During the early modern period, France, United Kingdom, Netherlands and some states in Germany became self-sufficient in arms production, with diffusion and migration of skilled workers to more peripheral countries such as Portugal and Russia.
The modern arms industry emerged in the second half of the nineteenth century as a product of the creation and expansion of the first large military-industrial companies. As smaller countries (and even newly industrializing countries like Russia and Japan) could no longer produce cutting-edge military equipment with their indigenous resources and capacity, they increasingly began to contract the manufacture of military equipment, such as battleships, artillery pieces and rifles to foreign firms.
In 1854, the British government awarded a contract to the Elswick Ordnance Company of industrialist William Armstrong for the supply of his latest breech loading rifled artillery pieces. This galvanized the private sector into weapons production, with the surplus being increasingly exported to foreign countries. Armstrong became one of the first international arms dealers, selling his weapon systems to governments across the world from Brazil to Japan.[6] In 1884, he opened a shipyard at Elswick to specialize in warship production—at the time, it was the only factory in the world that could build a battleship and arm it completely.[7] The factory produced warships for many navies, including the Imperial Japanese Navy. Several Armstrong cruisers played an important role in defeating the Russian fleet at the Battle of Tsushima in 1905.
In the American Civil War in 1861 the North had a distinct advantage over the south as it relied on using the breech-loading rifle against the muskets of the south. This began the transition to industrially produced mechanized weapons such as the Gatling gun.[8]
This industrial innovation in the defense industry was adopted by Prussia in 1866 & 1870-71 in its defeat of Austria and France respectively. By this time the machine gun had begun entering into the militaries. The first example of its effectiveness was in 1899 during the Boer War and in 1905 during the Russo-Japanese War. However, Germany were leaders in innovation of weapons and used this innovation nearly defeating the allies in World War I.
In 1885, France decided to capitalize on this increasingly lucrative form of trade and repealed its ban on weapon exports. The regulatory framework for the period up to the First World War was characterized by a laissez-faire policy that placed little obstruction in the way of weapons exports. Due to the carnage of World War I, arms traders began to be regarded with odium as "merchants of death" and were accused of having instigated and perpetuated the war in order to maximize their profits from arms sales. An inquiry into these allegations in Britain failed to find evidence to support them. However, the sea change in attitude about war more generally meant that governments began to control and regulate the trade themselves.
The volume of the arms trade greatly increased during the 20th century, and it began to be used as a political tool, especially during the Cold War where the United States and the USSR supplied weapons to their proxies across the world, particularly third world countries (see Nixon Doctrine).[9]
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