UC Riverside UC Riverside Electronic Theses and Dissertations Title The Political Economy of Military Industry Reform Permalink https://escholarship.org/uc/item/2jn2s6j1 Author Grimes, Collin Publication Date 2019 Peer reviewed|Thesis/dissertation eScholarship.org Powered by the California Digital Library University of California UNIVERSITY OF CALIFORNIA RIVERSIDE The Political Economy of Military Industry Reform A Dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Political Science by Collin Grimes September 2019 Dissertation Committee: Dr. David Pion-Berlin, Chairperson Dr. John Cioffi Dr. Marissa Brookes Copyright by Collin Grimes 2019 The Dissertation of Collin Grimes is approved: Committee Chairperson University of California, Riverside Acknowledgements This study brings together five years of research on military industries and their reform, none of which would have been possible without the support of a whole host of people and institutions in many countries. I would like to thank my advisor, David Pion- Berlin, for his partnership through it all. His help, through limitless discussions and scrutiny of as many drafts—not to mention his steadfastly urging me to continue to study a politically-challenging topic and his provisioning of preliminary contacts—was vitally important. The Institute of Political Science at the Pontifical Catholic University of Chile (UC), directed by Alfonso Donoso, provided me a position as a visiting researcher for four months while I conducted field work in Santiago, Chile. That affiliation helped me not just to complete my field study, but to disseminate my research and access elite circles. My dear friend and then colleague at UC, Rodrigo Espinoza Troncoso, was a vital resource in Santiago and an inspiration to me in our many discussions. Close relationships with friends and advisors afforded me entry into the voluminous collections to be found in Buenos Aires, Argentina, where I spent another month studying after leaving Chile. James Brennan in the Department of History at the University of California, Riverside (UCR) referred me to Marcelo Rougier in the Faculty of Economic Sciences at the University of Buenos Aires (UBA). Marcelo not only delighted in our conversations about this topic, but referred me to Jesús Emilio Monzón, iv the archivist at the Center of Studies of the Situation and Perspectives of Argentina (CESPA) in UBA’s Institute of Economic Research. It was in CESPA, with Jesús’s assistance, where I toiled for more than one hundred hours, eventually gathering over 800 pieces of original archival evidence, before leaving Buenos Aires and returning to California to analyze my data and complete this work. The Department of Political Science at UCR provided financial assistance for the field research. Then there were the friends who filled me with joy and, wittingly or unwittingly, consistently motivated me to try to stand taller and see further than before, including, in no particular order, Rodrigo Espinoza Troncoso, Kevin Pham, Rocio Lopez, Ashley Koda, Diego Esparza, Antonio Ugues, Matias López, Noga Glucksam, Ryan Larsen, Julisa McCoy, and Ximena de Tezanos Pinto. And last but not least, I would like to thank my loving parents and sister, whose devotion never did fade. v ABSTRACT OF THE DISSERTATION The Political Economy of Military Industry Reform by Collin Grimes Doctor of Philosophy, Graduate Program in Political Science University of California, Riverside, September 2019 Dr. David Pion-Berlin, Chairperson Ownership and management of defense industry enterprises affords the military power, autonomy, and a claim to economic rents. Why do some countries successfully transfer some or all of these enterprises from military to civilian ownership and management while others fail? This study stresses the joint role of the balances of coalitional and institutional strength between civilians and the armed forces. Civilian and military must surmount obstacles in order to translate their preferences into policy. They must find party and executive allies who can compete on their behalf to craft or defeat legislation that affects their interests, and they must create or develop bureaucratic agencies that can design policy efficiently and effectively. Coalition formation and institution creation become crucial, especially in fragmented polities. When civilians can forge a stronger legislative coalition and can create a defense industry bureaucracy that is stronger than the existing military bureaucracy, enterprises will be transferred; when the military can forge a stronger coalition and maintain a relatively stronger bureaucracy, reform will stall. Firms will be partially transferred when the civilian bureaucracy is stronger but the military coalition is stronger. How civilian and vi military coalitions and institutions behave and interact and how they form, ossify, or fail to develop is assessed through a comparative analysis of Argentina (1983–1989), Argentina (1989–1997), Chile (1990–2018), Turkey (1983–2018), and Portugal (1976–2018). vii Table of Contents Introduction………………………………………………………………………………1 Chapter 1 Coalitions, Institutions, and the Path to Military Industry Reform Introduction………………………………………………………………………35 1.1. Civilian, Military, Periods, and Preferences………………………………...43 1.2. Coalition Building and the Problem of Generating Political Support………52 1.3. Institution Building and the Problem of Generating Institutional Capacity...72 1.4. (Re)Shaping Military and Society: A Model of Military Industry Reform…84 1.5. Operationalization and Measurement……………………………………….88 1.6. Methodology and Cases……………………………………………………..98 Conclusion……………………………………………………………………...110 Chapter 2 Political Stasis in a Fiscal Enclave: Chile, 1990–2018 Introduction……………………………………………………………………..118 2.1. The Chilean Military Industry in 1990…………………………………….122 2.2. Civilian Presidents and Copper Soldiers…………………………………...130 2.3. Reform Efforts Lagos Administration Corporate Governance Initiative………………..137 Bachelet Administration Corporate Governance Initiative……………..153 Defense Ministry-Led Mixed Capital Program…………………….......158 Executive Branch-Led Corporate Governance Initiative………………172 Conclusion……………………………………………………………………...179 viii Chapter 3 Political Stalemate in a Rent Market: Argentina, 1983–1989 Introduction……………………………………………………………………..183 3.1. The Argentine Military Industry in 1983…………………………………..187 3.2. Raúl Alfonsín and Soldier Capitalist………………………………………196 3.3. Reform Efforts Management Modernization Policy……………………………….……203 General Savio Corporatization Initiative………………………...……..216 Plan Austral Privatization Program.………………………….………...225 Incremental Privatization Initiative……………………………….…….234 Conclusion……………………………………………………………………...239 Chapter 4 Political Revolution and the End of Military Capitalism: Argentina, 1989–1997 Introduction……………………………………………………………………..243 4.1. The Argentine Military Industry in 1989……………………………..........248 4.2. Carlos Menem and Men of Arms…………………………………………..250 4.3. Reform Efforts Policy on State Reform……………………………………….……..….253 Military Enterprise Privatization Program………………………….…..268 Conclusion……………………………………………………………………...313 Chapter 5 Power and Industry in the Mixed Markets of Turkey and Portugal Introduction……………………………………………………………………..317 5.1. Turkey……………………………………………………………………...321 ix Defense Industry Restructuring Project………………………………...325 Defense Industry Privatization Plan…………………………………….333 Imperial Defense Industry Policy………………………………………338 5.2. Portugal…………………………………………………………………….340 Enterprise Consolidation Action………………………………………..343 Defense Sector Liberalization Initiative………………………………..351 OGMA Corporatization Program………………………………………358 Arsenal do Alfeite Corporatization Program…………………………....364 Defense Industry Privatization Plan…………………………………….368 Conclusion……………………………………………………………………...369 Conclusion……………………………………………………………………………..352 Bibliography…………………………………………………………………………...387 x List of Figures Chapter 1 Figure 1.2. Boundary Expansion and Control…………………………………...69 Figure 1.3. Function Expansion and Control……………………….....................84 Figure 1.4. Reform Outcomes and Coalitional and Institutional Strength………92 Figure 1.5. Strong and Weak Civilian and Military Coalitions………………….87 Figure 1.5.1. Strong and Weak Civilian and Military Institutions……………….95 xi List of Tables Chapter 1 Table 1.5. Stock and Flow of Coalitional Strength and Institutional Strength…..93 Table 1.6. Cases of Military Industry Reform and Coalitional and Institutional Strength ………………………………………………………………………...108 Chapter 2 Table 2.1. Chilean Military Firms and the Composition of Their Directories....125 Table 2.3. Powers of the Proposed Superior Council of Public Companies, 2005……………………………………………………………………………..138 Table 2.3.1. Party Strength in Chile, 1990–2014……………………………….148 Table 2.3.2. Lagos Corporate Governance Bill Quorum Vote Totals…...……..151 Chapter 3 Table 3.1. Ownership and Management of Argentine Military Firms…………189 Table 3.3. Powers of the Argentine Undersecretariat of Production for Defense, 1983……………………………………………………………………………..209 Table 3.3.1. Provisions of the General Savio State Corporation Draft Bill…….217 Table 3.3.2. Party Strength in Argentina, 1983–1989………………………….232 Chapter 4 Table 4.3. Military Enterprise Reforms Proposed Under the State Reform Act…………………………………………………………………………...….254 Table 4.3.1. Party Strength in the Argentine Senate, 1987–1997………………257 xii Table 4.3.2. Party Strength in the Argentine Chamber