No Recession for Arms Sales

The CEO
of a weapons manufacturer has plenty of chances to rub elbows with
deputy secretaries of defense, officials from Homeland Security,
retired military personnel, and the best and brightest of the defense
establishment almost any week of the year.

One such opportunity occurred at the ComDef 2008
conference, which wrapped up at the National Press Club in Washington
on September 3. Sponsored by weapons giants like Boeing, Raytheon, and
BAE Systems, the day-long conference was organized around the theme of
"Defense Priorities in an Age of Persistent Conflict." It featured
presentations from a Navy undersecretary, a deputy director at the
Pentagon, several weapons manufacturers, and defense representatives
from France, the Netherlands, Canada, and elsewhere. With this
high-powered lineup, the conference probably delivered on the promise
of its catch line: "Where the international defense cooperation
community gets down to business."

Next on the calendar in mid-October will be the Women in Defense
National Conference at the Crystal Gateway Marriott near the Pentagon.
Sponsored by consulting giant Booz Allen Hamilton, the conference
includes a panel on the "National Security Priorities in the Next
Administration," moderated
by a Lockheed Martin vice-president. Foreign policy advisers from the
McCain and Obama campaigns will be on hand and - in a nod towards
inclusiveness - representatives from Bob Barr's and Ralph Nader's
campaigns have been invited. The closing reception is sponsored by
Lockheed Martin, and Booz Allen Hamilton is picking up the tab for the
"Breaking a Glass Ceiling" dinner featuring retired Air Force Major
General Jeanne Holm.

And then, who would want to miss flying south for the winter? The Defense Manufacturing Conference
at Disney's Coronado Springs Resort in Florida in early December offers
military industry executives the chance to soak up the rays and address
the question: "Are we ready to provide affordable warfighting
capabilities?"

One of the persistent themes of these and many other weapons
industry conferences is the looming concern that the military budget -
which increased by two-thirds between 2001 and 2008 - can't keep
spiraling upwards forever. ComDef 2008 frames it like this: "persistent
warfare is eroding the capability of our armed forces and hard choices
will need to be made...It is increasingly unlikely that more money will
be found for defense." Last year, the Women in Defense conference addressed this issue with a panel titled "Shaking the Money Tree: Funding National Defense," moderated by a vice-president for programs and budget at Lockheed Martin.

Shaking the Money Tree

Lockheed Martin stands
head-and-shoulders above its competitors as a professional tree-shaker.
Between 2001 and 2008, the company saw its contracts from the
Department of Defense jump nearly 130%, from $14 billion to $32
billion. In a stagflation economy, their profit margin is more than
healthy. The Bethesda-based company reported a 13% increase in profitability for its second quarter - from $778 million last year to $882 million this year.

The weapons industry's concern about belt-tightening
notwithstanding, the military budget is likely to continue its dramatic
growth. The Defense Department's base budget,
which does not include funds for nuclear weapons or the
$12-billion-a-month "global war on terror," has grown by nearly 70% -
from $316 billion in 2001 to a request for more than $515 billion for
2009's fiscal year (which begins in October). Despite the fact that
these figures represent close to what the rest of the world combined
devotes to the military, neither Barack Obama nor John McCain
has adopted reducing military spending as part of his national security
plan. In fact, as both of them talk about modernizing the military for
the 21st century and expanding the size of the armed forces, the
billions add up.

So the weapons industry's alarm bells are ringing prematurely and
the future - particularly in foreign weapons sales - looks very bright.
Take Lockheed Martin, for example: The company, which is springing for
the floral arrangements at the Women in Defense conference next month,
has more than $10 billion in proposed or recent weapons deals with
foreign nations. The biggest deal could be worth $7 billion (that's a
lot of gladiolas and irises for Women in Defense) to Lockheed Martin.
The United Arab Emirates
is interested in the company's THAAD (Terminal High Altitude Area
Defense) system. The mobile truck-mounted system is designed to
intercept incoming missiles targeted at sites such as airfields or
populations centers.

Another potentially huge sale
would be to Iraq, where the combination of regime change, occupation,
and oil revenue has created loyal new customer. Even as U.S. fighter
planes bomb Iraqi cities, the Maliki government has indicated
it would like to order 36 of the company's advanced F-16s. Recent sales
of these $100 million planes to countries like Morocco, Pakistan, and
Romania have all contributed to a bumper year for the Bethesda-based
company. But Lockheed Martin isn't the only company reaping rewards in
the age of persistent conflict. War and instability are good for
business across the board. Jeanne Farmer of the Defense Security Cooperation Agency, which processes requests for foreign military sales, noted
at the ComDef meeting, "in the current environment, everybody needs
everything right now. We do expect to continue to have large, large
sales."

"Our program," she continued, "is growing by leaps and bounds,"
describing how her agency is dealing with more than 12,000 open cases
(in some instances the weapons have been transferred, but not all
options have been exercised or the licenses have not expired) totaling
upwards of $270 billion.

U.S. weapons sales to foreign countries in 2008 are on track to be
45% higher than in 2007. This year, the United States will offer about
$34 billion in weapons to Iraq, Pakistan, Saudi Arabia and other
countries. In 2007 that figure was $23.3 billion, just a small bump
from the $21 billion of 2006. So far in 2008, Farmer's agency has
processed more than $12.5 billion in possible foreign military sales to
Iraq - not including the F-16 fighter plane request, which has not yet
been formalized. On Baghdad's wish-list are systems like the Abrams
tanks, attack helicopters, Hellfire missiles,
heavy transport aircraft, and other weaponry. Proponents of
billion-plus weapons sales argue that these sales will reduce Iraq's
reliance on the United States military, but we need only look at
Pakistan to see evidence that these policies create well-armed short
fuses.

Since the beginning of the war on terror, the United States has
transferred billions of dollars in weaponry and more in military aid to
Pakistan. Recently, the U.S. military has mounted attacks in Pakistani
territory aimed at Taliban and other restive elements without even
informing Islamabad in advance. The response from the Pakistani
parliament? A forcefully worded statement
that the Pakistani military - armed, trained, and outfitted by the
United States - be prepared to "repel such attacks in the future with
full force." It wouldn't be the first time U.S. forces clashed with
U.S. armed adversaries.

Bad News for Them: Good News for Us?

A multi-billion-dollar trade, a world bristling with weapons, and a
well-organized and powerful industry committed to keeping it that way:
these factors make the arms trade big news. Whoever assumes the
presidency in January will have to choose between continuing Bush's
policy of arming the world or setting a new course against strenuous
objections from the military-industrial complex.

But neither of the presidential hopefuls has devoted even a few
lines of major addresses to weapons-sales policy. Even so, the industry
seems worried about Barack Obama's vice presidential pick Joe Biden.
Loren Thompson, a pro-industry analyst with the conservative Lexington
Institute, told Defense Daily International
that "Biden's record on weapons-related issues is that of a
doctrinarian...he always comes down on the liberal side. So this is not
good news for the defense industry."

As CEOs, retired generals, and Pentagon officials flit from one
industry-underwritten conference to another, bemoaning imagined
cutbacks and belt-tightening, the real bad news for their business
would be good news for everyone else - namely peace, diplomacy,
democracy, and human rights.