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CSR and the Arms Trade

MONTHLY FEATURE October 2007

CSR and the Death Trade

By

Michael Hopkins
Director, MHC International Ltd.

Abstract: Can CSR contribute to reducing the spiraling Military Industrial Complex - Michael Hopkins thinks it can.

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CSR and the Death Trade

"I firmly believe that Corporate Responsibility is part of the everyday management of a responsible business and I expect all our employees to make it an integral part of all that they do." Mike Turner, CEO , BAE Systems, http://www.baesystems.com/CorporateResponsibility/

The Problem

The military-industrial-complex (MIC) dominates the main democracies' social, economic and environmental policies. The late Kenneth Galbraith wrote that 'Defence and weapons development are motivating forces in foreign policy. For some years, there has also been recognised corporate control of the Treasury. And of environmental policy'. President Eisenhower warned of the MIC when, bravely, in his farewell address to a national television and radio audience in January 1961 he said: "This conjunction of an immense military establishment and a large arms industry is new in the American experience," He recognized that this development was essential to the defense of the nation, but he warned that "we must not fail to comprehend its grave implications. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes."

Anthony Sampson's famous book, The Arms Bazaar (Bantam Books, New York, 1978) detailed the history of international arms merchants. Beginning with founders like Nobel and Krupp, Sampson worked forward through the postwar MIC to our contemporaries who have turned Lebanon (and now Bosnia) into arms marts, and weapons laboratories. Along the way, Sampson detailed the subterfuge, bribery, and power politics that inevitably shadow the arms trade. Sampson emphasized the difficulties of controlling this industry and noted that "the ordinary citizen is right to lump the arms trade in with the slave trade, and be appalled at both.'"

In my own book, CSR and International Development (Earthscan, London, 2006)', I argued that the more we can hold corporations responsible for their actions the less likely that large corporations like Halliburton, Bechtel or the Carlyle Group can benefit, and influence hugely, our political processes. Halliburton, which had US vice-President, Dick Cheney as one time CEO, built the Guantanamo prison compound for terrorism suspects and donated $709,000 to political campaigns between 1999 and 2002. Bechtel, considered the largest contractor in the world, donated $1.3 million to political campaigns between 1999 and 2002 and is the earlier employer of former Defense Secretary Caspar Weinberger, former Secretary of State George Schultz, and former CIA Director William Casey. The Carlyle Group had former UK Prime Minister John Major as Chairman of its European Group until 2004, and he continues to serve as a consultant on energy matters.

The problem is the vicious circle whereby increased arms sales lead to increased wealth for the producers and, consequently, political power, leading to a thirst for war. Would the wars in Vietnam, Iraq have escalated so rapidly in the absence of the arms industry? Almost certainly not!

Closely related is the penchant for any bureaucracy to feed upon itself. Promotion in the armed forces depends on strictly observing the internal rules and following the leader unquestionably. Clearly promotion is helped when an agency grows in size as invariably happens when war breaks out. Many believe it is not a coincidence that the war on terror was so aptly named. I do not believe in the conspiracy theory that 9/11 was aided and abetted by the military, although many in the military undoubtedly prospered because of it. Moreover, it is clear that the armed forces, and the companies that support them, are not reluctant to go to war and hence the need for close, and independent, democratic control. In the USA, the brain behind its foreign policy is the State Department, currently led by Condoleeza Rice. The brawn is in the Pentagon and relations have never been good between the two entities.

A reading any day of the main newspapers illustrates this conundrum. For instance, at the time of writing this article, the conflict between the US State Department and the Pentagon is illustrated by the current concern with Iran and Syria. According to The New York Times (NYT) of 10 October 2007, a sharp debate is under way in the Bush administration about the significance of the Israeli intelligence that led to the September 2007 Israeli strike inside Syria.

Vice President Dick Cheney says Israeli intelligence was credible, while Secretary of State Condoleezza Rice questions whether there was a real threat. The debate, according to the NYT has 'fractured along now-familiar fault lines, with Vice President Dick Cheney and conservative hawks in the administration portraying the Israeli intelligence as credible and arguing that it should cause the United States to reconsider its diplomatic overtures to Syria and North Korea. By contrast, Secretary of State Condoleezza Rice and her allies within the administration have said they do not believe that the intelligence presented so far merits any change in the American diplomatic approach.'

Not cheap either

None of the above comes on the cheap. Annually, around half the total US government discretionary expenditure was used for military purposes. Some sources believe that the overall expenditure of the misguided Iraq war will eventually end up at one trillion dollars ($US1000bn) - note the US contribution to the UN is only around $US3billion! What this means in foregone health care, educational services, not to say the reputation of the USA, is incalculable.

We know that war in Africa has just about eaten up all foreign assistance and a major factor behind the lack of development almost right across the continent - see BBC, October 11, Wars in Africa wipe out aid gains. Can we again blame the MIC? Or is it just a case of there is a demand and someone has to fill it?

A Congressional Study released in early October 2007 showed that the US is the leading arms supplier to the developing world with sales of $US10.3bn in 2006 followed by Russia ($US8.1bn), Britain ($US3.1bn). The largest buyers were Pakistan ($US5.1bn), India ($US3.5bn), Saudia Arabia ($US3.2bn) and Venezuela ($US3.1bn). One might ask why a socialist President in Venezuela with no major armed or guerrilla conflict in his country chooses to be so arms conscious? One might also ask why the arms that are sold continue to kill and maim long after their sell-buy date? Why can't landmines self-defuse after a period? Why does armour piercing munition have to include nuclear material with a half-life of thousands of years?

The trade is not cheap in reputation either. Tony Blair, former UK Prime Minister, fell into its trap shortly before leaving office. In December 2006, Blair announced that an investigation by the Serious Fraud Office (SFO) into the circumstances of the major al-Yamamah arms deal agreed by the leading aerospace company British Aerospace (BAe) with Saudi Arabia in 1996 - which had long been surrounded by allegations of bribery - was being "discontinued". It was, he said, a tough decision, but one he had to take in the "national interest". The cancellation was designed to protect a subsequent, £10 billion agreement secured by BAe with Saudi Arabia for seventy-two Eurofighter jets. The Saudis had, it appeared, threatened to withdraw from the deal because of the SFO investigation.

The evolving, entangled story goes way beyond Britain, as Chris Floyd wrote: "Slush funds, oil sheiks, prostitutes, Swiss banks, kickbacks, blackmail, bagmen, arms deals, war plans, climbdowns, big lies and Dick Cheney - it's a scandal that has it all, corruption and cowardice at the highest levels" (see "War profits trump the rule of law", Baltimore Sun, 22 December 2006).

One may ask why is it that the arms trade has become so important to countries such as the UK which, otherwise, portray themselves as paragons of virtue in a corrupt world? Could not the UK live without the arms trade and develop alternative uses for its cutting edge scientific expertise - global warming for instance?

But is the Defence Industry capable of CSR?

There are some promising signs. For instance, the 2006 Corporate Responsibility Report of BAE Systems, part, as they state "..of the everyday management of a responsible business". Or is it a cynical strategy to gloss over the very unpleasant aspects of their trade? Certainly BAEs 2006 report is a very professionally produced document that covers all the issues that a CSR report might be expected to contain.

But, following Charlton Heston, President of the National Rifle Association at the time of Michael Moore's brilliant documentary 'Bowling for Columbine', BAE seems to have a similar position to Heston who believes it is people that kill people not guns! BAE states in its CR report that 'Human nature creates conflict, not the defence industry.' There is not much doubt that the easy availability of guns in the USA leads to more injuries and deaths than in countries where arms are better controlled - fifty people were killed in 2005-06 by guns in the UK, compared with the US figure for 2004 of 10,654 i.e. 200 times as many in a population only five times a large!. A similar conjecture applied to the arms trade would mean no arms less conflict!

Which brings us to another point. Given human vices - smoking is another area - should companies that cater to them, and make good profits, be banned? Or should we accept such industries and work with them at least to be as socially responsible as possible? MHCi takes the latter stance, while being aware that a company is certainly not homogeneous i.e. the CR people in a company might just be accused of whitewashing while the real work gets done by the real believers. BAE write 'We are proud to be part of the defence industry and see our role as providing national security and protection for sovereign governments while delivering to our investors. We recognise the serious nature of our business and know that we must operate at the highest level of responsibility."

Perhaps BAE has given the lead in its CR report and we should look carefully at their promise: "Looking ahead to 2007, the Company is committed to a more proactive approach to CR through the alignment of the CR agenda with the company strategy."

And maybe not all is gloom and doom as a recent report from the USA shows - Gov. Arnold Schwarzenegger has signed a law that will require new semi-automatic handguns sold in the state to be equipped, starting in 2010, with microstamping technology, which imprints identifying markers on bullets as a weapon fires. With this technology, police can match bullet casings found at a crime scene to the gun that shot them. The potential benefit for crime-solving is enormous. In signing it, Mr. Schwarzenegger bucked not just his own party, but also the National Rifle Association which, true to form, waged an intense lobbying campaign urging a veto!

Regarding the al-Yamamah arms deal, referred to above, BAE take the issue head on. They wriggle 'What was BAE Systems view on the decision to cease the SFO enquiry into Saudi? We believe a timely conclusion to the investigation was required. It is not reasonable or just that such investigations and associated allegations which are unsupported by evidence, should continue indefinitely.'

Is there a Solution?

"Despite the snigger factor of 'green bullets', there is no reason why BAE Systems should be treated differently from any other large manufacturing company whose products have an environmental impact." Rob Lake, Socially Responsible Investment Analyst (BAE Corporate Responsibility Report, 2006).

Money brings with it power, power corrupts and absolute power corrupts absolutely. Could the application of CSR break this stranglehold? CSR has been brought to prominence as much because of actions by NGOs as by the need for corporations to show that profits can be made responsibly. But when it comes to the arms trade, mainstream criticism has been muted. Certainly if CSR had been as prominent in the USA before the preparation of the wars in Vietnam and Iraq the wars would have been less likely, or even not have taken place. The relations between Halliburton, Bechtel, Carlyle and many other corporations in a CSR world would have been intensively examined. Stakeholders would have been held publicly accountable and socially irresponsible actions such as supporting war efforts for personal gain would have been stamped out. Naïve? Perhaps. But right now, large corporations are more powerful than the UN, and more powerful than many nation states. Therefore, CSR is even more of an urgent issue than has ever been seen before. It's a tool that must be used wisely and my plea is to use it, certainly for impending catastrophes such as global warming, but also to control existing ones such as the seemingly uncontrollable Military Industrial Complex.

[These issues and more will be discussed at our CSR update Executive Forum in London on Dec 13th - see brochure]

Michael Hopkins is Professor of Corporate and Social Research at Middlesex University Business School, and Managing Director of the CSR advisory company and think-tank MHC International Ltd. His books include The Planetary Bargain: Corporate Social Responsibility Matters (Earthscan, 2003) and Corporate Social Responsibility and International Development: Is Business the Solution? (Earthscan, 2006)

Copyright © This e-mail address is being protected from spambots. You need JavaScript enabled to view it. and with thanks to Ivor Hopkins, Julian Roche and Jawahir Adam of MHCi for comments and editing the earlier draft

In 'Cloud Over Civilisation', The Guardian, July 15th, 2004

Which Companies Will Put Iraq back together?" by Diana B. Henriques, The New York Times, March 23, 2003,

Many treat the US foreign policy as homogeneous. This is a mistake. The State Department generally has a good understanding of conflict and would, undoubtedly, have prepared for post Iraq better. Whereas the Pentagon has the power and the money and tends to act as a state within a state.

See Michael Hopkins 'The Politics of Responsible Business'. Open Democracy, June 2007 http://www.opendemocracy.net/responsible_business

http://www.timesonline.co.uk/tol/news/world/us_and_americas/article1695763.ece

October 17, 2007, New York Times: 'Good News on Guns, from California'

 

 

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