EU’s Security - Industrial Complex12.09.2018
This text has previously been published in Finnish in the paper edition of Kaleva www.kaleva.fi on the 13th of August 2018.
EU’s military strength is more than a matter of defense budgets. This was stated by Risto Murto of Varma in his article in Kaleva 27th of July. Especially Murto highlighted the need for a military-industrial complex, if EU wants to be a peer military might with the US. However, Murto didn’t spell out why such a complex would be needed to create strength.
One could think that a local industry enables larger investment, as the money spent doesn’t directly drain outside of the local economy. On the other hand, if the similar argument was made about bananas, we’d be sure to remember the principle of comparative advantage.
Additionally, Murto writes about the share of public investments going to the defense sector. According to him, in the US the share of military research spending of the total public research investments is 60%. Where as in the EU, the share is only 5-10%. As military applications of technology are often secret and other innovations are protected by IPR, this can be seen as an area, where a local military-industrial complex in fact does produce military strength. An innovation unknown to the enemy can potentially increase military capabilities significantly. Good examples include steel and radar, as well as the extreme example of nuclear weapons.
The article closes on a thought that the emergence of a military-industrial complex in the EU is very unlikely, because Europeans are considered unwilling to make it happen. Two reasons can be identified behind the unwillingness. First, the article also discusses the fractured nature of the EU. States find it hard to come to an agreement on, for example, joint equipment purchases or mergers of companies within the industry. I believe this to be true, for it is unlikely that a comparable complex would’ve emerged in the US, if the federal government wouldn’t have been able to engage in pork-barreling over the states. For example, it has been presented that the F-35 program couldn’t be stopped due to employment effects even if it would be considered a failure. The second reason is the ethos of the citizens. A large portion of Europeans won’t find investments into defense desirable even in the current prevalent security status. The effect is most profound with Germany as the economic powerhouse of the EU, which might still carry historical reasons.
If EU and Germany would however want to develop their military-industrial complex, the recent changes in how wars are fought open up better possibilities than before. While a moment ago, the holistic security paradigm meant mainly channeling military expenditures to other causes, now, an increasing amount of threats and cures for them are simultaneously applicable in both civilian and military contexts. Good examples include police and border guard equipment, cyber and information environment protection and security and electronic surveillance and positioning solutions.
The need of governments to enhance security and citizens’ reluctance to traditional arms procurement could possible be mended by investing in the creation of a security-industrial complex somewhat akin to the military-industrial one. This would mean an increase in public investment to products of local companies such as described above and especially to the development of these products.
To be distinct from the current innovation policy the new model should put front and center the user organizations of the EU member states – in essence the security authorities. EU and Finland could learn from the US DARPA organization and require the extensive use of a culture of experimentation instead of application processes. The activities should, in contrast to DARPA, include user organization besides the ministry of defense. In addition, public procurement and innovation subsidies of larger companies could be directed to support the same viewpoint. Especially effective and growth inducing results would be achieved by directing the investments towards start-up companies’ products, either directly or by encouraging the existing established security sector companies to include smaller ones in their deliveries.
For purposes of the generation of the complex, most fruitful would be, if the start-ups, that have gotten their operations started by the co-operation, would be acquired by EU defense sector companies. New business and innovations would be created simultaneously as the competitiveness of the acquirers would improve by increased scale and ability to differentiate. Even though this wouldn’t realize the synergies between competing companies, the speed up in innovation leading to the differentiation in offerings, would be a more natural way to open EU level joint procurement than traditional horse-trading negotiations. The road is long, but a security-industrial complex can not be built in a day.
Member of the Board
Goodmill Systems Ltd.