The dirty arms money boom

Guest blog by Francesco Vignarca (Italian Peace and Disarmament Network)

The two major armed conflicts that in recent months have put war back at the center of Western public opinion’s attention (while too many other wars continue to be ignored) have, among other things, made its economic and profit-making dimension evident.

As Peace and Disarmament Network we had already underlined in previous analyzes the robust growth on the stock market of military industries following the war in Ukraine and the international response to this war. A recent analysis by the Financial Times reinforces this even beyond the usual clichés: the stock average in the sector has grown by 25% in the last 12 months, while the European Stoxx index for aerospace and defense has risen by more than 50% in the same period. Stock trends are a ‘profit forecast’ based on numbers in the order book that entices investors and speculators. According to data from the City newspaper referring to 15 major military companies, at the end of 2022 (the last year with complete data) total confirmed orders were $777.6 billion, up from $701.2 billion two years earlier. This trend continued also in the first six months of 2023 (with orders worth 764 billion dollars already confirmed). And we are only at the beginning.

When publishing its 2022 list of Top 100 Global Military Companies, Stockholm’s SIPRI highlighted a total turnover of just under 600 billion dollars, which remained in line with the previous year because it did not yet included the big leap of global military spending (already at an all-time high of 2,240 billion dollars). The time political decisions on public budgets take, and the time it takes for orders, contracts and technical details to be finalised, is so long that even the Russian invasion of almost two years ago is barely showing in the order book and therefore very little in turnover. Except obviously for those types of military goods that are immediately in high demand following intense conflict (such as ammunition or artillery) or for specific innovative products (drones).

If you want to understand what happens in the field of the military industry, you therefore need to look at a longer time span and include the past, to grasp a dynamic that does not depend only on specific conflict situations. One should not be mistaken about decisions that are actually structural but are passed off as ‘exceptional’ (by politics and armed interests) only to have them digested without protests. The real novelty of the post-pandemic military world is the political discourse, while the enormous growth in armed affairs did not in fact begin two years ago. This is shown by the same data from the Financial Times on the order portfolio of the top 15 military companies: the growth by over 10% in the last two years actually exploded by 76%, especially in the last eight (from 441.8 billion in 2015 to the already cited 777.6 of 2022).

Driving force behind everything is the growth of military spending. As precisely calculated in the recent Greenpeace report ‘Arming Europe’ in the last decade (2013-2023) military spending in Europe shows a record increase, 14 times higher than that of GDP (+46% in NATO-EU countries, +26% in Italy) driven above all by the purchase of new weapons (+168% in NATO-EU countries; +132% in Italy). At a global level, military spending has practically doubled from 2001 onwards, experiencing a stronger growth trend especially in the field of military procurement of new weapon systems. The aforementioned SIPRI Top100 has seen a turnover double in the same period, and the growth since 2015 (since Chinese companies are also evaluated) is 14%.

It is therefore no coincidence that the post-2001 military industry stock market trend (with the ‘war on terrorism’) is even more frightening than the recent one: a Lockheed Martin or Northrop Grumman share went from less than 30 dollars to 450 at present ones, that of General Dynamics from 27 to 250. Shares from Rheinmetall worth 10 euros are now worth over 300 and even Leonardo (despite a decline during the divestment of the civilian aircraft) has increased its share value tenfold in the last ten years.

Which strenghtens the picture of a structural, not incidentical, development leading to the formation of a complex that must now be called the ‘military-industrial-financial’ complex, very different from that of the 20th century. In fact, among the main shareholders of all major arms companies we find the same mega funds (which also suggests the idea that competition is certainly not the basis of this sector): BlackRock, Vanguard, Capital Group, Wellington, State Street, Jp Morgan…

In summary: by evaluating a long and more complex trend (in which different data are connected) can we strengthen the almost banal intuition of a continuous exploitation of war (and everything that comes from it, even suffering and destruction) by certain actors. In order to try to counter the propaganda of those that profit and of politics now dominated by the mantra of militarisation which certainly does not contribute to security or peace in the world.

First publised in Il Manifesto, January 6, 2024

Steun Stop Wapenhandel