2007/07/04

National defense industries

The national defense industry is often considered as a strategic asset, as something essential to national self-preservation. Well, it's like that in larger nations. Smaller ones survive easily without.

Such national defense industries have a surprising, somewhat funny and weird characteristic: They always seem to be the only ones who meet the demands of their nation's forces. Well, sometimes only in partnership with defense industries of allied nations, but that's the exception from the rule.

Of course, they don't always offer the best stuff. It's a matter of lobbying and even rational behavior. About 40-60% of defense spending on indigenous equipment flows back as taxes and so on. Indigenous weapons might be more expensive to buy, but in the end they're usually cheaper over time.

Arms exporters stumbled on this problem and found a nice solution; offset agreements. Nation A buys for x bucks in nation B and nation B buys for y bucks in nation A.

In theory, this system could even include an exchange to trade these obligations with each other. Trading the obligation to buy in nation C a with the obligation to buy in nation D would eliminate some inefficiencies of the system.
Overall this seems to be a nice system that would make it as expensive to buy domestically as to buy overseas.

But there's another, probably outdated, reason for buying indigenous products; the needs of mobilization. There might be a crisis/war that needs a buildup, fast. Now this is usually considered as a remote possibility and certainly no problem as long as you buy inside of your alliance.

So why do our forces then prefer so strongly indigenous products while experts can most often identify superior alternative offers within the same alliance?

Procurement should be freed of irrational national egoisms, our troops should get the best stuff, not the cheapest or strictly indigenous products.

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