ABSTRACT
This chapter builds a political economy framework for addressing how the Global Defense Industry's (GDI) affects fragile and corrupt states. Prior work demonstrates that during the post-Cold War era, military spending and arms imports are linked to greater FDI flows for only corrupt economies (Drezner and Hite-Rubin 2014; Hite-Rubin 2015). This dynamic is troubling because high corruption within these states, along with greater rent-seeking and security risks, brought on by rising military spending and arms imports, is a recipe for “development in reverse” (Collier et al. 2003). The chapter interrogates four hypotheses for why this military-FDI link manifests only where corruption is more endemic. The first two hypotheses are sourced from defense economics and international relations literatures and found to be lacking. Hite-Rubin then develops two additional hypotheses that conceptualize state-level corruption as a mediating variable. Hypothesis 3 outlines why GDI sales are more likely to involve defense-offset arrangements with high FDI “buy back” to corrupt states. Hypothesis 4 posits that the GDI's illiberal trade practices distort markets and incentivize corruption and patronage politics.
