial base, Structure of military expenditures,

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Three recent books by three experts on defence economics analyse the economic impact of military expenditure on economic growth and development in Less Developed Countries (LDCs). Saadet Deger's theoretical economic analysis betrays a strong bias against militarism and militarization in contemporary society. Nicole Ball presents a more general analysis, studying a large number of concrete cases, and taking their political and sociological characteristics into account. Both Deger and Ball see armament as a cause of underdevelopment. Robert Looney engages mainly in econometric analysis. He provides a comprehensive analysis of data from 77 LDCs, distinguishing between producers and non-producers of armaments. Looney's empirical results indicate that domestic political-bureaucratic influences are more important than international rivalries, and that the economic environment of arms producers differs significantly from that of non-producers. To us, however, these results seem unconvincing: data are incomplete, the econometric methods employed are very simple, and the theoretical background is weak. As regards economic analysis, Deger's study seems more rigorous, but its assumptions are heavily slanted in favour of the ideas of the peace research movement. Nicole Ball's analysis is the most interdisciplinary of the three, and also more empirical, historical and descriptive than the others. These three important books should be read by every specialist on defence problems. Their various approaches, their different perceptions of the economic impact of military expenditure and their different philosophical backgrounds provide a broader view of the economics of defence.