Banks in the Business of War

Jordi Calvo Rufanges

There are various reasons for the existence of war or organised armed violence. Amongst those that we can identify and understand with ease are economic reasons. It is difficult to demonstrate that the business people who benefit from the preparation and outbreak of war want the conflicts to occur. However, it is not completely outlandish to think that some businessman, greedy and lacking scruples, might uncork a bottle of champagne when he knows that an armed conflict is going to happen. He might even open two bottles if a long war is predicted. This joy that we presume of the arms industry executive might not even be a result of chance.

Every business must, according to the liberal economic theory, maximise its profits over the long term. To maximise profit, an arms company must work to maintain the highest demand possible in both the short and long term for the products that it manufactures and sells. In order to keep selling arms in ten, twenty or thirty years, it will have to do what it can to ensure that arms continue to be necessary in the future--and the more the better, since this will give the company greater profits and will achieve the goals promoted by today's neoliberal capitalist model. Promoting present and future demand is a job that companies tend to approach through advertising, amongst other aspects of corporate communications that might not be pertinent. However it is also a regular, common sense practice for a business person to utilise other methods to ensure future sales. In the case of the arms industry, these methods could include collaboration in the generation of fear and potentially credible threats to security which justify inflated military budgets and ensure the purchase of present and future armaments. One example of this sort of influence is the case of the Olin Foundation, which over decades has dedicated hundreds of millions of dollars to promoting neocon ideology with funding from the military industry. It is more difficult to demonstrate that the arms industry promotes wars, trying to convince government officials to attack one country or another. Without being able to accuse anyone of doing so, we must accept that this possibility fits within the business logic of the neoliberal capitalist economic model. We also know that there are more than just a few arms industry lobby groups which work to benefit their members' businesses.

In this framework we find the economic reasons, and more specifically those related to the benefits that producers and sellers of arms expect to gain. Those who directly benefit from the business of war are those who make up the military-industrial complex, in which we have always clearly identified the convergence of business, military and politicians. But here we also find the financial institutions who get their piece of the arms industry pie and, therefore, of the wars, where the arms finally end up being used in bulk.

There are five main ways that financial institutions help arms companies through the services they provide. One very important way is the ownership of stock with the goal of becoming an owner, since in this way they can participate in the decisions of the arms company. Another way of aiding companies is through the granting of credits and loans, which help companies to undertake new arms projects, amongst other things. Another service demanded by the arms companies of the bank is the issuing of bonds and promissory notes in order to get financing from individual investors, or the issuing of shares in order to carry out capital expansion. Both options often imply large capital injections into the arms company. Another commonly used method, especially with the larger arms companies, is the integration of stock held in the military industries into investment funds that the banks offer to their clients in order to get maximum return on investment. Finally, the financing of arms exports is very relevant, first in terms of the administration of financial operations in exchange for a banking commission; secondly because the bank advances money from the exports to the arms industry, charging high interest rates; and thirdly because there are financial institutions that offer export insurance contracts, in which the company is paid for the arms sales, without the buyer having paid yet, in exchange for paying the corresponding premium to the bank in question. The financial institutions that help arms companies in any of these five ways, we have called 'armed banks', because the bank always wins in the arms business, too.

Every day there are more institutions that study, with precise data, the relationships between banks and arms companies as well as running campaigns. A good place to find a compilation of information about investments in arms by more than 60 financial institutions across the world is www.bancaarmada.org, where it is revealed that at least 45 billion euros have been devoted by banks to the arms business. It is also shown that the biggest banks in the world are also the most heavily armed banks and that, if we want to be responsible consumers from the perspective of a culture of peace, we should stop being clients of armed banks. Because it is with our money, as little as it may be, that the banks help the arms companies.

The financial institutions are jointly responsible, as are the other parties of the military-industrial complex, for armed violence and as such, for half a million deaths resulting from arms each year. Without the help of the banks, there would be many fewer arms in the world and certainly many fewer deaths, mutilations and lives destroyed as a result of war.

Jordi Calvo Rufanges is a member of Delas Centre for Peace Studies