One of the least noticed inheritances of the new Labour government is Britain's military bias. The British economy has long born the imprint of Imperial levels of military spending, and it still hosts an exceptionally large defence industry (Fine and Harris 1985, Edgerton 1989, Wulf 1993). It is not only large, it is also changing radically. Labour has come to power at a crucial stage in the restructuring of arms production. It has adopted a strategy for the defenceindustry which was developed largely by the industry itself. This article sets out the background and offers some suggestions as to the likely impact of the Blair government on the post Cold War reconstruction of the arms industry.
The dilution of the Peace Dividend and the absence of conversion
When the Cold War came to an end many observers optimistically looked forward to a peace dividend. The resources which could be released from military and military-industrial uses might be used to restore industrial capacity in countries and regions struck by de-industrialisation, or to rebuild the tattered welfare state. Some hoped they would be used to boost international assistance for development (Thee, 1991). In the event, one of the biggest peace dividends in history has been frittered away. In the US, 85% of the Peace Dividend has been soaked up in reducing the budget deficit (Bishak, 1997). In Germany the bulk of the saving arising from the redundancy of the Cold War defence apparatus has been used to reduce the impact of reunification on public spending. In Britain too the savings have been absorbed into the wider attempt to limit taxation.
Not that Cold War levels of defence spending have become a thing of the past. In the US and on the global scale defence spending is now around the level of the late 1970s, which the peace movement of the time regarded as a period almost-certainly suicidal 'Exterminism' (Thompson et al, 1983). Moreover, some believe that the decline in arms spending will soon bottom out and may even give way to an upturn. The decline in US spending is slowing, and in early 1997 President Clinton pledged to increase annual arms purchases from the present $42bn to $60bn by 2002 (Clark, 1997). In Russia defence spending is said by some to be so low that it threatens the collapse of the armed services and nuclear infrastructure and there is a vociferous demand for a spending increase to allow the creation of a modern professional army (Thornhill, 1997). In Britain, the incoming Labour government pledged to maintain Front Line capacity and immediately confirmed a number of major long-term projects. In France defence spending has only recently started to fall as a result of the Chirac government's EMU-oriented cuts in public spending, but it is intended to sustain a large part of defence research spending. Meanwhile, across Pacific Asia arms spending is rising, driven partly by growing GDP, and partly by simmering territorial disputes and militaristic governments. In the new century Japan could overtake the UK in terms of military spending. In the Middle East the post Gulf War slow-down in defence spending may be coming to an end.
Overall, although world military spending is perhaps a third below the level before the Berlin Wall came down, it is still enormous, and it may even grow again. The US, the one remaining military superpower, accounts for about half of it. The fact that US spending has remained so high, and that it is now in effect competing militarily with itself, testifies to the entrenched power of military and militaryindustrial interests that otherwise unusually democratic country. As a result, developments in the US have a profound influence on the reconstruction of the arms industry globally.
As in any industry, the combination of a downturn in demand and the expectation of big prizes in the future for companies that survive it has precipitated a burst of restructuring. Although the pace and details vary widely from country to country, this is everywhere characterised by a concentration of capital (through amalgamation and rationalisation), a narrowing of corporate specialisations, large-scale de-manning, and an overhaul of employment conditions and industrial relations as the balance of power shifts towards management. …