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Saturday, February 5

The Weapon-dollar Petro-dollar Coalition

Nitzan & Bichler seem to have an interesting view on Israel.

Unfortunately, most of those who tried to understand this link between oil and arms have willingly put themselves into the familiar straitjacket of aggregates. The theories are numerous, but their story is almost always about ‘states’, ‘policy makers’ and the ‘national interest’. Economists writing in this vein, such as Chan (1980) and Snider (1984), for instance, tend to concentrate on the issue of ‘recycling’. The problem, as they see it, concerns the balance of payment. Energy crises jack up the cost of imports for oil-consuming
countries, while creating trade surpluses and accumulated reserves for the oilproducing ones.

A relatively efficient way to ‘re-balance’ these imbalances, they
continue, is for oil importers, mostly developed countries, to sell weapons to
oil exporters. Politically, this is easy to do. Consumers in the arms-exporting
countries don’t care much since the shipments do not require new taxes,
whereas rulers in the oil-exporting countries like the trade since it boosts their
self-image and sense of security. The resulting arms race is perhaps unpleasant,
but largely unavoidable; unless, of course, the producing countries agree to
lower their oil prices.

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