The story begins..

Said arms deals, like all the best scams, take place not in shady car parks at midnight with manilla envelopes, but in full plain sight of the nation. they tie in torture, women’s repression, oil, moolah, UK servicemen’s lives and a lot of tax money – flowing OUT of the coffers.

From an economic point of view, it’s all supposed to be about exports – selling goods and services to foreigners. They’re what build wealth in the long term, not shuttling money round and round this little island. Think about it like this: if I paint a picture and flog it to a mate, perhaps in exchange for a CD, that’s one thing. But we’re really just swapping stuff. On the other hand, if a stranger wants the painting I can take the cash and use it to buy some more paint cheap to do another painting etc. This is because of things like comparative advantage that you can read about later.

The point is that governments are (perhaps rightly) obsessed with having a ‘trade surplus’ – from the perspective of the Bank of England, our real national ‘profit’ each year is simply what we earn in exports minus what we spend on importing stuff. All those pounds shuffled about inside the UK each year don’t really matter.

The Export Credits Guarantee Department (ECGD) exists to promote British industry’s exports. If a UK company does a certain deal with an overseas company or government, and the foreigners feel like not paying, the UK taxpayer picks up the tab. The idea behind the system is to promote our export sales to other contries by making it less risky to do business with dodgy clients.

Setting aside for a moment the fact that government subsidies to exports (which these amount to) are illegal under international trade laws, and give our economic competitors a big shitty stick to beat us with in trade negotiations at the EU, WTO and G20, the logic behind taxpayer funding of the ECGD unravels as soon as you look at it. which is presumably why they gave it such a boring name (since ‘The Bribing Foreigners With Public Cash Department’ is a bit nearer the mark but less politically acceptable).

For starters, the arms industry has sucked in 30-60% of the ECGD’s funding over the last few decades, even though arms account for less than 4% of all our exports. Eh? So the other 96% of our exports (tractors, pharmaceuticals, Amy Winehouse) sell themselves just fine? Hmm… And exactly just who would need the services of the ECGD, should they be unable to pay for a brand-new tank, assault helicopter or aerial spy drone? Unstable dictatorships? Repressive regimes? You guessed it.

Secondly, the economic logic behind supporting the arms industry is a bit flawed. Jobs created in these contracts are already subsidised by us to the tune of £10,000 minimum each job, each year. And the profits these companies make (£16,000,000,000 operating profit for BAE in 2008 alone) *don’t* end up in the taxman’s coffers, but safely overseas in shareholders’ and managers’ tax havens. That new school round the corner? That new bridge? That MRI scanner? And yes, that soldier’s flak jacket? All were paid for by taxes collected on wages of call-centre workers, teachers, builders etc.

Of course, the minister signing off the deal usually gets a say on where those subsidised jobs go. You won’t be suprised to realise that they typically end up in a hotly-contested constituency. If you’re thinking of a comparison with the 18th-century ‘Pocket Borough’ episode of Blackadder, where he buys a parliament seat, well, so am I.

Along the way, some of you might have moral or ethical problems with selling weapons abroad to places like: Saudi Arabia, one of the most repressive regimes in the world, especially to women; or Sri Lanka, who have just concluded a decade-long internal war against the Tamil ethinic minority through the simple tactic of shelling their refugee camps; Indonesia, whose General Suharto decided (in the name of internal order) to wipe out a bigger proportion of his own subjects than either Hitler, Mao or Stalin; or the Sudan, whose own internal persecutions hit the headlines every spring when refugees spill over into drought-struck and war-torn Somalia, precipitating famine. So you can also blame the ECGD for Bono.

But, lastly, the military / strategic arguments against these sales are compelling. The point behind advanced military technology is that it gives you an advantage. Ideally, it should render all previous weapons obsolete, giving you and your allies a decisive advantage / deterrent. So it’s distinctly odd that we should be selling weapons at all to the list of nasties listed above.