Leadership: Defense Spending Shrinks Worldwide


May 12, 2009: Thailand is cutting its defense budget by a third, to $5.6 billion. Most nations on the planet are also slashing defense spending, and most blame the current global recession. The reductions sometimes  come in the form of smaller increases (such as in the United States and China). But more often, there are absolute cuts (15 percent in the case of Russia). Even smaller nations, like Austria, are cutting spending by about 9 percent.

In the past decade, global defense spending had grown nearly 50 percent, to over $1.3 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, $1.3 billion for a year or two. But the spending growth will probably resume as soon as the recession is over.

Defense spending is still raised, or lowered, mainly due to local politics. The Thais are cutting spending partly because of local politics, where the military has become embroiled in a struggle between royalists (including the military) and populists (who represent the majority of voters). In South Korea, spending is declining partly in recognition of the military decline of North Korea, which has long been the chief threat.

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.

With the U.S. defense budget accounting for over 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 in the 1980s (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 3.4 percent of GNP. 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 forces would have to get their decrepit gear replaced anyway, and now that is being done, although with a smaller (than during the Cold War) armed forces.

Another reason the defense spending, as a percentage of GNP, keeps going down, is because the 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.




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