The Economic Benefits of Defence Manufacturing

There are economic advantages in making defence equipment, rather than buying it:

A defence manufacturing industry also creates the opportunity to export equipment and services to other countries.  This has advantages:

  • The exports are helpful to the economy (
  • The exports increase the total volume of manufacturing, giving it economies of scale and thereby reducing the cost per item (3.3.2), so it becomes cheaper for the exporting governments to equip their own armed forces.

The economic attractions of making, rather than buying, defence equipment have led to one of the remaining elements of protectionism within the EU – as when Angela Merkel prevented BAE Systems from merging with EADS in October 2012, reported in an Economist leader, A European mega-merger? Nein, danke.



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