The briefing: The Stockholm International Peace Research Institute (SIPRI) is well known for their military expenditure data which emphasizes consistent global coverage. Sam Perlo-Freeman went over the data. World spending is $1.7 trillion and for the first time since 1998 did not increase in real terms. That comes to $249 per person or 2.5% of world GDP. This leveling off was driven by the United States, although otherwise patterns from 2010 to 2011 I hard to discern. Russia and some developing world countries have been moving up on rankings and European countries have been down, although the U.S. is still dominant at 41% of global military spending. One regional point: Asia and Oceania has overtaken western and central Europe in the past few years.
SIPRUI puts the U.S. at $711 billion in outlays, which includes State department military age. That puts it at 4.7% of U.S. GDP, one of the higher rates in the world. They anticipate overall spending to fall given the end of the wars, assuming no new ones start, and if sequestration starts in January 2013 it will mean much steeper declines. By comparison, the total for Europe was fairly constant, but only thanks to increases from Russia and Azerbaijan (89%!). In central Europe the cuts started in 2009, spending in western Europe ha been declining more recently although France, Germany, and the U.K. have been making smaller cuts so far. As you might expect, Greece, Spain, and Italy have all had fairly dramatic cuts.
Panel discussion: Chantal de Jonge Oudraat (SIPRI) moderated a panel discussion with Nora Bensahel (Center for a New American Security) and Gordon Adams (Stimson Center).
Nore Bensahel thought that sequestration was the big issue for the U.S. and thought that no progress was likely until the election. That's a 11 week lame duck session as the payroll cuts and the Bush tax cuts will also be expiring. She expects some sort of temporary reprieve as the most likely outcome. The current planned cuts only result in a 1.7 percentage point cut and if sequestration is included, that drops by 3.6 percentage point cut. That's still about at the 2002 spending percent and still leaves the U.S. higher as a percentage of the world than any point in the 1990s.
In Asia and Oceania, Bensahel expected next year will see a jump in spending by China's neighbors. On Russia, she argued that Russian capabilities don't seem to be matching Russian spending due to weaknesses in the Russian industrial base and a poor state of personnel, readiness, and training. She expects some of the neighbors will increase their capacity, although austerity measures will be a check on that. Latvia, Lithuania and Estonia have all been dramatically dropping their spending (all 30% or greater drops) despite likely being particularly worried.
Gordon Adams thought the Russia data was the most interesting but similarly doubts their capabilities and ability to maintain their spending. He argues that oil prices are a key driver and the we should expect that changes in the global oil price to drive drops or rises in the future. He's skeptical about increases in eastern Europe spending, although he thinks that she's right that the economy will be key. He expects a fair amount of useless discussion about NATO burden sharing until we have a real discussion about how to deal with common challenges and acknowledge Europe's comparative lack of interest in intervention in Asian affairs. In Latin America he expects the drug wars to drive variance.
On the U.S., historically debt and end of wars traditionally trumps defense spending with cuts of about 30% in ten years. Interestingly, they tend to happen under Republican presidents. He thinks that the present discussion is a shadow play and that sequester may well not happen. He mentioned a variety of other big issues that will be discussed in the lame deck session which could be the making of a big disaster or a deal. Big question with sequester will be at what level OMB decides to implement the sequester. He expects that even with a likely kicking of the sequester can down the road, there still will be notable drop offs but he agrees with Bensahel that this won't notably effect our current dominant global capability.
Q&A:
On data quality and transparency, Perlo-Freeman found that central European and Latin America data was getting better while in the Middle East and Africa the data is getting worse. A few countries, such as Vietnam and South Korea, are getting better at transparency but most are staying the same.
On the topic of differences between countries, Bensahel noted that there's no consistent way to account for losses to corruption, that gets to a regionalist issue. Adams added that a primarily internal versus primarily external role (e.g. China vs. U.S.), the aforementioned corruption, and the active participation of the military in some economies. Benashel added that the Middle East is also an area where military spending has a particularly low rate of conversion from spending to capability.
On use of exchange rates versus purchasing power parity which can result in very different trends. U.S. versus China is 5:1 with market exchange rates and 3:1 with purchasing power parity (PPP). He argues that PPP does give a better measure of opportunity costs, guns versus butter, but thinks its complex for capabilities. Personnel are cheaper in China but training and equipping them to U.S. standards may not be. Top of the line military technology, when available in the PRC, is almost certainly not cheaper and may even be more expensive.
There was a discussion of what intelligence spending was included in SIPRI's total. Gordon Adam's pitched his recent book for more detail on the issue of what falls in the national security budget.
When asked whether the U.S. should go lower than planned spending, Adams thinks we probably can and will. He thinks that non-defense political and policy factors will drive the decrease, national security factors becomes less salient. Bensahel agreed arguing that percentage of world spending isn't really the relevant calculation.
On whether the U.S. should step in for European decreases, Adams notes that there's no functional or geographic definitions of responsibility, thus there's no agreement between the Europeans and the United States about what the shared burden is. Bensahel agreed and said that she expects that coming out of Libya and Afghanistan we'll be seeing NATO as less valuable for military if not political reasons. The trouble with intra-European cooperation, provision guided munitions, aerial refueling was a surprise and suggests that NATO has minimal independent operations capability. Jonge Oudraat added that the 'smart defense' concept could compound the lack of independence issue. Perlo-Freeman notes that even with a recall of U.S. forces, there's no real threat from Russia. It's about the ability to do operations of choice, which is going to reduced over time.
Susan Jackson, also of SIPRI, commented on the status of the military arms productions. She noted lot of growth in the military services industry. In the Middle East, where's there's less bang for the buck in terms of capability per dollar of military spending, industry is moving in to fill gaps. There's also an increase in corporate strategy to export outside of the Middle East and Europe. India, the Middle East, and Brazil have been the main targets. The third major trend is moving into cyber security.
Arms race between Azerbaijan and Armenia, Perlo-Freeman notes that Azerbaijan winning the race thanks to oil revenue. They both have have some of the highest shares in Europe and there's a real risk of war.
Brazil cut military spending despite growth which was Perlo-Freeman attributed to an attempt to avoid economic overheating without hitting social programs. He notes that they do have regional ambitions, but that the center-left coalition doesn't consider that the highest priority. Adams argued that guns versus butter distinctions seem to be coming more apparent. At the same time, global conflict is down, imminent security threats have faded in Latin America and Europe.
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