Thursday, September 10, 2009

Selling negative externalities - ban global arms trade

It is acknowledged that wars impose the largest and most pernicious of negative externalities on the society and economy. And weapons are the instruments to fight international wars and violent internal civil strifes. It may therefore be not too inappropriate to describe weapons as responsible for causing the "mother of all negative externalities".

The NYT reports that US stands alone at the top of the list of global arms sellers, signing agreements to sell weapons valued at $37.8 billion in 2008, or 68.4% of all business in the global arms bazaar, up significantly from American sales of $25.4 billion the year before. Italy was a distant second, with $3.7 billion in worldwide weapons agreements in 2008, while Russia was third with $3.5 billion in arms sales last year — down considerably from the $10.8 billion in weapons deals signed by Moscow in 2007. The increase in US sales comes despite the value of global arms sales in 2008 (at $55.2 billion) declining 7.6% from 2007 and the global economic recession that has adversely affected all other industries. Weapons sales to developing nations reached $42.2 billion in 2008, up from the $41.1 billion in 2007, of which 70.1% originated in the US. The top buyers in the developing world in 2008 were the United Arab Emirates, which signed $9.7 billion in arms deals, Saudi Arabia, which signed $8.7 billion in weapons agreements, and Morocco, with $5.4 billion in arms purchases.

And, as with all negative externalities, the obvious answer to mitigate its effects is to get the sellers (of these externalities) to internalize the costs. Since these wars inflict extensive and too-large-to-quantify human suffering, the obvious solution to internalizing costs is to impose a ban on international arms trade. However, such bans can be effective only when the embargo covers all international trade in weapons.

Given the massive avoidable suffering caused and economic destruction generated by wars, a global ban on arms trade should have been at the top of the list in global multi-lateral discussion forums. I am therefore surprised that it does not compete with climate change and nuclear proliferation as important issues in multilateral negotiations. Should we give credit (for this) to the clout of the global arms industry or the appetite for war within and between nations?

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