Blood money? U.S. is world’s top arms dealer

The United States is the top arms peddler in the world, its weapons sales to other countries far surpassing those by Russia and others, the Congressional Research Service reported last month.

Put another way: The U.S. is the lead player in making our world awash with arms, causing horrifying levels of death, destruction and environmental degradation. In so doing, it is fueling the flood of refugees fleeing the devastation. Terrorism feeds on this; many of the weapons we ship abroad wind up in terrorists’ hands. The massive arms industry that supplies and profits from this weaponry distorts our economy, and – given that most other manufacturing jobs have moved overseas – funnels people into jobs making weapons of war that they might prefer not to make if they had a choice.

In 2014, the most recent year covered in the report, the U.S. widened its share of the global arms market. It signed $32.8 billion worth of arms sales agreements with other countries-a whopping 50.4 percent of all worldwide arms transfer agreements that year. Russia was a distant second, with $10.2 billion, or 14.2 percent. (This widened the previous year’s gap between the two countries’ share of the market, when the U.S. controlled 38 percent of the world’s weapons sales market.)

Yet one hears little worry expressed in the mainstream media over this situation. On the contrary, the report has the war industry excited.

Defense News, a publication serving the “global defense community,” noted the “opportunities … because global instability is creating demand.”

“Peace is not breaking out around the world, and nations are going to have to increase the size of their force structures,” Frank Finelli, a managing director at the Carlyle Group, told the publication. The Carlyle Group is a big but shadowy player in the military industry, government and financial worlds.

Industry consultant John Niehaus said his “clients are increasingly optimistic about their future sales prospects.”

Who gets the money?

The CRS report covers government-to-government arms sales. The governments make the deals. The seller government contracts with private “defense” corporations to provide the weaponry. For example, the U.S. recently signed off on a $1.83 billion weapons sale to Taiwan, and a $1.29 billion arms sale to Saudi Arabia. The Taiwan deal involves refurbishing two U.S. Navy frigates, and providing anti-air and armor missiles, defensive ship systems and 36 amphibious assault vehicles, produced mainly by U.S. “defense” industry giants Raytheon and Lockheed Martin. The Saudi sale will provide over 10,000 bombs, munitions, and weapons parts produced by Boeing and Raytheon.

The Congressional Research Service report was issued Dec. 21. A week later, the financial news site The Street had its investors’ eye on “the thriving global arms bazaar.” It pointed to the top U.S. military stocks to watch – Lockheed Martin, Northrop Grumman, General Dynamics, Raytheon and Boeing. “These giant companies make the jet fighters, drones, missiles, and other defense systems that foreign nations increasingly covet in a troubled world.” The Street noted that these companies’ biggest clients in 2014 included South Korea, Qatar and Saudi Arabia, “countries in regional ‘hot spots’ that will only get hotter in 2016.”

By way of illustration, here is a list of major arms and logistical support contracts the U.S. government awarded to U.S. corporations to fulfill government sales agreements with Gulf Cooperation Council countries between March and September 2015, via the Council on Foreign Relations:

  • On May 27, Lockheed Martin Missile and Fire Control was awarded a $12,037,639 contract for post-production support services for the Royal Saudi Land Forces Aviation Command Modernized Target Acquisition Designation Sight/Pilot Night Vision Sensor program.
  • On June 11, Boeing Co. was awarded a $41,146,387 contract for Apache helicopter post-production services and maintenance in Saudi Arabia.
  • On June 24, L-3 National Security Solutions was awarded a $95,000,000 contract for air operations center training to Royal Saudi Air Force personnel.
  • On July 24, Raytheon Co. was awarded a contract for 355 AGM-154 Block III C Unitary Joint Stand-Off Weapon missiles for Saudi Arabia, including associated supplies and services.
  • On July 13, Booz Allen & Hamilton was awarded a $12,386,000 contract for support services in the areas of training and education, engineering, technical, and management support services to the Saudi navy.
  • On July 29, the State Department approved the sale of $500M “for ammunition for the Royal Saudi Land Forces and associated equipment, parts and logistical support.”
  • On July 31, DynCorp International was awarded a $17,313,518 contract for maintenance support to the Royal Saudi Land Forces Aviation Command aviation program.
  • On September 24, Boeing Co. was awarded a $22,311,055 contract for 13 Harpoon lll-up round tactical missiles and seven Harpoon air launch missile containers to Saudi Arabia.

 

A list of the top 100 U.S. military contractor corporations in 2015 is available here, and gives an idea of the billions of dollars involved in a year’s worth of contracts.

These are typically “cost-plus contracts,” which guarantee profits for the companies (at taxpayer expense) even if projects go over budget, as they generally do, or if the Defense Department underestimates the initial budget. Critics say such contracts promote wastefulness, inefficiency, and cost-padding. Moreover, there is little government oversight of these contracts and how they are carried out. (The Project on Government Oversight has information on the massive failures of the Pentagon’s accounting and management practices, and its penetration by outside contractors. See this piece, for example.)

What about those profits?

Think Progress reported in 2012 that “The last ten years have seen massive growth in defense industry profits.” During that period, “the largest defense contractors have prospered to a degree that would have looked very unlikely just eleven or twelve years ago.”

“The defense industry has continued to enjoy this prosperity” during and after the 2008 economic recession “that has had a devastating effect on both businesses and families across the country,” the report noted.

Even as families, communities and public services continue to struggle financially, in just one year, 2014, the nation’s top six aerospace and defense contractors reported a 7 percent increase in profits. According to the National Priorities Project, Lockheed Martin, the nation’s top military contractor, “saw over $5.5 billion in profit, and paid its CEO more than $34 million in 2014. And the $32 billion it received from the U.S. government made up more than seventy percent of its total sales.”

Boeing, another giant military contractor, reported profits of $5.45 billion. A big chunk of that came from Boeing’s commercial aircraft, but one-third of its revenue comes from military-related products. Northrop Grumman, another top 10 U.S. military contractor, reported profits of $2.7 billion, up 6 percent from the previous year.

Who gets the weaponry?

More than 75 percent of worldwide weapons sales go to developing countries, defined by the report as the countries of Asia, Near East, Latin America and Africa. Not surprisingly, the leading markets for arms are in the Near East and Asia. And the bulk of the sales efforts are focused on the wealthier – as well as highly strategic – countries in those regions, such as Saudi Arabia, the United Arab Emirates, and India. Saudi Arabia has been the top weapons buyer over the past seven years, to the tune of $86.6 billion, far exceeding any other country. It has also been the top U.S. weapons buyer: from 2010 to 2015 the U.S. made $90 billion worth of arms deals with Saudi Arabia, according to a separate Congressional Research Service report. “Saudi Arabia’s relationship with the United States is primarily as a source of cash for weapons,” says the Council on Foreign Relations’ Micah Zenko.

What kinds of weapons are we selling to the world? They include surface-to-air missiles, tanks and self-propelled guns, supersonic combat aircraft, artillery and armored vehicles.

The CRS report notes that the weakened state of the global economy is slowing the growth of military purchases. “Concerns over their domestic budget problems have led many purchasing nations to defer or limit the purchase of new major weapons systems,” the CRS says. Yet “orders for weapons upgrades and support services can still be rather lucrative, and such sales can provide weapons suppliers with continued revenue, despite the reduction in demand for major weapons systems.”

As a result, competition among sellers has increased, according to the report, and arms suppliers are widening their net, seeking to sell their weaponry to new countries and regions. Thus, there is an incentive to promote militarization of conflicts that did not start out that way.

The competition among sellers is both among countries – the U.S. is in a sharpening competition with Europe in this – and also, in the U.S. for example, among military corporations competing to land lucrative Defense Department contracts.

The “military-industrial complex”

The Congressional Research Service report’s numbers represent only government-to-government Foreign Military Sales program sales; according to the report, the bulk of foreign arms sales occur through such deals. The report does not include licensed commercial arms export deals, which, startlingly, are not recorded on an ongoing basis, according to the CRS.

Data that is collected on commercial sales is largely not made public, the report says. However a U.S. State Department Annual Military Assistance Report for 2014 shows that the value of such U.S. sales authorizations that year totaled billions of dollars. These include military goods and services such as: firearms, flamethrowers, ammunition; rocket, bomb, grenade, torpedo and missile launch vehicles; explosives and their components; warships, aircraft, armored ground vehicles and related navigation systems; chemical and biological weapons and services; nuclear weapons parts, equipment and simulation tools.

Because of the absence of data on these kinds of foreign weapons sales, the CRS acknowledges that its numbers undercount the real totals.

But the facts it does present show the vast sums of money being made by arms manufacturers, and their interest in keeping the sales and profits growing. Defense corporations are among the top “politically active corporations,” measured in the money they spend on federal lobbyists and campaign contributors, according to a Sunlight Foundation report.

The Center for Responsive Politics observes, at its OpenSecrets.org website, “The hundreds of billions of dollars the federal government spends each year on defense are part of the reason defense aerospace firms make millions of dollars in campaign contributions, a majority of which has gone to Republicans since 1989.”

These military contractors “concentrate their political donations on members of the House and Senate Appropriations subcommittees that allocate federal defense money. Prime targets of defense aerospace money also include members of the Armed Services committees, who influence military policy and have the power to create demand for this industry’s commodities.”

They also play a role in electoral politics through front groups. This year, for example, a new group called Americans for Peace, Prosperity and Security is promoting right-wing militarist policies in the race for the White House. Military contractors are heavily represented in the group’s leadership, including Raytheon, SAIC (another top 10 defense contractor), BAE Systems, and others. APPS is registered as a 501©4 nonprofit, which means it does not have to report its donors.

Moreover, defense industries participate heavily in the “revolving door” of prominent politicians going back and forth between influential government and corporate jobs.  Just one defense giant, Northrop Grumman has employed at least 20 former congressional staffers as lobbyists, Lee Fang reported in The Nation in 2013. In addition, the company has former lobbyists running the both the House and Senate Armed Services committees. Northrop Grumman, like many other corporations – military and otherwise – provides hefty bonuses to employees who take positions in government.

What happened to our economy?

It is a sad fact that – with highly lucrative, virtually open-ended contracts – the federal government subsidizes the “military-industrial complex” that President Eisenhower warned about in a 1961 speech. “Defense companies now make up a very substantial part of America’s much diminished industrial base – and these companies are hooked on the narcotic of defense spending,” defense expert Chuck Spinney, who spent 30 years at the Pentagon, wrote in Time magazine in 2012. This has come at the expense of civilian manufacturing, civilian research and scientific innovation, and all the jobs that have been lost in those areas. As an indicator of the economic distortion caused by our country’s “defense dependency,” Spinney points out that more than half of the federal government’s research and development budget now goes to military-related activities.

Meanwhile, we see other manufacturing and jobs continuing to hemorrhage.

At the same time, Good Jobs First reports that financially hard-pressed state and local governments, along with the federal government, are shelling out billions of dollars in subsidies to defense contractors, in the form of grants, tax credits, and other “incentives.” Lockheed Martin, for example, has received $1.2 billion in federal, state and local subsidies in the last 10 years, the bulk of them since 2010. That includes $766 million in subsidies from state and local governments. Northrop Grumman got over $1 billion in government subsidies, almost all from state and local governments. California, constantly struggling over budget priorities, is one of the biggest subsidizers of these companies.

The usual rationale is that this spending protects or attracts jobs. But research has shown that spending on human needs produces more jobs across a range of pay scales than spending on the military. One billion dollars spent on clean jobs, health care and education plus tax cuts for working families will create “substantially more jobs” across all pay ranges (high, middle and lower) than the same $1 billion spent on the military, a 2009 report from the University of Massachusetts showed.

Blood money

The worldwide government-to-government arms trade totaled $71.8 billion in 2014. The 75-page Congressional Research Service report contains 44 tables and diagrams detailing the billions, the buyers, and the sellers. Behind the avalanche of numbers are millions of human beings killed, maimed, orphaned, left homeless, their schools, hospitals, cities and villages destroyed. Also behind the numbers are human needs that are going unmet in the seller countries such as the U.S. Instead of being used for meeting people’s needs, our tax monies are sucked up and economic development thwarted by war spending pushed by powerful “special interest” weapons corporations.

Photo: S L R Jester/Flickr/CC

 

 


CONTRIBUTOR

Susan Webb
Susan Webb

Susan Webb is a retired co-editor of People's World. She has written on a range of topics both international - the Iraq war, World Social Forums in Brazil and India, the Israel-Palestinian conflict and controversy over the U.S. role in Okinawa - and domestic - including the meaning of socialism for Americans, attacks on Planned Parenthood, the U.S. as top weapons merchant, and more. Previously she taught English as a second language and did a variety of other jobs to pay the bills. She has lived in six states, and is all about motherhood, art, nature and apple pie.

 

 

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