Leadership: Buying Defense Against Iran


September 2, 2009: The fastest growth in defense spending these days, and for the foreseeable future, is in the Persian Gulf. That's because of tensions between the Arab states there, and Iran. And then there's all that oil wealth. Angry people with lots of money is a perfect environment for an arms race.

While many nations have been slashing defense spending because of the global recession, the big spenders are still growing. The big five (U.S., China, France, Britain and Russia), account for 63 percent of defense spending. The U.S. spending, $607 billion in the last year, accounts for most of that (42 percent of global defense spending). The growth is largely due to growing economies. The U.S. spends 4 percent of GDP on defense, while China spends 2.7 percent, France 2.4 percent, Britain 2.3 percent and Russia 2.7 percent.

The nations that spend the most of their GDP on defense are also the most wealthy. Saudi Arabia spends 9.4 percent and Israel 7.2 percent. North Korea, which releases little information on defense spending, probably spends 10-20 percent, and is an exception. Many North Koreans are starving, and poverty is the norm there. With their miniscule GPD, and the large (1.1 million troops) armed forces, North Korea has to be spending a large chunk of the national income on defense. South Korea, with a much larger economy, spends only 2.5 percent of GDP on defense.

The Persian Gulf Arab states will soon account for ten percent of the world total defense spending. This is a lot, especially when you consider that there are only 97 million Gulf Arabs (1.5 percent of the world total). The United States accounts for 4.6 percent of the world population, and 45 percent of the planetary defense spending. Thus the U.S. still spends more per capita on defense, but the Persian Gulf Arabs are firmly in second place.

In the past decade, global defense spending had grown nearly 50 percent, to over $1.4 trillion. That's about 2.5 percent of global GDP. After the Cold War ended in 1991, defense spending declined for a few years, to under a trillion dollars a year. But by the end of the 1990s, it was on the rise again. The region with the greatest growth has been the Middle East, where spending has increased 62 percent in the last decade. The region with the lowest growth (six percent) was Western Europe. The current recession may get global defense spending stalled at, or maybe even a little below, $1.4 billion for a year or two. But the spending growth will probably resume as soon as the recession is over.

About a third of global defense spending is for buying weapons and major items of equipment. The rest goes largely for payroll and maintaining troops and equipment. Western Europe, for the most part, maintains armed forces more to keep people employed, than to provide any credible military capability. Britain is an exception, and still maintains a fairly large force on a skimpy budget. Some European nations can scrounge together a small expeditionary force for overseas operations, but even that's a strain. Most of NATO's military power comes from the United States, while most of the criticism of what the United States should do with their forces comes from the nations that can't provide much themselves. In the Persian Gulf, a disproportionate portion of defense spending goes for new equipment. Per capita, the Persian Gulf Arabs have modern equipment on a scale equal to the Western industrialized nations.

With the U.S. defense budget accounting for nearly half the military spending on the planet, you'd think that records were being broken. Well, they aren't. As a percentage of GNP, U.S. military spending continues a decline that has been going on since the 1960s (when, because of the Vietnam war, defense spending was 10.7 percent of GNP). That went down to 5.9 percent of GNP in the 1970s and, despite a much heralded "defense buildup" in the 1980s, still declined to 5.8 percent. With the end of the Cold War, spending dropped sharply again in the 1990s, to 4.1 percent. For the first decade of the 21st century, defense spending is expected to average 3.6 percent of GDP. Most of the current defense budget is being spent on personnel (payroll and benefits), and buying new equipment to replace the Cold War era stuff that is wearing out and to pay for operations in Iraq and Afghanistan.

U.S. procurement needs are heavier than usual now because, during the 1990s, procurement was cut to about 15 percent of the defense budget, instead of the usual 25 percent. This was to be part of the post-Cold War "peace dividend." But then September 11, 2001 came along and the peace ended. Since then, U.S. defense spending has increased about 60 percent. Not only that, but the remaining post-Cold War gear has to be replaced. Now that is being done, although with  smaller (than during the Cold War) armed forces.

Another reason the defense spending, as a percentage of GDP, keeps going down, is because the global economy keeps growing at a fast rate. Since 1991, global GDP has more than doubled, while defense spending has increased by about 34 percent. Americans, like the rest of the world, are spending more money on more things, but less of it on defense. As long as the world economy keeps growing, and ancient rivalries remain (and new ones develop), defense spending can be expected to grow. The recent global recession did not slow this growth much, and is now ending.



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