Great attention has focused on the dangers posed by Weapons of Mass Destruction (WMD). However, more than 80 percent of the violent conflicts waged during the 1990s employed only “small arms” (weapons ranging from pistols to RPGs). Consequently, the availability of small arms is a matter of real concern. How many guns are there circulating in the world? A lot. The Graduate Institute of International Studies, Geneva, runs an annual Small Arms Survey. The 2002 edition estimates that there are about 640 million small arms worldwide. Some of these guns are newly manufactured. About 8 million new guns were produced in 2000 alone. Some of them are used guns left over from earlier conflicts. Back in 2002, there were estimated to be about half a million small arms in Cambodia, which the Cambodians were busy selling all over the place through the conduit of Thailand.

The “belle of the ball” in small wars appears to be the old AK-47. (See my post on “The Gun That Made the Nineties Roar.”) The black market price of an AK-47 works as a barometer of conflict in a particular society. When the price is really low (say $40 for a used, but functional assault rifle), every little thug in the neighborhood can afford one. Violent robberies and the settlement of petty quarrels by means of homicide spread like wildfire. This is typically the case in the aftermath of some conflict, when the demand for guns has fallen sharply. A price range between $230 and $400 per weapon is the normal market price. Prices above $1,000 a weapon indicate a desperate, time-sensitive demand for weapons. Civil war is about to break out, so people will pay any price to get an assault rifle.

What do local market prices tell us about the state of civil peace in various countries around the world? Well, in 2002, an AK-47 sold for $15 in Mozambique, $40 in Cambodia, $90 in Sudan and Afghanistan, and $100 in both Nigeria and Nicaragua. Happy days were here again in these places after bitter wars. Other places, not so much. At the same time that the price of an AK-47 fell below market level in those places, they were bringing $800 each in Columbia, $1,200 in Bangladesh, $2,400 in Kashmir, $3,000 on the West Bank (more than twice as high as in 1999), and $3,800 in Bihar state in India. This indicated that a new catastrophe loomed over South Asia. It wouldn’t have to turn into a nuclear war to be deadly.

It is worth noting that the “merchants of death” aren’t always, or even mostly, Western industrial nations. One of the key forms of industrialization pursued by developing economies appears to be an arms industry. Many developing countries seem to want to alter their balance of payments by producing arms for sale abroad in a burgeoning world market, rather than importing arms in exchange for other exports. Small producers of arms now include Ukraine, Serbia, Croatia, Slovenia, Portugal, Canada, Saudi Arabia, Argentina, Chile, Peru, Columbia, Mexico, Indonesia, the Philippines, Malaysia, Thailand, and Australia. To some extent, these countries obtain the means to produce arms by attracting European arms manufacturers to license factories in the developing countries. Take the example of Heckler and Koch. The German-based firm licensed factories in Greece and Iran. However, Greece exported some of the weapons manufactured in the licensed factory to Libya. Reportedly, Libya transferred some of these Heckler and Koch weapons to Lebanon. The Iranian Heckler and Koch factory exported some of their weapons to the Sudan. From Sudan the weapons went to Lebanon, Algeria, and Egypt.

I suppose that somebody could use the AH-47 index to run a futures market in No Future.

Don Peck, “The World in Numbers: The Gun Trade,” Atlantic, December 2002, pp. 46-47.