The Indian Economy Blog

December 13, 2006

The Dollar Auction Continues

Filed under: Business — Atanu Dey @ 10:48 am

It should come as no surprise that the US is selling arms to Pakistan.

“2,769 Radio Frequency TOW 2A missiles, 415 RF bunker buster missiles, fly-to-buy missiles in both these categories, 121 TOW launchers for wire-guided and wireless missiles, E-2C HAWKEYE 2000 Airborne Early Warning Systems, simulators and support equipment. Their total worth could be up to $1.04 Billion.”

According Daryl Kimball, executive director of the Arms Control Association, “The latest geo-strategic rationale for many US (arms) sales is the so-called war on terror…. US officials claim that the recent sale to Pakistan of F-16 jets with air-to-air missiles will help in the fight against Al Qaeda. In reality, they are for fighting India and they create a market for selling similar US fighters to India.” [Emphasis mine.]

Of the many causes of third world poverty (and India accounts for a pretty large share of the third world), the buying of arms from the so-called first world must be a major cause. Yes, the US is the largest seller of weapons of mass destruction — it not only develops the weapons of mass destruction, but it also sells them around the world. The US has to keep selling these WMD so as to keeps its WMD factories humming.

But the US could not sell these weapons unless the leaders of the third world impoverished countries did not want to buy these for self aggrandizement. You need drug dealers and drug addicts. If there were no addicts, there wouldn’t be any profit in dealing. Or to put it another way, if there were no bidders, the auctioneer would be jobless. The dollar auction continues.

India’s development and the trade in WMD is clearly related, and I have pondered the issue before. From “Benefits of Weapons Trade“:

Take, for instance, trade in weapons of mass destruction. Is it welfare enhancing? The seller of these weapons clearly profits from the trade. What about the buyer? Does it really promote the security of the buyer? These questions bear investigation. While the answers may all be very trivially obvious for some, it is not at all clear to me. Though the perception may be widely shared that buying weapons is good use of scarce resources, it could also be wildly incorrect.

The reluctance of the US when it comes to selling arms to developing countries is like Sam’s reluctance to let his gullible friends paint the fence for him. When he finally relents, the friends are happy and suitably grateful to him for his magnanimity. Only in few trades are all the gains one-sided but trade such as these are exemplars of that set.

From the “Care and Feeding of the Permanent Arms Industry“:

The care and feeding of the monstrous permanent arms industry requires perpetual armed conflict. Like sheep to the slaughter, the third world countries eagerly line up for the treat of killing their neighbors while impoverishing themselves even further. A dispassionate observer could easily conclude that these poor over-populated third-rate countries deserve their demolition and wash his hands of the whole sorry mess.

And from “Part 2 of the Care and Feeding“:

Before I am taken to task by someone for stating the above, let me hasten to add that there is no law in the universe which prohibits a country from profiting from the stupidity of other countries. That India and Pakistan are abjectly poor overpopulated underdeveloped nations constantly at each others’ throat willing to further impoverish themselves by buying impossibly expensive weapons from abroad is not the US’s fault. The US merely supplies the arms, it does not directly go and starve millions of people of third world countries. The actual starving of untold millions of abjectly poor people in third rate world countries is because of the warmongering ignorant policy makers that populate these countries.

To round it all off, here are my views on the True Weapons of Mass Destruction:

The rich sell arms to the poor and the poor pay for it through the blood, sweat, and tears of its starving millions. To be sure, it is not the starving millions who are interested in fighting the poor of the neighboring countries. These millions of poor unfortunates are merely the slave labor that supply through their toil goods that the rich buy in exchange for the arms they ship to the armies of the poor nations.

It is interesting to ask who exactly wants war. Speaking personally, I am against aggression and don’t wish to be the victim nor the perpetrator of aggression. I also believe that the vast majority of people would happily live and let live. So how does it happen that nations arm themselves to their teeth and more often than not beggar their neighbors and themselves in doing so?

I believe it is so because nations are not monolithic entities. People have different stations in a country. The generals who wage wars and the politicians who direct the ship of state do not have to pay for the wars themselves. The poor have to die on the battle fields and those who are not paid to die, starve on the streets so that their meagre production can be shipped out to pay for the weapons of mass destruction that the leaders of the nation buy for their own amusement.

It is all karma, neh?


  1. As a regular reader of your blog, I know that the issue of (American) arms sales to developing countries (Pakistan and India) is close to your heart. Looking only at the effect of the actions, your conclusions are logical and reasonable.

    What I think your analysis should also consider is the centrality of the security dilemma and the fundamental nature of international relations. Realists like Hans Morgenthau, Kenneth Waltz and Mearshiemer will argue that conflict is inevitable in international relations. That’s what our own Vishnugupta aka Kautilya said two thousand years before Morgenthau. Realism does not present an optimistic view of the world, yet, offers the most accurate account of the affairs between states.

    What this means is that it’s not America’s fault. If the Americans did not, the Russians will. If not the Russians, then the Israelis, Chinese etc. That’s how the North Korean missiles ended up in Pakistan. That’s how Pakistani nukes ended up in nasty places. Btw, Pakistan is becoming an exporter of conventional arms now (they had a very successful convention called IDEAS 2006 in Karachi recently). I don’t have numbers, but in terms of lethality (as opposed to high-tech) I would not be surprised if such things as landmines, AK-47s etc are claiming more lives than F-16s and bunker busters at the hands of developing countries.

    States, therefore, have reasons to go to war. Your argument is that American foreign policy (through the sale of arms) is impoverishing the developing world. But American foreign policy too is driven by calculations of its own legitimate geopolitical interests. The sale of weapons becomes necessary in the pursuit of those interests. If I’m an American, I would care more for my own national interest rather than the well-being of some third world country. This does not, however, mean that all American foreign policies positions are well designed (there is no insurance against errors of judgement or plain old stupidity). One consequence of America’s pursuit of its own interest is an unfortunate arms race somewhere else in the world. But in all likelihood, that arms race would have occured even if America didn’t export the stuff.

    While generals and politicians generally are the actors who ‘start’ wars, I’m not so sure that ordinary Joes don’t believe it is necessary. It really depends on the nature of the war—if it’s a defensive war (eg in Kargil 1999-2000) you’ll find strong public opinion in favour of war. Wars of choice are a different matter.

    While on this topic, please see my recent post on the future of war.

    Comment by Nitin — December 13, 2006 @ 2:33 pm

  2. The weapons Pakistan is buying from the U.S. are probably being paid for by the U.S.

    The U.S. hands out coupons to friendly countries that are only redeemable through U.S. arms manufacturers.

    This program is known as Foreign Military Financing and is funded as part of the Foreign Aid budget.

    Here’s an overview of the 2004 U.S. Foreign Aid in the dreadful PDF format that has lots of tasty numbers and charts. Looks like Pakistan got about $400 million worth of death coupons that year:

    Comment by alphie — December 13, 2006 @ 3:32 pm

  3. About your deep philosophical question about who wants war:
    Most human beings are aggressive by nature. Some people are more aggressive than others and when these people are there in plenty in one nation, that nation goes to war more often than other nations. The Swiss don’t want war…but the Americans thrive on it.
    Usually it’s those nations who believe that their way of life is the best and the others have to follow it (a form of aggression) who go to war. Look what the US did to the American Indians. Their identity was annhilated. Now the Americans want Afghanistan to follow the American way of life. The way things are going in Afghanistan now, true democracy seems a pipe dream. It is believed that the Taliban (with full suppport from Pakistan) is planning an attack early next year.
    Indians are not aggressive by nature and defend well, but don’t attack. Unfortunately our neighbours do not have similar ideas and are going to keep us very busy for a long time to come.
    I think that the US wanted to supply the arms to Pakistan because they are terrified that Pakistan is cementing a relationship with China. One of the reasons why the US gave India the nuclear deal was because they want India to be a powerful country to offset the power of China. The US today wants to make sure that China remains in control…and for this they play games with both India and Pakistan.

    Comment by Nita Jatar Kulkarni — December 13, 2006 @ 6:14 pm

  4. Hi Atanu,

    Great post!

    But like Nitin in the comments above, I’m not sure if its just “the warmongering ignorant policy makers” who are responsible for war. Let’s take India and Pakistan, for instance. I’ve heard politicians make this statement, (Murli Manohar Joshi comes to mind) “We’ll blast them out of existence” — and people cheer! One could argue that politicians create sentiments like these by their very expressions but I would argue that the reason politicians say these things is because they work — people respond to them!! Plus statements like these are so common in conversation that I’ve lost count of times I’ve heard them from my friends.

    I also don’t know about most people in the world being able to live and let live. If that was so, wouldn’t we have solved most problems in the world by now? The Israel-Palestine thing would be over tomorrow if they all realized that they had to live and let live. So would our India-Pakistan problems. But it doesn’t work that way, somehow.

    Why? It is a pet theory of mine — a little fatalistic, to be sure — that any good thing is built on blood and guts. Secularism, as a concept, arose in Europe, because of all the blood that was spilled there over religion (and there was quite a lot of it). The European Union is a patent result of Western Europe’s very real aversion to another (world ) war. I don’t mean to say that Europeans actually think these things when they they think about war but that the memory of slaughter lives on as a cultural memory. The people of India and Pakistan don’t have a cultural memory of war and destruction, which means they respond jubiliantly to politicians making statements about blasting a country out of existence, which in turn makes politicians go on and on in the same vein. I don’t really have a solution and by no means do I want a war to erupt tomorrow between us and our neighbors — we have enough on our hands without adding war to it. But somehow, I think, peace won’t be posisble without having a real cultural memory of destruction. And frankly, I don’t like this thought very much myself.

    Comment by shreeharsh — December 13, 2006 @ 7:40 pm

  5. US is also paying a very heavy price for its defence expenditure
    and the arms industry lobbies covertly for maintaining the staus quo.
    Remember President Eisenhower’s warming about “millitary-industrial
    complex” ; US govt deficts, trade defict and national debt is
    in trillions. US fiscal health is none too healthy. Inflation
    and recession are lurking..

    As long as US dollar remains the reserve currency of the world,
    as long as the Asian Central Banks (esp China) retain their
    dollar holdings with US treasury bonds, etc, US dollar will hold.
    If and when if the central banks and others loose faith and sell
    their dollar assets, that will be the end of US dollar and its
    economy. USD will drop like a rock. No one is sure of the future.

    Lord Keynes warned “..there is no surer way of undermining a
    nation’s character than by undermining her currency..”

    We are a living example for this.

    Comment by Athiyaman.K.R — December 13, 2006 @ 8:32 pm

  6. Even if one ignores conquests and subjugation for over 1000 years of our land with destruction of culture and way of life of generations with independence, to live like normal people, attained just 60 years ago, it is a false choice that poor nations don’t need armies and security apparatus.

    Even if an un-corrupted India lived in a quite neighbourhood of post-WWII and post-cold war Europe with no threats from west or east (and with a powerful ally watching over), how much money would you want to tax and transfer to poor people? European nations with 1% of GDP spending on armed forces still have problems with poverty and economic growth just like nations spending 4-5% of GDP.

    And how nations have the war mongering generals and pockets of society attacked, and land and resources taken over?

    The comparison of poverty with national security is always false choice because reducing one doesn’t solve the other. It is especially true for our country.

    Comment by Chandra — December 14, 2006 @ 2:18 am

  7. The US has to dole out those arms to Pakistan, to keep its dictator pacifying its people and saying that US is doing good things to Pakistan. In effect, US had made Pakistant to do a U-turn on Afganistan and made Pakistan to reluctantly go after its own creation. For doing these puppy activities, the master has to sometimes throw bones and the puppy beleives that the master is too generous.

    Without those arms deal, Musharaff cant be the dictator for Pakistan (we would get a much worser devil from their anti-human parties) and US cannot move closer to India, while demanding Pakistan to go after Taliban.

    Comment by Balaji Viswanathan — December 14, 2006 @ 3:22 am

  8. Nita,

    The point you make about human nature forms the basis of one school of Realism. Perhaps not aggression per se, but the desire to dominate over others is in the order of things.

    (some nation go)to war more often than other nations. The Swiss don’t want war…but the Americans thrive on it.
    Usually it’s those nations who believe that their way of life is the best and the others have to follow it (a form of aggression) who go to war. Look what the US did to the American Indians. Their identity was annhilated.

    We need to distinguish between war and aggressiveness/belligerance/hegemonistic desires. Some states are more likely to initiate wars, but most are likely to fight them. (No state simply surrenders). The Swiss are in a situation—not entirely created by themselves—where they can avoid having to go to war. But they too do not take chances. The Swiss Army is not only a pocket knife.

    Comment by Nitin — December 14, 2006 @ 11:43 am

  9. well the recent indo-usa nuke deal highlights all your points..
    seriously can someone tell me what is the use of war and politics??
    and looking at things i get a feeling that our country is getting sold to usa..and what do we do when an american calls us bloddy indians??
    or a cricket coach makes comments on leaders??
    a good pt by the speaker of the lok sabha pointed out that our leaders need to set examples..
    and by far the only leader who i can see is setting good examples is our laluji(im serious)..
    talking of poor..they put thier hearts and souls into their work for what to destroy what they have created??
    we are landing with more questions than answers..
    the guys who run the govt dont care what happens they want misslies and cars and planes and tanks and so much who cares we get this for five yrs is their attitude..and of course the strikes..
    now everything is gone nuke..throwing bombs at each other is the latest idea atleast it is faster..
    one serious question which i would like to have an answer for for what did usa attack iraq and afghanisthan for??fighting war on terror or creating war on terror??
    tell them to try this against iran or north korea.
    we need to weapons atleast to stop them from bombing us..
    and yes dharma is lost in between..
    but only when evil things increase the unknown power manifests itself to save the good.(bhagavat gita)
    thus let time take us where it has to take us.

    Comment by vishesh — December 14, 2006 @ 5:34 pm

  10. the buying of arms from the so-called first world must be a major cause.

    Actually, it’s a miniscule cause – though it hits the emotional red button marvellously – as the above post proves. Your surely deliberate mislabelling of fighter jets as “weapons of mass destruction” (WMDs) is a symptom of this. What about agricultural trade? Agricultural trade barriers in both the developed and developing worlds cause vastly more human suffering than the weapons trade. Why is it that India is a net exporter of food, yet Indians still starve? Isn’t your government – and government in general – the problem?

    The US has to keep selling these WMD so as to keeps its WMD factories humming.

    Absolute rubbish. If the third world stopped buying American weapons, I can assure you that the American military-industrial complex would continue on more-or-less unabated. American weapons manufacturers’ sales to the American military outnumber foreign sales several times over. Commercial profit is the vastly junior motivating factor for the Americans in deals such as the one you mentioned regarding F-16 sales to Pakistan. The true profit is measured in political capital – it’s all about cementing alliances and quid-pro-quo. Pakistan supports the US agenda, so it has access to high-tech US military hardware. Ditto India.

    Russia, on the other hand (and most ironically), is far less discriminatory in regards to who it will sell its weapons to. In the heartland of the former Soviet Union, the profit motive reigns supreme when it comes to exporting weaponry.

    Of course you won’t notice this, and once again, knee-jerk anti-Americanism reigns supreme.

    Comment by James Waterton — December 14, 2006 @ 7:57 pm

  11. Nitin,

    I am a realist enough to admit that “conflict is in evitable in international relations.” The US plays a significant role in international relations but it is not alone among the rich industrialized nations profiting from conflict. Yes, if the US did not, other advanced countries would – and indeed, do – supply the weapons that the less developed countries use to basically slaughter each other.

    I believe that the US is at the leading edge of weapons development and thus sets the standards for the state of the art for killing humans. True, guns don’t kill people, people kill people. However, how efficiently the killing is effected depends on how efficient the US has been in developing the weapons of mass destruction. Let’s do keep in mind that the true WMD are not nuclear-tipped ICBMs but more of the conventional weapons that kill far more over regular use. Besides, fighter planes kill a lot more – not directly of course but indirectly. Here is how.

    Each generation of fighter planes that the US produces makes the previous generations available for sale to the impoverished third world countries. But even though no longer useful to the US, they are sold in lots that costs billions of dollars. To pay for these expensive toys, millions of third world people have to starve. Sure, the US does not directly starve them. There is a lot of indirection. Imagine if these were not available for sale to the poor countries. They would not have to pay for them through the hunger, blood, and sweat of the millions of poor.

    All poor nations cannot afford the best of the obsolete technology. So, for example, the US gifts Pakistan the weapons. Then India is forced to buy just to maintain parity. Thus they sell one to India for every one the US gifts to Pakistan. All fair and square. The US is the “Lord of War.” (See that movie even though that insufferable actor has the lead role.)

    Now, I realize of course that Americans are not evil incarnate because of which they sell arms to others. Any nation with capabilities similar to the Americans would do precisely as the Americans are doing. It is part of the basic human nature—and nature as we all well know is red in tooth and claw. If Indians had a chance to enrich themselves by selling weapons of mass destruction, they too would do it merrily.


    You write that “…it is a false choice that poor nations don’t need armies and security apparatus.” I don’t say that the poor don’t need security. What I am saying is that it is silly to spend billions of dollars in making a billion impoverished people secure against another few hundred million equally impoverished people. If the US were not supply a few billion dollars worth of arms to both sides of a conflict, the conflict would be much less costly in terms of dollars. The US is the auctioneer in the dollar auction where the players are India and Pakistan. Enough said.

    James Waterton accuses me of “knee-jerk anti-Americanism.” Although superficially my post can be read as anti-American, I would argue otherwise. I am not anti-American and certainly not knee-jerk anti-American. I leave that to the communists in India. What I am against is the supplying of arms to third world countries. One can be pro-America without being blindly jingoistic and support every aspect of American foreign policy. Indeed, it is out of my sincere love for America that I most seriously criticize the US for the evil that its warmongering leaders unleash upon the world.

    I consider myself a half-American, having lived nearly half my life in the US (and more than half of my adult life.) Both India and the US have my loyalty. See my post “What the world owes the US” for a brief elaboration of this point.


    Comment by Atanu Dey — December 17, 2006 @ 5:02 pm

  12. Atanu

    You have not answered James fully. Indeed your choice of terminology seems to be taken from the rhetorical manual of CPI(M). Consider this: If we were not bullheaded enough to starve our own millions by sheer stupidity of econmic planning, how much role would this arms race play in this alleged impoverishment? Ever thought about it from that angle? You probably have not and as James has already argued, it is a miniscule role already being played. Arms spending is a tiny fraction of te budget of even a arms-buying-maniac like India.
    And Atanu “war-mongering leaders” is really a pathetic one-dimensional term. You do your own intellect severe disservice by using these leftist monikers which have little, if any relation to reality. Little have you cared to find out just who pushed the so-called “neo con warmongers” to iraq. Heard of Vali Nasr? Fouad Ajami? and other Shia’a apologists? As I said you do your awesome intellect a severe disservice by repeating stupid monikers.

    Good day

    Comment by Tushar Saxena — December 17, 2006 @ 11:30 pm

  13. Atanu – Sorry, but the presumptions and flawed analysis in your original post stink of knee-jerk anti-Americanism to me.

    In response to your comment, the sentiment that Third World nations should be forbidden from buying foreign weapons is an extremely paternalistic one. Why do you wish to enfeeble Third World nations? Why do you think you have the right to remove the responsibility of citizens of Third World nations to regulate their governments’ military spending via the ballot box or the street?

    Your argument that fighter planes are WMDs because they “indirectly” cause the death of millions since the money spent on these weapons could be spent more effectively elsewhere is weak at best. You’d rather the government spent that money on some social programme that’d probably be set up to benefit the government’s cronies anyway? Using your logic, I see no reason why one couldn’t describe Indian fertiliser as a “WMD” because of all the indirect deaths the fertiliser subsidy causes due this most egregious example of useless government expenditure.

    In your response above, you again contend that American weapons sales are all about dollar profits, and how myopic such a stance is. As I pointed out earlier, commercial profit is not the primary factor in foreign sales of American weapons. If it was, China and North Korea would own new American weapons. And I think your analysis of US arms sales to India and Pakistan – that the Americans are deliberately creating an arms race to make more money – is very simplistic. Have you ever considered that it serves American geostrategic interests nicely when the balance of power between the subcontinental states doesn’t disproportionately favour India?

    Comment by James Waterton — December 18, 2006 @ 1:51 pm

RSS feed for comments on this post. TrackBack URL

Leave a comment

Powered by WP Hashcash

Powered by WordPress