The spoils of war – BAE announces rising profits

On 9 August BAE Systems announced sales of £6.9 billion for the six months up to 30 June, an 8% increase on the same period last year. Operating profits for the period were £643 million, up 19% on the 2006 figure. BAE is the largest arms manufacturer in Britain and the fourth largest in the world in terms of sales, supplying customers in over 100 countries.

BAE describes its growth as fuelled by the continuing US and British military involvement in Iraq and Afghanistan, which has led to ‘numerous operational requirement orders’, primarily for vehicles and small to medium grade ammunition. Recent estimates put the costs of the occupation of Iraq for Britain alone at a minimum of £6.6 billion to date. Arms expenditure by the 15 largest military-spending countries increased 7% after inflation during 2006. Sales by BAE’s Land and Armaments group for the six months up to 30 June were 43% higher than a year earlier, compared to only 2.7% growth for BAE’s Electronics, Intelligence and Support group. BAE’s growing profits rely on the fighting in Iraq and Afghanistan. BAE is among the companies which have benefited from the increased demand for Mine Resistance Ambush Protected (MRAP) wheeled vehicles, as imperialist armies attempt to adapt to the challenges of sustained popular resistance and reduce the vulnerability of support vehicles. In June BAE signed a contract to supply 441 MRAP vehicles to the US military, and on 31 July BAE completed the £2.2 billion acquisition of Armor Holdings Inc, a major US supplier of utility vehicles which reported sales of $2.4 billion for 2006. BAE has benefited from the higher growth rates of the US arms market, with their US-derived businesses expanding 12% in the first half of 2007. BAE has a direct interest in the expansion of the US war machine.

Saudi Arabia, a key ally of US and British imperialism, has long been a BAE priority. This September BAE announced the agreement of a new contract with Saudi Arabia to supply 72 Typhoon aircraft and associated training and support worth some £40 billion. In June the US Department of Justice notified BAE that it was commencing a formal investigation into BAE over charges of corruption which include its dealings with Saudi Arabia. However it is unlikely that an investigation would be allowed to seriously threaten imperialist interests. In December 2006 an investigation by the British government’s Serious Fraud Office was dropped after warnings that it could ‘damage national security’.

War is inevitable under imperialism, as imperialist ruling classes compete for a share of the plunder. In periods of crisis this rivalry becomes all the more intense. If the interdependence of the state and corporations was ever in doubt, in December 2005 the British government published its Defence Industrial Strategy, outlining in detail the long-term partnership between the Ministry of Defence and industry. BAE has taken an overtly political role in ‘educating’ the public about the moral legitimacy of extreme violence when in the hands of the state, philosophising in its Corporate Responsibility Report 2006 that ‘Human nature creates conflict, not the defence industry’, and that ‘The fundamental role of the defence industry is to support governments in providing national security to protect its citizens.’

In return, the violence employed by imperialist governments in putting down resistance benefits BAE and its shareholders. The underlying earnings of 15.3p per share during the first half of 2007 are 31.9% greater than for the same period in 2006. BAE’s Interim Report 2007 describes the ‘high tempo of military operations’ being carried out by British and US forces overseas as the main factor driving demand, and looks forward to this continuing: ‘While operations in these regions continue, near-term growth is anticipated.’ A section of the British ruling class has a direct interest in the continued escalation of military conflicts and in the war drive of the major imperialist powers. The integration of the ruling class’s command of different sections of the economy is exemplified by BAE Chairman Dick Olver, who is also a non-executive director of Reuters Group plc and former group chief executive of BP. Ultimately such profits based on destruction are totally unsustainable and are another indication of the parasitic and decaying nature of British capitalism.

Thomas Vincent

FRFI 200 December 2007 / January 2008


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