One European company seems to be surviving the global economic downturn just fine. EADS, the pan-European aerospace conglomerate best known as the parent company of Airbus, has recovered from a dismal 2007 to record a $2 billion profit in 2008.
Travis Sharp's new piece for FP, might offer a hint for why things are looking up for EADS. While the world's economy contracts, countries everywhere are investing in expensive military systems like those built by EADS:
Despite its overwhelming dominance in overall spending, the United States did not have the fastest growing defense budget in the world between 2005 and 2007, the most recent period for which an accurate assessment is possible. That distinction belongs to Kazakhstan, which saw its defense budget increase by 84 percent. Other countries with booming budgets during this period included Angola (80 percent), Ukraine (57 percent), Jordan (57 percent), and Slovakia (55 percent). The United States, China, and Russia had more modest growth rates of 17 percent, 27 percent, and 33 percent, respectively.
But EADS's good times may not last forever, particularly if U.S. Democrats enact "Buy American" policies to limit the amount of equipment the U.S. military buys from overseas. The main flashpoint for this debate is an Air Force refueling tanker contract that Airbus and U.S. rival Boeing have been fighting over for years with Congress acting as an increasingly incompetent referee. Former Undersecretary of Defense Jacques Gansler believes military protectionism is bad for dense and ultimately bad for the economy:
The Defense Department is not a social welfare organization, and its sole responsibility is to supply U.S. war fighters with the best equipment at the best price. Luckily, though, these two goals aren't mutually exclusive: Military globalization is in fact a blessing for Americans.
The United States is still the world's largest military customer, and it's in the interest of international weapons manufacturers to do business where the buyers are. In the past decade, a number of major international firms have set up shop in the United States. In fact, the Northrop deal would have created tens of thousands of U.S. jobs.
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