Workers assemble Browning-Inglis Hi-Power pistols at the John Inglis munitions plant, Canada, April 1944
The arms industry, also known as the defense industry or the arms trade, is a global industry responsible for the manufacturing and sales of weapons and military technology. It consists of a commercial industry involved in the research and development, engineering, production, and servicing of military material, equipment, and facilities. Arms-producing companies, also referred to as arms dealers, defence contractors, or as the military industry, produce arms for the armed forces of states and civilians. Departments of government also operate in the arms industry, buying and selling weapons, munitions and other military items. An arsenal is a place where arms and ammunition are made, maintained and repaired, stored, or issued, in any combination, whether privately or publicly owned. Products include guns, artillery, ammunition, missiles, military aircraft, military vehicles, ships, electronic systems, night vision devices, holographic weapon sights, laser rangefinders, laser sights, hand grenades, landmines and more. The arms industry also provides other logistical and operational support.
Stockholm International Peace Research Institute (SIPRI) estimated that 2012 military expenditures were roughly $1.8 trillion. This represents a relative decline from 1990 when military expenditures made up 4% of world GDP. Part of the money goes to the procurement of military hardware and services from the military industry. The combined arms sales of the top 100 largest arms-producing companies amounted to an estimated $395 billion in 2012 according to SIPRI. In 2004 over $30 billion were spent in the international arms trade (a figure that excludes domestic sales of arms). According to SIPRI, the volume of international transfers of major weapons in 2010–14 was 16 per cent higher than in 2005–2009. The five biggest exporters in 2010–2014 were the United States, Russia, China, Germany and France, and the five biggest importers were India, Saudi Arabia, China, the United Arab Emirates and Pakistan.
Many industrialized countries have a domestic arms-industry to supply their own military forces. Some countries also have a substantial legal or illegal domestic trade in weapons for use by its citizens, primarily for self-defence, hunting or sporting purposes. Illegal trade in small arms occurs in many countries and regions affected by political instability. The Small Arms Survey estimates that 875 million small arms circulate worldwide, produced by more than 1,000 companies from nearly 100 countries.
Contracts to supply a given country's military are awarded by governments, making arms contracts of substantial political importance. The link between politics and the arms trade can result in the development of what U.S. President Dwight D. Eisenhower described as a military-industrial complex, where the armed forces, commerce, and politics become closely linked, similarly to the European multilateral defence procurement. Various corporations, some publicly held, others private, bid for these contracts, which are often worth many billions of dollars. Sometimes, as with the contract for the international Joint Strike Fighter, a competitive tendering process takes place, with the decision made on the merits of the designs submitted by the companies involved. Other times, no bidding or competition takes place.
Painting shells in a shell filling factory during World War I
During the early modern period, France, United Kingdom, Netherlands and some states in Germany became self-sufficient in arms production, with diffusion and migration of skilled workers to more peripheral countries such as Portugal and Russia.
The modern arms industry emerged in the second half of the nineteenth century as a product of the creation and expansion of the first large military-industrial companies. As smaller countries (and even newly industrializing countries like Russia and Japan) could no longer produce cutting-edge military equipment with their indigenous resources and capacity, they increasingly began to contract the manufacture of military equipment, such as battleships, artillery pieces and rifles to foreign firms.
In 1854, the British government awarded a contract to the Elswick Ordnance Company of industrialist William Armstrong for the supply of his latest breech loading rifled artillery pieces. This galvanised the private sector into weapons production, with the surplus being increasingly exported to foreign countries. Armstrong became one of the first international arms dealers, selling his weapon systems to governments across the world from Brazil to Japan. In 1884, he opened a shipyard at Elswick to specialise in warship production—at the time, it was the only factory in the world that could build a battleship and arm it completely. The factory produced warships for many navies, including the Imperial Japanese Navy. Several Armstrong cruisers played an important role in defeating the Russian fleet at the Battle of Tsushima in 1905.
In the American Civil War in 1861 the north had a distinct advantage over the south as it relied on using the breech-loading rifle against the muskets of the south. This began the transition to industrially produced mechanised weapons such as the Gatling gun.
This industrial innovation in the defence industry was adopted by Prussia in 1866 & 1870-71 in its defeat of Austria and France respectively. By this time the machine gun had begun entering into the militaries. The first example of its effectiveness was in 1899 during the Boer War and in 1905 during the Russo-Japanese War. However, Germany were leaders in innovation of weapons and used this innovation nearly defeating the allies in World War I.
In 1885, France decided to capitalize on this increasingly lucrative form of trade and repealed its ban on weapon exports. The regulatory framework for the period up to the First World War was characterized by a laissez-faire policy that placed little obstruction in the way of weapons exports. Due to the carnage of World War I, arms traders began to be regarded with odium as "merchants of death" and were accused of having instigated and perpetuated the war in order to maximise their profits from arms sales. An inquiry into these allegations in Britain failed to find evidence to support them. However, the sea change in attitude about war more generally meant that governments began to control and regulate the trade themselves.
Stacks of shells in the shell filling factory at Chilwell during World War I.
The volume of the arms trade greatly increased during the 20th century, and it began to be used as a political tool, especially during the Cold War where the United States and the USSR supplied weapons to their proxies across the world, particularly third world countries (see Nixon Doctrine).