The Boom in the Death Business

The newest increase in the arms trade is said to have amazed even the Department of Defense. Announcing recently that US foreign military sales were worth $9.5 billion in the 1975 fiscal year, the Defense Department described the pleasant news as “unexpected.” In 1973, these US sales were worth some $3.9 billion. The entire value of the world’s arms trade was $9.2 billion in 1973, according to the US Arms Control and Disarmament Agency, and only $5.8 billion in 1970. “Foreign military sales” (from aircraft and missiles to howitzers and military “support services”) are now worth almost a tenth of the value of all US exports, overshadowing the other stars of American foreign trade. In measuring sales for 1975, the Defense Department counted orders made during the year, rather than deliveries of weapons.¹ But $9.5 billion is twice the value of all US wheat exports, and three times the value of exports of computers.

The most lucrative corner of this boom market is, notoriously, the Persian Gulf. Three countries, Iran, Kuwait, and Saudi Arabia, bought close to half of all US military exports. In the fastest arms race in history, these countries spent more money last year to buy American armaments alone than they paid for all their arms imports in the twenty years before 1973. Of course, a billion dollars buys a lot less bang than in the 1950s and 1960s, what with inflation and hard times. But four billion dollars a year is still worth a fighter squadron or so; Iran has ordered several squadrons of the supersonic F-14A fighter, only two years in service with the US Air Force. Meanwhile, the United States’s competitors in the arms trade, France and the Soviet Union, are also active, having sold some billion and a half dollars’ worth of arms apiece, last year, to the Persian Gulf countries.²

The rearmament boom extends beyond the Middle East. It is not simply a spree by the prosperous oil exporting countries, not just another Iranian extravaganza. All continents are involved, and many different developing countries. Of the US sales that the Defense Department lists for 1975, some two thirds are to developing countries, including the oil exporting countries. Latin America, for example—until recently relatively parsimonious and “unsophisticated” in its local arms race—has increased its imports of US arms particularly fast in the last three years.

The arms bonanza may be the sign of a lasting change in the world arms economy. It may mark the beginning of a long expansion in US arms exports to developing countries. Such an expansion would be perhaps the most dangerous of all the recent changes in the world economy. It would certainly be the change which is least amenable to political and public control. Few seem to realize that the arms sold by US and European companies are often resold after they arrive in the country that buys them. Iran exports US fighter planes to Ethiopia and to Jordan with US government approval. Jordan sells its British “Tigercat” air defense system to a Liechtenstein corporation, for shipment to South Africa, while seeking military aid from the US.

For the United States, there have for many years been political reasons to export weapons, and these reasons are invoked to justify the present boom. Iran, it is suggested, will be tied ever more intimately to the United States by its dependence on US arms and expertise, and above all by its need to buy spare parts for American planes.

The political rationale may now be reinforced by economic pressures. Military exports are increasingly important to the US economy. One reason has to do with the balance of payments, since arms exports improve the US trade balance in general, and the balance with oil exporting countries in particular. A second reason is industrial: arms exports to places other than Southeast Asia may become more and more useful for the US aerospace industry now that arms shipments to Indochina are finished.

The economic pressure on US companies to export has in fact been illuminated in exhaustive detail in recent congressional investigations of corporate payoffs and of the use of foreign sales agents. The most comprehensive was a study of the Northrop corporation, one of the largest exporters of military aircraft, and a company that concentrates with particular effort on developing countries. Northrop was also, of course, one of the corporations that made illegal contributions to President Nixon’s re-election campaign. The hundreds of pages of Northrop documents made public by the multinationals subcommittee of the Senate Foreign Relations Committee provide an unprecedented view of the economic reasons that lead aerospace companies to export; as well as of the small incidents—the briefings, the retired generals wandering around Switzerland with $600,000 in currency—that added up to export promotion for one particular company.

The arms trade is carried on in secret: since the first armaments conference held by the League of Nations in Geneva in 1925, reformers have believed that if more were known about arms exports the arms trade could be controlled. One of the few reliable sources of information about the recent arms trade, and about world military expenditure, is the Stockholm International Peace Research Institute (SIPRI). The Institute was set up in 1966 by the Swedish government (to commemorate 150 years of uninterrupted peace, the SIPRI publications explain). It has published studies of the arms trade, nuclear proliferation, chemical and biological warfare. Each year it produces a yearbook and a “register” of arms sales. To an important extent, SIPRI provides the kind of information that the idealists of 1925 called for, and that the League of Nations itself published in its Armaments Yearbooks between 1924 and 1939. SIPRI studies hundreds of newspapers and thousands of government press releases, analyzes Jane’s Fighting Ships, reconstructs the hidden statistics of the Soviet arms industry.

The Arms Trade with the Third World, published by SIPRI in 1971, is of particular interest now. It provides an important history of the commerce in arms; it also explains the economic forces which encourage the present multiplication of the arms trade. Barnaby and Huisken’s Arms Uncontrolled uses this arms trade study in a wider examination of the world arms race.

(SIPRI has this year published the 1971 study in an abridged version, which is unfortunately much less valuable than the original: it leaves out most of the history of the arms trade with Iran and Saudi Arabia, for example, as well as a considerable part of the discussion of the “economic pressures to export,” and it dispenses with the more anecdotal sections of the study—for example, with Paul Warnke explaining as assistant secretary of defense that “We’re selling security not soap chips.”³

The study distinguishes two main patterns of arms exporting among the developed countries which account for almost all the world commerce in arms. Some countries export arms for “hegemonic” reasons, i.e., to extend political influence, and others for reasons that are more or less “industrial.” Two countries, the United States and the Soviet Union, export arms for largely political purposes. The Soviet Union, as the SIPRI studies show, in the 1960s and early 1970s exported considerably more major weapons to developing countries than did the United States, and was by far the leading supplier of arms to the Middle East, mainly to Egypt, Syria, and Iraq.

The other exporting countries, and above all France and Britain, sell arms in large part for economic reasons having to do with the needs of their own arms industries. They could not maintain an advanced defense industry without exporting as much as a fourth of the armaments they produce. They must export in order to pay for military research and development, and to achieve the benefits of long production runs.

Both France and Britain of course also have political reasons for sustaining a domestic defense industry. But the pressure to export has its own momentum. The commerce in arms is self-reinforcing, as the SIPRI studies show. French companies design aircraft specifically for the “developing world” market; the French military is directed to request for its own use those weapons which might profitably be exported. By far the most important pressure on the French is to maintain full employment. Export orders keep the companies and workers in the aerospace industry occupied when there are lulls in work on domestic orders. The benefits of exporting become an urgent issue in domestic politics.

The case of France, which recently replaced Britain as the third largest exporter of arms, after the US and the Soviet Union, illustrates clearly the export momentum. The French began to expand their arms trade most diligently in the 1950s after they retreated from Indochina and from the responsibilities of procuring weapons for colonial wars. The value of their exports quadrupled between the mid-1960s and 1972, and doubled again in the recent boom: export orders are now worth almost $5 billion. Their defense industry employs 270,000 people, or more than almost any other French industry: its fate is critical to the national economy. The US now sells planes to Iran two years after they are first flown, but in France outraged military officers have recently accused the government of selling advanced tank technology in the Middle East even before it is used in the service of the French Republic.

In the recent spring selling season, the French government welcomed some seventy national delegations to its Le Bourget airshow. Its indigenous specialty is in arms for developing countries. (France competed unsuccessfully with the US, earlier this year, to supply advanced fighters to Belgium and other small NATO countries; it now tries harder in the developing world, even to the extent of revising its long policy of supplying arms to South Africa.) Customers from Africa to Israel inspected the French offerings. After the airshow, most of the delegations repaired to another government-sponsored pageant, at the Satory exposition of land-based armaments. There they considered more than 600 different weapons and watched promotional maneuvers: the shows were reported to include demonstrations of a training device called an “atomic explosion simulator” to be used in war games, where its 300-foot mushroom cloud of smoke mimics the effect of detonating a tactical nuclear weapon.

The recent expansion in US arms sales suggests peculiarly important questions about the economics of the arms trade. Are US arms exports likely to continue to increase? To what extent do the inherent pressures to export that determine French policy also apply to the US defense industry? Of course, the US defense budget of $90 billion or more per year is still uniquely suited to support an indigenous industry. But the US industry now exports considerably more than the 5 percent of its total production that it sold abroad in the 1960s, and the foreign exchange benefits to the US economy are correspondingly greater.

The US may, in the SIPRI researchers’ terms, expect that “industrial” reasons to export will be more intense. For one thing, increased exports allow aerospace companies to expand without inflationary and often unpopular increases in domestic military buying. Iran and Saudi Arabia now pay the research and development costs for certain US weapons. Just as the recent expansion in US food exports allowed the Nixon Administration to abolish many domestic farm support programs, so arms exports remove some of the pressure from the domestic military budget.

The US defense industries experienced a serious depression in 1970, after military procurement was cut back for Vietnam. They recovered in part because of increased foreign sales. This expansion was the industrial expression of the Nixon Doctrine, whereby the United States, instead of exporting armies and pilots, exports bombers and fighters to be flown by foreign pilots. The SIPRI studies note the origins of this doctrine in Defense Secretary Clark Clifford’s famous calculation that an Asian soldier is worth one fifteenth as much as an American soldier. They also discuss the technology of the Nixon Doctrine in fascinating detail: the “automated battlefield” (the phrase is General Westmoreland’s from 1969) and such innovations as the Remotely Piloted Vehicle, or RPV, a pilotless plane which needs no “man-rated equipment,” costs less than half a million dollars, and which, Barnaby and Huisken write, prefigures a “coming generation of expendable RPVs”—at last, the throwaway aircraft.

The rising importance of arms exports can be seen clearly in US trade with Latin America. US exports of technologically advanced arms to Latin America were limited by Congress in the 1960s. The Johnson Administration’s Latin American policy also favored economic development over military spending, and spending for counterinsurgency over a high technology arms race. Several Latin American countries subsequently bought advanced weapons from France and Britain. But in 1971, both arms imports into Latin America and the US share of these imports again began to increase. US military sales to the region were worth eight times as much in 1974 as in 1970. In June 1973, President Nixon waived the restriction on “technologically sophisticated” exports to Latin America to allow the sale of the F-5E, a supersonic fighter made by the Northrop corporation: since then, Brazil, Peru, and Chile have ordered the plane.

In these changes in US policy, there is at least a shadow of what has happened in France and Britain: above all, the political pressures not to cause unemployment by restricting arms exports. If we consider the US defense industry as a whole, these sales do not make a great economic difference. But some of the poorest aerospace companies depend importantly upon exports (Lockheed, for example, which has been compensating for depressed sales of commercial aircraft by exporting its C-130 Hercules transport planes), as do some of the richest, such as Northrop.

The “Northrop documents” made public by the Senate’s multinationals subcommittee provide an extraordinary vision of the expansion in US arms exports—a view from the eye of the chief executive. The documents were compiled by the accounting firm of Ernst and Ernst as part of a “special investigation” required during the recent Securities and Exchange Commission inquiry into corporate accounting for payments to foreign agents. They include several hundred pages of company letters and memoranda, many composed by Mr. Thomas Jones, the corporation’s president.⁴

Early in the investigation, Mr. Jones explained the history of the company to the accountants. In the 1950s they “were having a real problem making a profit and making a go of it…at this time the basic premise at Northrop was that they should adopt a very ‘hands off’ relationship as regards political matters…. [By 1961] they felt that they almost had to go overseas for business, inasmuch as they were not getting what they considered their fair share in the US, because of their ‘honest pricing’ policy.”

As their foreign business increased, their hopes became more elaborate. They designed aircraft for overseas markets. By 1968, Jones wrote of a proposed fighter plane that was “defined” to satisfy several foreign countries, much as “Boeing, for example, may talk to as many as twenty or thirty airlines over a period of years.” The company’s efforts to promote exports were ever more grandiose. Thus Jones, in the same 1968 memorandum, proposed that the Shah of Iran might use the opportunity of a forthcoming state visit by the West German chancellor to explain the virtues of the new Boeing-like multinational plane, then known as the P-530.

“It is terribly important,” Jones wrote, “that we take advantage of this opportunity to have His Majesty mention to the Chancellor his concern about the equipment problems of the future and his feelings about Northrop and the 530 solution. It is important that he tell the Chancellor of his conversation with the President [of the United States]…. You can see that if His Majesty will tell this to the Chancellor it will indicate clearly that Nitze’s letter to Northrop [Paul H. Nitze, then deputy secretary of defense, who had written to Jones to tell him that the Defense Department would pay part of the development costs of the new plane] was not intended to set up a self-serving US venture, a venture that would compete with other countries, but quite the opposite. It will make clear that…the US is placing itself at the disposal of its Allies and providing the practical means of doing it in terms of a product which is already defined.”

(The Shah’s reaction to these suggestions is not recorded. Jones’s intermediary, to whom the memorandum was dispatched, was Kermit Roosevelt, a Northrop consultant. Mr. Roosevelt has recently explained on British television his role as the senior CIA agent in the coup that overthrew Mossadeq in 1953 and restored the Shah to power. His letters to Northrop executives made public with the other company documents mention conversations with, for example, “a friend in my old place of employment.” Mr. Roosevelt is only one of many former government and intelligence employees who have found work with the arms companies; many colonels and generals have retired to jobs in their offices.)

Northrop’s ventures in bribery and influence are sometimes ingenuous. When trying to hire European dignitaries as consultants, such as the late General Paul Stehlin of the French air force, they follow Lockheed’s contacts, and even its contracts. At one point, the company became involved with the West German company Siemens and several other American and Japanese firms in forming a consortium to provide telecommunications services in Iran. Siemens proposed “somewhere along the line,” that the companies in the consortium each pay more than a million dollars in cash for “commissions or fees” into a Swiss bank account.

As a Northrop financial controller explained to the Ernst and Ernst accountants, “There was no assurance that Siemens, which controlled the account, used the cash for the announced purpose and clearly no evidence that the funds were used to bribe any public officials. For that matter, [he] does not assume that Siemens did anything other than pocket the money….” All the same, Northrop went along with the scheme of the worldly Europeans: “they having been in business [in Iran] for many, many years prior to this date,” as a Northrop attorney observed.

A retired air force officer and Northrop vice president—a “West Point All-American,” the Northrop controller adds—was chosen to travel with the money. He appears to have visited Switzerland twice, once to hand out cash to unknown persons in a hotel room, and once to open a bank account. The accountants add that he is “a retired lieutenant colonel in the Air Force and…a straightforward individual. In fact, he even wired the number of the Swiss bank account to the members of the consortium, which is a violation of Swiss law….”

The Northrop documents also contain detailed discussions of arms exports to Latin America. In 1965, the Northrop executives were perturbed about the US government’s refusal to restrict aircraft sales to Latin America. They continually reminded US officials—the emissary here was another retired air force man, a General Timberlake—that British and French firms were active in the region, and of the ominous appearance in Caracas of a British commercial attaché “specialist in aircraft business.”

Their efforts were unsuccessful. But the discussions do provide a peculiar view of the Defense Department’s policy of arms export restrictions in the mid-1960s. Thus the disappointed Northrop executives were told in 1965 by Assistant Secretary of Defense John McNaughton that “possibly by 1970 after…the economic and educational status of these countries had progressed, that the US policy might be relaxed somewhat.” The same prospect is mentioned by the Northrop executives as vouched for by “an intelligence service in Brazil,” and is confirmed to them by a major general from the office of the Joint Chiefs of Staff. This optimism suggests that the Defense Department may have been concerned as early as 1965 with the prospects for military sales after the Vietnam procurement boom.

By 1973, the executives were much more enthusiastic and were renewing their contracts with Brazilian sales consultants. In March 1973, Mr. Jones describes the chances for selling the new, sophisticated F-5E fighter in Brazil as “especially promising.” In June of that year, President Nixon ended the restriction on sales of the F-5E to Latin America; since then some eighty of the fighters have been ordered by Latin American countries.

The effort of US officials to promote sales of the F-5E is only one of the interesting subjects suggested in the Northrop documents. President Nixon’s agreement to exports of the plane followed Northrop’s substantial campaign contributions; three months earlier, in March 1973, Mr. Jones wrote to Kermit Roosevelt that “we were briefed by Dr. Kissinger, Shultz and Ehrlichman. Interesting….” The 1975 SIPRI Yearbook describes the F-5E as a “poor man’s weapon,” and lists orders by developing countries for more than 500 of the planes: the fighter is a pure instance of the new arms boom. It is exported by the US to Jordan, produced under Northrop’s licenses in Taiwan and Brazil, and sold by Iran to Ethiopia.

There is something dismally familiar about the recent history of the arms trade. American and European arms companies bustle about their business much as they did in the 1960s, or in the 1930s. As in the 1930s, reformers demand information, truth, and public control. Even the details of exporting are the same. In 1936 the British disarmament expert Philip Noel Baker published a study of The Private Manufacture of Armaments that described the ways in which governments subsidize arms exports; it had much to say on the arms race in Latin America, bribery and influence, investigations of the arms industry in the US Senate, sales trips to Chile and Peru by executives of the Curtiss aircraft corporation.

But the fact that reformers and politicians have tried for so long to control the arms trade should not dissuade modern legislators from new efforts. Indeed, the endeavor to limit arms exports is now more urgent than it has been at any time since the 1930s.

The US Congress last December passed an amendment sponsored by Senator Gaylord Nelson (D-Wisconsin) which allowed Congress the right of veto over weapons sales worth more than $25 million either in cash or in government credit. Nelson has this year introduced further legislation to give Congress longer time to consider such a veto, and to require detailed reports to Congress when US arms sales to any country exceed $50 million in a year. With other senators and representatives, Nelson has also proposed broader legislation designed to “give Congress an opportunity to evaluate in advance and set guidelines for the US foreign military sales program.” Representative Les Aspin (D-Wisconsin) has suggested that an annual budget be set for foreign military sales, and that sales be accompanied by an “arms sales impact statement.”

The effort of studying these reports is arduous for legislators and their staffs, and Nelson’s amendment has only been used so far in the case of missile sales to Jordan. Yet the restrictions which Congress imposed in the 1960s on arms sales to Latin America worked well for five years or so; the new legislation to be considered this year could be even stronger in its effects.

Congressional action is particularly important now precisely because the United States is beginning a major new increase in arms exports. It is doing so at a time when the US is under some of the same economic and industrial pressures to export—expressed by the Washington activities of the arms industries—that have made France a $5 billion profiteer of war. In two years the effort to control arms exports will be that much more difficult: as the momentum of these exports speeds up, the compulsion to sustain markets, to earn more foreign exchange and maintain employment in Northrop’s export factories will be much harder to resist.

Some questions about the arms trade are asked only in low, careful voices. The most solemn of these is whether the race to buy and sell conventional armaments causes war. The Department of Defense itself is sensitive to this question. Announcing the recent increase in foreign military sales to a value of $9 billion, it observed that a third of all export sales are for military “support”—e.g., constructing roads and airfields—and therefore might provide an indirect economic benefit by promoting development. Yet no one in the long history of weapons sales has any experience of an arms race on the scale now continuing in the Persian Gulf, and of the ways in which this bonanza may lead to war. In Latin America, certainly, the arms race of the 1920s and 1930s was accompanied by small wars. There have been more than a hundred large and small wars in developing countries since 1945, according to studies cited by the SIPRI researchers, most of them accompanied by coups and poverty and repression.

The reformers of the 1920s believed that the increase in arms buying between 1909 and 1914 led to the First World War. It was this conviction that forced them to efforts that were ever more hopeful and more doomed. Their fears are now considered simplistic. But their efforts failed only with further war. The newest increase in the arms trade is as sudden and as unconsidered as any since 1914: a precedent which should be an impetus to reformers in 1975 and 1976.

BIG TRADE IN SMALL ARMS

According to Representative Les Aspin of Wisconsin, the State Department, during the first six months of 1975, approved the sale of more than $2.5 million worth of revolvers, pistols, and carbines to private arms merchants overseas. Export licenses were granted for thirteen separate deals involving 25,695 firearms to foreign arms dealers. “Once the arms are sold overseas,” Aspin said, “the private arms merchants can sell them to anyone regardless of his or her political persuasion. The State Department should cancel all these export licenses, which can easily lead to firearms falling into the hands of right-wing terrorists, left-wing terrorists, or any other kooky group that has the money to buy guns.”