And that is called paying the Dane-geld;
but we've proved it again and again,
that if once you have paid him the Dane-geld,
you never get rid of the Dane
– Kipling
It's a truism that human beings have never needed much in the way of technology to kill each other but it is equally true that it never hurts to have better weapons than one's potential opponents provided, and here is the rub, one knows how to use them. Many of the bush wars that burned across the galaxy occurred in impoverished, disorganised, politically corrupt, class structured colonies. Where armies existed, the troops were undertrained, badly armed and demotivated. The officer class tended to be, if anything, even worse, commissions and promotions being generally dependent on political or family connections.
Few colonies possessed the resources to manufacture anything but the most basic military equipment. Of course, better equipment could be purchased, often at some economy-breaking percentage of a colony's GNP, but was then handed to troops who had little idea how to service it, let alone use it in combat. Peasant communities were littered with immobile and inoperable prestigious military toys. There were a number of examples of low-tech armies slaughtering nominally superiorly equipped forces; a machete that cuts has many advantages over a laser rifle that fails to fire because the owner did not know to keep the mirrors clean. The classic example was on Sargon's World where the Bushmen massacred the beautifully tailored and equipped army of the Third Prophet before sacking his city. Grass still grows in the streets of what was Templetown.
A better solution was to hire professional soldiers who brought and operated their own equipment. A peasant community could, by putting itself in a debt that their grandchildren would still be paying, hire an elite regiment for a matter of weeks or months. But at least this way they would have grandchildren, losing meant impoverishment, cultural annihilation, economic slavery or even genocide.
Mercenaries can be defined as military units that are hired for a limited period of time and come complete with their own officers and equipment. This rules out situations where foreigners are co-opted either voluntarily or forcibly into a national army and armed and officered by national citizens. Other than that it is rather difficult to generalise about the mercenary regiments. Some were regular military units of a Terran or Colonial state hired out for political or financial gain. Others, although recruited primarily from a single state, especially the officer cadre, were organisationally and financially independent of that state's government. At the other extreme were cosmopolitan units that had no connection with any particular state or world.
The relationship between mercenaries and their employers is always fraught. The hosts tend to regard their employees as a bunch of unprincipled, armed thugs who are leeching off them in their moment of greatest need and whose loyalty is suspect. After all someone, possibly the enemy, might come up with a better employment offer and business is business. It has not been unknown in history for mercenaries to change sides at a critical moment.
For their part, the mercenaries tend to treat their employers with open contempt. After all, if they had any balls they wouldn't need to hire troops. This attitude is not helped by the fact that the only locals most of the troops are likely to meet are the hustlers and the whores who hang around the army camps.
However, the real problems arise when the fighting ends. It occurs to the civilians that the mercenaries are now the strongest power in the land and it occurs to the mercenaries that the civilians might think their pay now an unnecessary expense. The situation can be even worse if the mercenaries' side lose. Any armistice deal is unlikely to include clemency to foreign mercenaries, let alone back pay.
In the late 3rd Millennium, mercenary warfare was so prevalent that it was commercially viable to set up a Bonding Authority of merchant banks to oversee mercenary contracts. The Authority grew out of Felchow & Sohn in Bremen, the first merchant bank to see the lucrative opportunities of war as a business. The system worked by clients depositing a bond of money at the Authority which was released to the mercenaries provided they satisfied their contract, which was to fight not necessarily to win, or if the client broke their end of the deal. The Authority itself prepared and enforced the contracts, mercenary units that reneged were declared outlaw and hunted down and destroyed.
In the short term, the Authority 'civilised' the endless bush fires across the galaxy, sharply reducing the incidence of atrocities either by or to the mercenaries. In the long term, by making war just another form of acceptable business, albeit a highly profitable one, the Authority had a devastating effect on galactic development. The whole commercial system was winding down as resources were diverted from infrastructure development into weapons and soldiers. In many ways this was more devastating then the wars themselves as planet after planet spent the bulk of its GNP on servicing military debts.
The Great Crash was entirely predictable.
Extract from War and Finance, a history of merchant banking Sarah Loyd