The economics of defence conversion

Disarmament following the end of the ´cold war´ has led to renewed interest in defence conversion. The simple case for conversion appears attractive. Its advocates claim that firms which have specialised in defence business and are surplus to defence requirements can contribute to the ´peace dividend´ by transferring their plant and labour force to the production of civil goods and services. Such a solution avoids losing a defence firm´s valuable expertise and technical knowledge by applying it to civilian activities and, at the same time, avoiding the dislocations associated with redundancies and plant closures. Here, the author describes how reality is more complex.