Producing Airpower: The Rise and Fall of Neo-Liberalism’s Defence Agenda

ABSTRACT

Few policy issues are more challenging than complex weaponry’s procurement and employment. Technology drives weapon costs upwards faster than economies are growing and militaries struggle to maintain increasingly sophisticated arms. Certain governments have adopted a reform agenda rooted in neo-liberal economic theory to address these challenges. Two broad policies – enhancing inter-firm competition for contracts and outsourcing activities to the private sector – emerged as central to this reform agenda. Although rarely presented as such, these reforms present a significant intellectual challenge to the hitherto predominant statist model for military power’s provision. Surprisingly, in light of neo-liberal policies’ adoption by militarily active states, no study has systematically examined these reforms’ content and impact. My article fills this lacuna by examining the state – the United Kingdom – that most consistently enacted neo-liberal defence reforms. To preview the conclusion, neo-liberal reforms initially generated small initial efficiencies, but then produced significant adverse consequences when pursued beyond a certain minimal level. Britain’s competition policy, for example, ultimately incentivized firms to consolidate into monopolies, which narrowed the scope for future competition and prevented the state from upholding fixed price contracts. Outsourcing, likewise, proved detrimental once policymakers sought to extend its scope beyond a limited range of simple services.     

Defying Convergence: Globalisation and Varieties of Defence-Industrial Capitalism

Globalisation is transforming the production of armaments in ways poorly understood, yet critical to states' security. Most analysts contend that this process forces states to converge upon laissez-faire policies that systematically disadvantage smaller states. However, broader research in comparative political economy suggests that domestic institutions drive states to adapt in distinct ways independently of their size. Indeed, the Varieties of Capitalism (VoC) approach argues that national institutions shape both how states develop adjustment strategies and their firms' comparative advantages. This article examines two small states – Israel and Sweden – to ascertain whether defence-industrial transformation drives them to converge upon common laissez-faire policies or, contrarily, whether distinct VoC shaped their adaptation strategies along different lines. To preview the conclusions, institutions impel states to respond to defence-industrial transformation in divergent ways. Liberal market states, such as Israel, respond by introducing greater competition for contracts and liberalising their import/export policies. In coordinated market states, such as Sweden, government cooperates with business groups to selectively open industries to foreign capital and position them to compete globally. Although they adapt differently to transformation's common challenge, these cases demonstrate that even small states can retain robust defence-industrial bases, albeit ones with increasingly distinct comparative advantages and disadvantages.