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 12: The political economy of international collaboration: an overview of benefits and costs

Keith Hartley

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

Extract

Both military and civil aerospace equipment is costly, their costs are rising and these trends affect all nations. For example, the unit cost of combat aircraft has grown at an exponential rate with time; typically by a factor of four every ten years. Similar trends but at different rates apply to commercial airliners, bomber aircraft, helicopters, ships and tanks (for ships and tanks the cost growth has been at a rate of two every ten years; Augustine, 1987, p140). For military aerospace equipment, the historical cost trend arises from technical progress for each new generation of equipment with nations seeking to acquire the latest high technology defence equipment to maintain their superiority in the technical arms race. Technical progress in commercial airliners reflects similar competitive pressures between airlines searching for aircraft which are faster, with greater range and seating capacity and lower operating costs (see Chapters 4, 6 and 7). Costly equipment and continued rising unit costs provide the economic context for international collaboration in aerospace programmes. The cost incentives to collaborate with other nations result from large ‘fixed’ development costs and high unit production costs where small national orders for costly equipment are unaffordable. On this basis, international collaboration for the development and manufacture of costly military and civil aerospace equipment appears economically attractive; but appearances can be deceptive. This chapter reviews experience with such programmes and the economic case for collaboration.

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