An Interview with Nicole Ball
BY METTA SPENCER
For seven years before the Iran-Contra arms scandal raised public curiosity about the international arms trade, Nicole Ball was studying that bloody industry. Ball is an American researcher on the economics of Third World militarization. She works at the Swedish Institute of International Affairs. PEACE interviewed her at the Pugwash meeting in Budapest .
PEACE MAGAZINE: Your work is on the relationship between militarization and the economy in the Third World. We sometimes hear it said that if we'd cut back on military expenditure, there'd be the money for development. Inga Thorssen's report to the U.N. said that the world can afford development or arms -- not both.
BALL: That's right. To some extent I disagree. Military expenditures do use a lot of the resources of many Third World countries. However, if such expenditures were reduced, that doesn't necessarily mean that the savings would be applied to development purposes. That depends on the priorities of government.
P.M.: Fair enough, but would enough be saved to make the critical difference? Could it turn the tide?
BALL: Probably not. In many countries military expenditure counts for less than 15 percent of the state's budget. It would be nice to have an extra 15 percent, but that would not be enough to solve all of the development problems of those countries. Many of their problems are not financial, but structural. The problems that have to do with questions of power are not easily solved simply by applying greater sums of money.
P.M.: Could many of these countries really disarm?
BALL: The governments say they couldn't. Governments believe that their duty is to protect the state, and in the real world, they feel that they could not cut back. Now, many Third World countries do not face serious external threats, if one looks at it realistically. They may have a perception of being threatened, but in fact are not. So, many countries -- if we looked only at external threats -- could reduce their military expenditures somewhat. But even in those countries, the military has a definite internal security role to play. They protect the regime in power. The government would be loathe to disband the military in the absence of external threats because they depend on it to stay in power.
P.M.: And is that more often the case in the Third World than in industrial societies?
BALL: Yes. We see places in industrial societies where the military has been influential -- such as Poland at present and Greece a few years ago -- but in general the formal role of the military in industrial society is smaller than in the Third World. However, the military is not devoid of influence in any system -- including the United States and Canada.
P.M.: But those Third World countries that rely on the military to keep themselves in power -- isn't it difficult for them to control the military?
BALL: Yes, there can be that problem. There are constantly coups and counter-coups and so on. This is a phenomenon of the Third World.
P.M.: What other benefits are gained from keeping a military? For example, is an army ever kept large to control unemployment? In Canada, I've heard people suggest enlarging the armed forces for that purpose.
BALL: Yes, but if you look at the size of the Third World labor force, aged 15 to 64, you find that the armed forces can provide employment opportunity for only a very small proportion of the economically active population. There are a few exceptions to that -- Singapore, for example. However, in Singapore they are worried about the opposite problem: They say that the military is taking much-needed manpower away from the economy. They have perhaps 6 percent of their population in the armed forces, and this is a drain on the economy.
P.M.: What about the role of the superpowers in the militarization of the Third World? We hear that wars in the Third World are often "proxy" fights between the superpowers. Arms are often provided to keep these countries within the orbit of a superpower.
BALL: That's partially, but not entirely, true. Most conflicts in the Third World have their roots in the Third World. The question is, to what extent are these conflicts exploited by the two superpowers? In a number of cases, they are. We can think of the conflicts in Central America and Afghanistan today, and the situation in Vietnam previously. However, many other conflicts between Third World countries are not obviously exploited by the major powers. Most such countries do have to obtain their arms from abroad -- from the industrial nations, whether of East or West. Although some 54 Third World countries produce some weapons themselves, very few of them produce a large number. Some people argue -- as I think you suggested -- that the Third World is pressured to purchase by the arms sellers of East and West. And to some extent this is true, but we should never lose sight of the fact that many Third World governments are very eager consumers of this equipment.
P.M.: And purchasing it at an increasing rate.
BALL: Yes, over the past 15 or 20 years it has increased, but in the last two or three years, largely for economic reasons, the arms trade to the Third World has decreased somewhat.
P.M.: Why? Is the market saturated?
BALL: That's not the problem. Objectively speaking, they do have quite a lot and shouldn't want more, but the real problem is economic. Countries are hard pressed now for foreign exchange. When they have to cut back, one place is on the purchase of weapons.
P.M.: Many of them try to build up their own arms industries. Have any of them succeeded in doing so? And are there any great benefits for those that have?
BALL: A number of countries produce a fairly diversified and large amount of weapons. Israel, for example. In discussions of this sort, Israel is considered a Third World country, although it may not be considered so for other purposes. Israel, India, Brazil, Argentina, and South Africa are among the major producers in the Third World. Oddly, China is not considered a Third World country for this purpose, but sort of a third superpower. But China should also be counted in this list.
For the major producers but not the small ones, you might be able to say that, yes, there are some benefits. People do get trained, there is no doubt about that, and the technology that they learn might be put to use in other areas. But this is a costly way of gaining such skills. And the military industries' technology is more sophisticated than that in other sectors of these countries' economy. So people are trained to do things that they may not be able to apply in other jobs.
However, it depends what industrial sector and what skill you're talking about. An electronic assembly job is much the same in military and civilian manufacturing, so the skills could shift from one sector to the other. But in any case, only a limited number of people would benefit, and it would be costly for them to acquire their skills in this way.
However, it depends what sector and what skill you're talking about. An electronic assembly job is much the same in military and civilian manufacturing, so the skills could shift from one sector to the other. But in any case, only a limited number of people would benefit, and it would be a costly way for them to acquire their skills.
P.M.: What about "spin-offs"? It is sometimes said that civilian industries benefit from applying technological advances that were originally made by the military.
BALL: Yes, it's suggested that because military industries are particularly sophisticated, this is a good way to introduce advanced technology into developing countries. But I doubt whether the benefits are great. First, the technologies are so sophisticated that they don't match the other technologies in the society. Besides, there are not many people employed in these technologies. And what is more, the products that such technologies turn out are often not items that the population needs. However, sometimes -- as in the case of India and Israel, for example, which have developed military electronics -- products have been developed for export, which have produced income for the country. In such cases there is some benefit. But overall, the technologies are usually too sophisticated to be integrated into the rest of the economy -- and even if they weren't, they wouldn't provide so much employment. The benefits are probably outweighed by the negative aspects.
P.M.: And spin-offs for the advanced economies?
BALL: Even for the advanced economies, the benefits are limited. Ask the people who work in military industries, and who are familiar with the technology; they will tell you that spin-off doesn't occur naturally. You really have to look for ways of applying the technology developed in the military. This can be a very expensive way of developing products that are not necessarily of the kind that civilians need.
P.M.: Some of the militarization of the Third World takes place through loans or even gifts from other countries. To what extent is hardware supplied as gifts?
BALL: After the Second World War -- in the 1950s and into the 1960s -- a lot of equipment was provided free of charge, particularly by the United States. In about the mid-1960s, that policy began to change. The Soviet Union has provided a lot of equipment free of charge to certain specific countries -- Cuba, North Vietnam and now to unified Vietnam -- but all other countries have had to pay for their Soviet equipment. However, until the early 70s these were on rather soft terms. The interest rates were lower and the loan ran for a longer period than U.S. or other Western credits. So the grant element was perhaps larger in the case of the Soviet Union than the United States, even though countries were having to pay for their weapons. Now, from the early 1970s onward, terms hardened for all suppliers -- East and West.
Then, at the end of the Carter administration, and the beginning of the Reagan administration, Congress decided to phase out the U.S. military assistance program, which was the mechanism through which weapons were transferred free of charge, primarily to Third World Countries. In about 1983 the Reagan administration began to increase the grants again, but what they did was very interesting. Under the guise of worrying that weapon purchases were multiplying the debt burdens of Third World countries, they "reformed" the program under which foreign governments purchased from the United States, using U.S. credits. They decided to reduce the interest rates, which were at market rates -- around 11 or 12 or 13 percent -- and very expensive for Third World Countries. They decided that interest rates would be at about half market rates -- or at 5 percent. Of course this was much cheaper, and one has to ask whether this was beneficial, in terms of debt created. I can well imagine that some Third World countries purchased equipment with these cheap loans that they wouldn't have otherwise bought. This may be the mechanism for increasing military-related indebtedness of the Third World.
P.M.: But not every country has even needed to pay for its military supplies, either with cash or with loans. For example, haven't the Saudis bought weapons for some of their friends?
BALL: Yes. And not only the Saudis. Algeria and Kuwait have done that too. Libya often promises to buy, apparently, but doesn't come through in the end.
P.M.: Are arms sales guided more by considerations of commercial profitability or by the politics of international alliances?
BALL: In the West, companies are not particularly concerned with world policies. But in the East bloc, they are more likely to be guided by political considerations.
P.M.: But many Western countries do restrict sales of arms to countries that are potentially belligerent.
BALL: Canada does, Sweden does, Germany does. Whether these regulations are followed, of course, is another question. I don't know that the United States does, though it may decide that it's not selling to certain countries for certain reasons. Yes, in the West, political considerations are important, but the countries that sell are mainly interested in profit. And since the mid-1970s, the Soviet Union has required that arms be paid for in hard currency, Previously the loans were very soft, and countries were even allowed to pay with commodities. Some countries, such as India and Ethiopia are still allowed to pay in commodities when they buy weapons from the Soviet Union or Eastern Europe. But such oil-rich countries as Saudi Arabia and Libya have been required to pay in hard currency. This suggests that economic motives are not totally unimportant to the Soviets.
Among Western sellers, the West Europeans are more interested in selling for commercial reasons. The French government actively helps market French goods.
P.M.: One famous result being the use of French Exocet missiles by Argentina against the British.
BALL: Right. In the United States, political reasons tend to be more important, though of course companies do go out and try to sell. The government identifies its most important clients, helps them with credits, and makes the whole thing possible.
P.M.: But does the government regulate such sales? When it came to selling AWACS to Saudi Arabia, Congress decided what could be sold.
BALL: Yes, the government has made decisions about what could be sold. In the 1960s the government had a ban on the transfer of sophisticated supersonic jet aircraft to Latin America, because it wanted to prevent an arms race in Latin America. The United States unilaterally imposed an embargo, which held for a while. Then Peru broke ranks and purchased Mirage aircraft from France, which set up a whole spiralling of the arms race. The United States also has what it calls "third party transfer restrictions." For example, Israel makes an aircraft -- the Kfir -- which contains American components, such as its engine. The United States retains the right to prohibit sales of those aircraft to other countries. And in fact, the United States has prevented Israel from selling those aircraft to certain Latin American countries which would have liked to buy them.
So, yes, the United States does have restrictions, but they differ from those in Sweden and perhaps in Canada, which are moral restrictions. They are based on power considerations, not moral ones, and are not formal.
P.M.: I was surprised to hear that military budgets in the Third World are more for personnel than arms.
BALL: Yes. The common perception is, I think, that military expenditure in the Third World is equivalent to weapons expenditure. In fact, Third World countries spend a very large part of their military budget maintaining their security force -- just paying, clothing, and housing their troops.
P.M.: Is this a higher proportion than in the technologically advanced armed forces?
BALL: Yes, I think so. Probably it would be about 30 percent for a Western European army. I found 50 to 60 percent not uncommon for personnel costs alone in the developing countries that I studied. And then operating costs (which include maintaining weapons) accounted for another large part. Weapons procurement, given the data that I have, do not appear to account for more than 20 percent of expenditure in many countries.
However, there are problems in carrying out research on this question. No government wants to let its adversaries know exactly what sort of weapons it is purchasing, so the records often do not reveal the entire extent of arms procurement, so my figures may be low. Another thing that countries do is barter. India is allowed to pay in commodities. When the Indians buy an aircraft from the Soviet Union, they simply transfer goods. It probably enters the trade figures and the balance of payments, but not in a way that I can easily identify. It may be listed as cashew nuts, or tractors, or aircraft.
P.M.: Does this bartering trade occur only between socialist, planned economies? You don't find the U.S. government swapping commodities, I suppose.
BALL: Well, the American trade is pretty well tracked. What happens with the French, British and the Germans I don't actually know. I've heard of barter arrangements. But yes, it's mostly East-bloc countries.
P.M.: You live in Sweden, the only nation to have undertaken a study of economic conversion.
BALL: Yes. In 1982 the United Nations requested that nations study and report on the possibility of converting defence industries to civilian purposes. The Swedish study group projected the outcome of cutting military expenditure in Sweden. It concluded that there would be no serious economic consequences. A certain number of people would be, yes, out of work. But people are always changing jobs and the numbers were not great. They could be absorbed. The study group suggested ways for planning, and since then the government has set up a working group under Ambassador Maj-Britt Theorin, the Under-Secretary for Disarmament Affairs. So there is an ongoing process in Sweden.
The United States has an office called the Office of Economic Adjustment, which has helped certain communities adjust to the loss of military bases. The Swedish Government report may be the only official governmental report, but quite a lot has been written on defense industry conversion, particularly in the United States. The U.S. government in the late 1960s and early 1970s funded studies of what would happen to specific industries, categories of workers, and technologies if military expenditure were cut. There has also been research in West Germany and the U.K. on this.
P.M.: Is any generalization possible from all this?
BALL: Yes. Conversion would not pose any serious problem for any country. Certain regions -- the smaller regions especially -- and certain categories of workers and firms would have some difficulty in adjusting. Sometimes you might have to shut down firms; sometimes you could use the machinery and workers to produce something new. This depends on planning. Advance planning is very important.
P.M.: That's encouraging. But I have believed for a long time that the main economic motive behind the arms race was the widespread desire to keep the level of demand high and steady. Militarization does level out the demand for manufactured products, doesn't it? It seems to me understandable that manufacturers would be reluctant to convert from military to civilian products, if those products are susceptible to greater fluctuation in demand. I mean, people will only buy a limited number of pairs of shoes or refrigerators, so there can be a glut on the market. But military hardware can be shot off into outer space, or allowed to rust, or to become obsolete, and then will be replaced by the new model. The military is an assured, steady market.
BALL: Well, actually, military production as a source of production is a rather unstable sort of employment, particularly for production workers. When you order a new piece of equipment, it is designed and tested and put into production. But the follow-up piece of equipment is usually not ordered immediately. You still have to go through the design stage, so there are usually gaps in production and companies have to lay off workers if they don't have other projects to shift them to. So, as a source of employment, it is not terribly stable. But it is quite true that companies that produce for the military are very reluctant to try to diversify because it provides a stable source of income. This is because of the way in which military production is financed: The government pays before the product is delivered.
P.M.: And on a cost-plus basis.
BALL: No, it's not even that they make tremendous profits. It's simply that, if you make a pair of shoes, you get paid when you sell the shoes. If you make an aircraft, you get paid as soon as you start designing it. And you keep getting paid. This is the way the system works in most countries. So you have your money rolling in and you know how much it is going to be. And there is the added advantage of very often having it cost-plus. In the United States you see that this has gotten a little out of hand; there are clearly super-profits to be made in certain areas, but I think the main attraction is simply the stability of the income. For the poor person who is working, this may not mean stability of employment.