MACHINERIES OF WAR AND MECHANISMS OF CHANGE IN WORLD POLITICS by Matthew David Williams A thesis submitted to the Department of Political Studies in conformity with the requirements for the degree of Doctor of Philosophy Queen’s University Kingston, Ontario, Canada September, 2007 Copyright © Matthew David Williams, 2007 ABSTRACT The purpose of this dissertation is to anticipate changes in the international system by examining changes in Western defence industries. The defence industries are a mechanism for producing power. In an anarchic international system, power is the means by which states find security. To produce power through a defence industry, a state must possess a range of attributes of power. The investment needed to produce an array of defence equipment is considerable, and so a state must possess appropriate economic resources. The cost also necessitates acts of political will, to direct resources away from other ends which might be more readily enjoyed. Finally, the defence industry must produce equipment that is strategically relevant—which requires a high level of technology derived from domestic research and development. The structure of the international system is fundamentally a question of the nature of the distribution of power, and the factors that make up state power are all to be found in defence industries. The question posed here is “to what extent is change in the system predictable through looking at trends in the defence industrial base?” After establishing the theoretical perspective, this paper goes on to look at the changes that are taking place in the strategic environment. This is followed by an analysis of the forces that act upon the defence industrial base, and of the implications of the adverse trends that they generate. From these, the indicators which signal change in the international system are derived. Then the responses of both state and industry are examined to test for the presence of these indicators. Finally, the conclusion is an assessment of how changes in the defence industrial structures of the West reflect and may be able to anticipate change in the international system. ii PREFACE AND ACKNOWLEDGEMENTS The international system is the highest order of political organisation. As such, the nature of the system is of great interest, and major changes in its structure are of great interest also. Despite attention given to it, predicting the future of the international system has proven to be a difficult task—reality has foiled expectations. Continuity has obtained where change was expected: Europe has not returned to balance of power politics; Japan did not emerge as a rival superpower. Change has occurred where continuity was imagined. Most striking of these was the largely unheralded end of the Cold War: a decades-old struggle ended not in war, but by the voluntary abandonment of the struggle by one side. Unexpected change is the more serious, for it offers little chance for preparation. While the end of the Cold War was probably a benign change, all system level changes will not be. What follows is an attempt to find a new barometer. This dissertation will be using the defence industrial base as a device for looking at change in the international system. Subject to political interventions, economic forces, and strategic requirements, defence industries are boxed in by a variety of pressures to which they must adapt. It is in these adaptations that the readings can be made. The other subject is the international system itself. This dissertation will be looking therefore in two directions, one with a “political-economy-of-defence” eye at the defence industrial bases in the West, and the other through a hegemonic stability theory lens at the international system. iii In addition to satisfying a personal interest in the subject matter, this dissertation is intended to contribute to the field by making an unusual connection. The defence industrial base is a small niche, but it lies at a particular nexus of forces which makes it correlate with the needs of system-level theory. This may make it the ideal indicator. The thesis will proceed to decide whether a change in the international system can be perceived in the defence industrial sector, and, if so, what kind of change it may be. As noted, this is a venture to be undertaken with caution—but it is perhaps better to be prepared for a change that does not come than to be found unready by change that does come. I would like to thank my supervisor, Dr. David Haglund, for his patience, guidance, and insight. I am grateful to Dr. Charles Pentland for his suggestions and assistance in the early stages, helping propel the enterprise forward. The fine attention to detail that Dr. Kim Richard Nossal paid to my dissertation was invaluable. I am delighted that Dr. Alistair Edgar was able to come and offer his perceptive contributions. I also wish to thank Dr. Ugurhan Berkok, for his continuous enthusiasm and for bringing me into the defence economics world at RMC. The staff at the Political Studies department was of great help, particularly Karen Vandermey, without whom I would have failed to navigate the administration. A great deal of the research for this paper was derived from anonymous interviews with industry observers and NATO officials undertaken over the last five years. These sources are generally not noted except where a large section would otherwise go unaccounted. I am grateful for their willingness to offer their time and invaluable expertise. Also, I wish to express my appreciation to the Department of iv National Defence, whose support through the Security and Defence Forum made that research possible. Finally, I would like to thank my Mum and Dad, for everything. v CONTENTS Abstract . ii Preface and Acknowledgements . iii List of Tables and Figures . vii List of Abbreviations . viii Chapter One: Introduction . 1 Chapter Two: Theorising Change . 32 Chapter Three: Observing Change . 94 Chapter Four: Driving Change . 132 Chapter Five: Investigating Change—State Responses . 179 Chapter Six: Investigating Change—Industry Responses . 244 Chapter Seven: Conclusion . 288 Bibliography . 309 Appendix A: Consolidation in the U.S. Defence Industrial Base . 323 Appendix B: Consolidation in the European Defence Industries . 326 Appendix C: Defence Expenditures . 329 vi TABLES AND FIGURES Table 1: Defence Expenditures Of European And North American States, 2005 . 198 Table 2: Market Share Of The Top N Global Defence Industrial Firms As A Proportion Of The Top 100 . 247 Figure A1: The Formation of Lockheed Martin and L-3 Communications 1990-1997 . 323 Figure A2: The Major Acquisitions of Raytheon . 324 Figure A3: The Major Acquisitions of Boeing . 324 Figure A4: The Formation and Major Acquisitions of Northrop Grumman . 325 Figure B1: The Formation and Major Acquisitions of BAE Systems . 326 Figure B2: The Formation and Major Acquisitions of EADS . 327 Figure B3: The Major Acquisitions of Thales . 328 Table C1: Defence Expenditures for European and NATO States 1996-2005 . 329 vii ABBREVIATIONS AMRAAM Advanced Medium Range Air-to-Air Missile ASD Alternate Service Delivery AWACS Airborne Warning And Control System BGT Bodenseewerk Geratetechnik BMD Ballistic Missile Defence BRITE Basic Research in Industrial Technologies for Europe CASA Construcciones Aeronáuticas S.A. CEA Commissariat à l’Énergie Atomique CF Canadian Forces COTS Commercial-Off-The-Shelf CVF Future Aircraft Carrier DASA DaimlerChrysler Aerospace SA (previously Daimler-Benz Aerospace SA) DCI Defence Capabilities Initiative DCN Direction des Constructions Navales DDSA Defence Development Sharing Arrangement DIB Defence Industrial Base DND Department of National Defence (Canada) DOD Department of Defense (United States) DPSA Defence Production Sharing Arrangement EADC European Aerospace and Defence Company EADS European Aeronautics, Defence and Space company ECSC European Coal and Steel Community EDA European Defence Agency EFIM Ente Partecippazioni e Finanziamento Industrial Manifatturiera ERRF European Rapid Response Force ESDP European Security and Defence Policy ESPRIT European Strategic Program for Research in Information Technology EUCLID EUropean Co-operation for the Long-term for Defence GD General Dynamics GDLS General Dynamics Land Systems GDP Gross Domestic Product GE General Electric Co. (United States) GEC General Electric Company (United Kingdom) GIAT Groupement des Industries de l’Armée de Terre GIE Groupement d’Intérêt Économique GPS Global Positioning System HDW Howardtswerke-Deutsche Werft HST Hegemonic Stability Theory IFOR NATO Implementation Force IRI Instituto per la Riconstruzione Industriale ISAF International Stabilization Assistance Force IT Information Technology ITARS International Trade in Armaments Regulations viii JSF Joint Strike Fighter KBR Kellogg, Brown & Root LFK Lenkflugkörpersysteme MEADS Medium Extended Air Defense System MES Marconi Electronic Systems MNC Multinational Corporation MNE Multinational Enterprise NASSCO National Steel and Shipbuilding Company NCW Net-Centric Warfare OCCAR Organisme Conjoint de Co-opération en Matière d’Armament PED Political Economy of Defence PSM Projekt System und Management QDR Quadrennial Defense Review RACE Research into Advanced Communications technologies RMA Revolution in Military Affairs R&D Research and Development SAGEM Société d’Application Générales de l’Electricité et de la Mécanique SAIC Science Applications International Corporation SEPECAT Société Européene de Production de l’Avion