The Political Economy of Aerospace Industries

The Political Economy of Aerospace Industries

A Key Driver of Growth and International Competitiveness?

Keith Hartley

The Political Economy of Aerospace Industries will appeal to undergraduate and graduate students in industrial and defence economics, public choice and policy courses. It will also be of interest to researchers, policy-makers and those involved in the industry in various different capacities.

Chapter 11: Buying military aircraft

Keith Hartley

Subjects: economics and finance, industrial economics, political economy, public choice theory, politics and public policy, political economy, public choice

Extract

National Departments of Defence are major buyers of military aircraft and other aerospace equipment and sometimes the only buyer. They buy a variety of equipment ranging from such simple items as paper clips, batteries, food and vehicles to complex aerospace products such as combat aircraft, helicopters, military airlifters, missiles and space systems. There is also spending on R & D for new aerospace equipment projects together with expenditure on equipment support. For combat aircraft and maritime patrol aircraft, equipment acquisition can account for some 60 per cent of life-cycle costs with support costs accounting for some 40 per cent of the total (e.g. Typhoon; Nimrod MRA4: NAO, 2011a; 2011b). National aerospace industries are usually major recipients of their national Department of Defence spending, involving contracts with small numbers of major prime contractors and large numbers of firms in supply chains. When purchasing aerospace equipment, Defence Departments can choose to buy from their national aerospace industry, or they might import equipment, or they might be involved in international collaborative programmes. Inevitably, large-scale spending, especially on a single project (e.g. F-35 aircraft) by a single government department creates controversy. There are pressures to buy from the domestic aerospace industry rather than purchase foreign equipment and to support jobs by buying from firms in areas of high unemployment. Critics focus on project management by the Defence Department and on the performance of aerospace contractors. They criticise inadequate monitoring of projects, leading to cost escalation, delays, unsatisfactory equipment performance and cancellations.

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