Defence industrial policy – a sound security strategy or an economic fallacy?

Abstract

This article explores whether it makes sense for national governments to employ defence industrial policies – such as offsets and discriminatory procurement practices – to support their domestic defence industries. This question has so far primarily been discussed by economists, who have argued strongly against the use of defence industrial policies. This article maintains that these economists fail to address the often complex motivation behind the introduction of these policies. It illustrates these shortcomings by contrasting their arguments against a case study of Norway, which accounts for the country’s use of defence industrial polices from the early post-Second World War era up until today. The article concludes that, depending on their objectives, defence industrial policies can be seen as either a sound security strategy or an economic fallacy.