# Stock Market: Why are Defense Contractors considered a "vice" industry? **URL:** \ **Category:** Factual Questions\ **Created:** [February 16, 2011, 11:24pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641 "2011-02-16T23:24:13Z")\ **Posts on this page:** 9\ **Page:** 1
**Author:** ![robert\_columbia](https://avatars.discourse-cdn.com/v4/letter/r/e79b87/32.png) [@robert\_columbia](https://boards.straightdope.com/u/robert_columbia)\ **Post date:** [February 16, 2011, 11:24pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/1 "2011-02-16T23:24:13Z")
Vice investing, in terms of the stock market, involves investing in Alcohol, Tobacco, Gambling, and Defense Contractors. Why is defense considered a vice? According to Wikipedia’s article on Socially Responsible Investing, the concept of socially responsible investing was spearheaded by Quakers. Is this the origin of classifying defense contractors as a vice industry, since Quakers doctrinally oppose war? > **[Socially responsible investing](https://en.wikipedia.org/wiki/Socially_responsible_investing)** > > Socially responsible investing (SRI), social investment, sustainable socially conscious, "green" or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by proponents.: 4  Socially responsible investments often constitute a small percentage of total funds invested by corporations and are riddled with obstacles.: 4  > Recently, it has also become known as "sustainable investing" ... ---
**Author:** ![Yarster](https://avatars.discourse-cdn.com/v4/letter/y/7c8e57/32.png) [@Yarster](https://boards.straightdope.com/u/Yarster)\ **Post date:** [February 17, 2011, 12:01am UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/2 "2011-02-17T00:01:37Z")
I can only assume that defense contracting is equated to “guns” and “war”, which I gather more liberally minded folks will consider a “vice”. For what it’s worth, I will never forget my wife’s response on 9/11 to watching the twin towers fall on the news, which was: “Whoever was responsible for this is going to get a whole lot of bombs dropped on their country. Now seems like a good time to invest in defense stocks” and a week later, I purchased the Fidelity Select Defense Fund. That was good investment advice - thanks honey! ---
**Author:** ![FasterThanMeerkats](https://avatars.discourse-cdn.com/v4/letter/f/278dde/32.png) [@FasterThanMeerkats](https://boards.straightdope.com/u/FasterThanMeerkats)\ **Post date:** [February 17, 2011, 12:06am UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/3 "2011-02-17T00:06:16Z")
Thoughts on the first question: “Vice” implies a character flaw, and since wars of any kind typically increase sales and profits for defense contractors, the argument can be made that profits come at the price of lives. Trading lives for shareholder dollars can reasonably be thought of as a character flaw. Even defensive technologies, such as armor, can be rationalized as ways to kill opponents more efficiently. Some might also make the argument that you’re just determining who is killed - us or them - but not changing the sum total. (not saying I subscribe to this rationalization, but the argument can be made) And defense contractors typically do not distinguish between wars of “defense” and wars of aggression. They make money either way and are unlikely to say “Sorry Congress, we don’t believe this is a defensive action, so we’re sitting this one out and not shipping you anything.” Furthermore, defense contractors can be opportunists and choose to sell to countries abroad not interested in “defense.” Finally, no military provider ever categorizes itself as an “offense” contractor. So the term “defense” is really just an industry nicety. I’m sure other folks will be along with cites that a lot of “defense” contractors instigated or at least cheered for arms races, especially in the early 20th century and with the [Military Industrial Complex](http://en.wikipedia.org/wiki/Military%E2%80%93industrial_complex) (my cite here is also that it’s also a world wonder in Civilization Revolution. I conquer all in the name of defense!! :)) ---
**Author:** ![constanze](https://avatars.discourse-cdn.com/v4/letter/c/f9ae1b/32.png) [@constanze](https://boards.straightdope.com/u/constanze)\ **Post date:** [February 17, 2011, 9:49am UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/4 "2011-02-17T09:49:57Z")
I have never heard of “vice” as a measurement in selecting against stock funds, but (esp. in connection with Quakers) a few banks over here offer “ethical” investments. And one of the criteria on the negative index (the ethics council that selects the stocks has one negative list of reasons that cause a company to be excluded, and sometimes a second positive list that cause a neutral company to be included. So Siemens might be listed for promoting women and offering kindergartens, but Junghans was dropped after long discussion because they produce pins for land mines). Any companies that produce weapons or parts of weapons are negative (it’s not called “defense” in German). If a company only made defensive material for the Army like body armour and clothing, they might not count, but most companies produce weapons because that’s more money. As Meerkats already explained, the companies don’t say “Well, the US is currently in a defensive war, so let’s produce weapons for our guys”. They produce first, and then look around where they can sell their weapons to. And even when a country forbids selling to certain regimes, the weapon companies try to get around that law because it’s profitable. ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [February 17, 2011, 5:22pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/5 "2011-02-17T17:22:27Z")
I think **constanze** is right. It’s not that defense is considered a “vice” industry, it’s that “socially conscious investing” usually includes defense among the industries that it does not invest in. ---
**Author:** ![hibernicus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hibernicus/32/2802_2.png) [@hibernicus](https://boards.straightdope.com/u/hibernicus)\ **Post date:** [February 17, 2011, 6:59pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/6 "2011-02-17T18:59:31Z")
As an investor, you may wish to avoid the risk of creating a conflict between your interests and your values. If you invest in a tobacco manufacturer, you put yourself in a position where each person who takes up smoking brings you a financial benefit, and each person who gives up causes you a loss. Similarly, if you invest in a company that makes bullets, you’ll make more money if war breaks out. ---
**Author:** ![Darth\_Panda](https://avatars.discourse-cdn.com/v4/letter/d/ee7513/32.png) [@Darth\_Panda](https://boards.straightdope.com/u/Darth_Panda)\ **Post date:** [February 17, 2011, 7:11pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/7 "2011-02-17T19:11:02Z")
> [@FasterThanMeerkats](#): > > Finally, no military provider ever categorizes itself as an “offense” contractor. So the term “defense” is really just an industry nicety. > > I’m sure other folks will be along with cites that a lot of “defense” contractors instigated or at least cheered for arms races, especially in the early 20th century and with the [Military Industrial Complex](http://en.wikipedia.org/wiki/Military%E2%80%93industrial_complex) (my cite here is also that it’s also a world wonder in Civilization Revolution. I conquer all in the name of defense!! :)) Sometimes the best defense is a good offense. ---
**Author:** ![Intelligently\_Designed](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/intelligently_designed/32/20957_2.png) [@Intelligently\_Designed](https://boards.straightdope.com/u/Intelligently_Designed)\ **Post date:** [February 17, 2011, 11:06pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/8 "2011-02-17T23:06:29Z")
Wouldn’t this be in the same line of thought that led to the creation of a Bureau of Alcohol, Tobacco and Firearms? ---
**Author:** ![constanze](https://avatars.discourse-cdn.com/v4/letter/c/f9ae1b/32.png) [@constanze](https://boards.straightdope.com/u/constanze)\ **Post date:** [February 18, 2011, 12:02pm UTC](https://boards.straightdope.com/t/stock-market-why-are-defense-contractors-considered-a-vice-industry/571641/9 "2011-02-18T12:02:16Z")
The [Ethikbank](http://www.ethikbank.de/die-ethikbank/anlagekriterien.html) (ethical bank) has the following negative criteria: > [@](#): > > Die EthikBank vergibt keine Kredite an Unternehmen und kauft keine Aktien oder Anleihen von Unternehmen, die: > > Militärwaffen herstellen oder vertreiben > Atomkraftwerke besitzen oder betreiben > Pflanzen oder Saatgut gentechnisch verändern > Ozonzerstörende Chemikalien herstellen oder vertreiben > Kinderarbeit zulassen > Tierversuche bei Kosmetika durchführen > > The Ethikbank does not give loans to, or buy stocks of, companies that do the following: > produce or sell military weapons > own or run nuclear power plants > genetically modify plants or seeds > produce or sell ozone-destroying chemicals > allow children’s work > conduct animal testing for cosmetics Each point has a longer listing with exact explanation and definition. The positive list is > [@](#): > > Die EthikBank investiert das Geld ihrer Kunden in die Unternehmen des Natur-Aktien-Index (NAI). Der seit 1997 bestehende Aktienindex umfasst globale, erfolgreiche Öko-Vorreiter. > > The Ethicsbank invests the money of her customers into companies of the Nature Stock Index. Existing since 1997, this index contains global, successful ecological pioneers. > > Darüber hinaus kauft die EthikBank Wertpapiere ausgewählter Unternehmen des DAX und MDAX. Diese Unternehmen kommen nur in Betracht, wenn sie unsere vorgenannten Negativ- oder Tabukriterien nicht verletzen (Atomkraft, Rüstung, Kinderarbeit, Grüne Gentechnik etc.). > > Beyond that, the Ethicsbank buys stocks from selected companies of the DAX( German Stock Index) and MDAX (MidCapDax). These companies are only considered if they don’t violate our above listed negative/ taboo-criteria (Nuclear Power, Military weapons, children’s work, GM etc.) > > Das alleine reicht aber nicht. Diejenigen Unternehmen, die unsere Tabukriterien bestehen, müssen sich darüber hinaus überdurchschnittlich positiv mit folgenden sozialökologischen Standards auseinandersetzen: > > That alone isn’t enough, however. Those companies that pass our taboo criteria, have to be exceptionally positive in the following social-ecologial standards: > > Umweltpolitik > Umweltmanagementsysteme > Leistungen im Umweltbereich > Geschäftspolitik unter Beachtung der Menschenrechte > Förderung, Gleichberechtigung und Vielfalt der Mitarbeiter > Dialog mit Mitarbeitern, Kunden und Lieferanten > Weiterbildung und Personalentwicklung > Schaffen und Erhalt von Arbeitsplätzen > Vorsorgemaßnahmen, um Korruption und Bestechung zu verhindern > > Enviromental politics > Enviromental management systems > Achievements in the enviromental area > corporate politics regarding human rights > Equality, diversity and help for employees > dialogue with customers, employees and suppliers > Ongoing qualifcation and development of personnel > Creating new and keeping established jobs > preventive measures against corruption and bribery > > snip Now, as private bank, the ethics bank has chosen these criteria according to what they believe the majority of their customers want to influence - strenghetning by investing into the positive, weakening by not giving money to with the negative list. Of course, they are free to add or remove criterias as they see fit, or as the customers want it - part of their approach is to be a glass (=transparent) bank, so that the customers can know in advance where their money is going at all. Whereas when you give money to a “normal” bank like Hypo, Commerz, Dresdner, Deutsche etc., they will invest that money into nuclear and weapons industry soleyl because of profit.