We conclude our analysis of how structural changes are impacting upon international economic and financial systems by examining the interaction between economics, politics and war. Throughout history, the relationship between economics and war has been mediated by politics. The current economic travails of many developed states, for example, has led to a reduction in defense expenditure. In sharp contrast, the defense capabilities of many emerging countries are developing at relentless pace. Nevertheless, the defense industry is globalizing and slowly taking root in emerging markets, while developing countries trapped in conflict are falling further behind economically.

After examining the relationship between economic development and military power first, we compare the effects of war in developed and developing countries. We then consider how economic performance determines defense budgets, with a particular focus upon India’s burgeoning defense sector and military capabilities. The week concludes with analysis of the flow of arms from the largest defense contractors across the international system. Indeed, these patterns demonstrate that the global arms trade is determined as much by geopolitical considerations as it is economic ones.