chapter  6
36 Pages

Military spending: decision- making in anarchy and herd instincts

The annual military spending of the world today is about US$1 trillion, which has reached close to Cold War levels. The major producers and suppliers of conventional weapons are the five permanent members of the UN Security Council. These five members – the US, the UK, France, Russia and China – together contribute roughly 90% of reported conventional (global) arms exports. The major buyers of conventional arms are a handful of developing nations struggling with their developmental aspirations, deep poverty, internal violence and potentials for cross-border conflicts  – ten developing nations absorb 61% of the arms exported to the developing world.1 Since the five permanent members of the UN Security Council dominate the global arms trade, they have little incentives to introduce and enforce regulations and controls in the global arms market and, as a result, the global arms trade and the arms race continue unabated in a legal and moral vacuum. In the absence of meaningful regulation the global arms market, akin to anarchy, suffers from widespread corruption, bribery and kickbacks in the midst of which the top three armament firms usually share immense market spoils, for example, a whopping profit of $50 billion in 2012, from producing machines for aggravating human miseries. By the end of the Cold War, from Smith (1994), we now know how armament firms have regularly spread false rumours about military and naval programmes of various nations, engaged in scaremongering, played off one nation against another, influenced public opinion on armament through the control of media, and formed powerful arms cartels to promote the global arms race. It is often argued that the arms race has deepened the cycle of violence, oiled terrorism and increased human rights violation mostly in developing nations. Despite a great relevance of the arms race for the contemporary world, the traditional literature on the arms race – based on the Richardsonian action-reaction processes – made limited progress in explaining the factors responsible for triggering, fuelling and propelling the arms race (see Rider, 2009). It is only recently, as explored in Section 2.2 in full detail, that the latest game theoretic models of the arms race in Baliga (2011), Baliga and Sjöström (2004, 2008, 2011, 2013a, 2013b),

and Baliga, Lucca and Sjöström (2013) provide a formalisation of the critical role of information revelation, transmission and pre-play communications to offer new insights into the dynamics of the arms race. In a similar vein, the latest vintage of international relations models, as reviewed in Section 2.1, highlights the role of social learning, information problems and information acquisition to explain the onset of the arms race (see Klein, Goertz and Diehl, 2006; Rider, 2009; Rider, Findley and Diehl, 2011). From these models we now know that there is nothing automatic, instantaneous or sacrosanct about the arms race as there is positive probability that the détente equilibrium will prevail to prevent the arms race from occurring.