Institutions, Trust and Varieties of Privatizing National Security

by Moritz Weiss

Abstract

The privatization of national security has evolved as a vibrant field of study for International Relations (IR) scholars. As its first contribution, this paper develops a theoretically specified pathway to show how different politico-economic institutions produce different designs for privatizing state-owned defense industries. Its second, theoretically broader, contribution lies in its introduction of trust as a causal mechanism. This enables institutionalist theorizing to show how actors translate the information provided by macro-institutions into the micro-choices of a design with or without sovereign safeguards. This framework is then applied to investigating two deviant cases, where conventional theories would have suggested the opposite privatization designs. Why did corporatist Germany unconditionally privatize its aerospace and defense industries in the 1980s, whereas the neoliberal government in the United Kingdom (UK) established significant control rights? I argue that the relationship of trust between government and business in Germany made the contractual safeguards required by the UK unnecessary. The paper’s causal pathways depart from Germany’s civil law tradition to be contrasted with the UK’s common law system. The former provided information beyond contracts and shaped informal institutions such as the informal grouping known as “Deutschland AG” [Germany Ltd], which allowed strategic coordination and the emergence of trust even in the arguably sensitive setting of a state’s security of supply of military platforms. By contrast, the UK’s common law system shaped formalized contracting – rather than trust – as the only means to address future uncertainty. Comparative process-tracing analysis is able to show, paradoxically, how liberal forms of coordination such as adversarial contracting have ultimately led to more state intervention in the UK’s defense sector than in Germany’s.

Keywords: institutionalist theory, trust, privatization, defense industries

Please contact Moritz Weiss if you are interested in the manuscript.