Global defense spending in 2020 increased 2.6 percent, to $1.96 trillion. This occurred despite the covid19 global recession. In 2019 spending was up 3.6 percent over the previous year. That was the largest one-year jump in a decade. Since 2010 defense spending has increased more than seven percent. Because of the global recession, 2020 spending as a percentage of global GDP increased, from 2.2 percent to 2.4 percent. This comes after a decade of decline, from 2.6 percent in 2010 to 2.2 percent in 2019.
Two nations, the United States and China, account for more than half of global defense spending. The U.S. is still in the lead, accounting for 39 percent of global defense spending while China accounts for 13 percent. Some major spenders did spend less in 2020, including Saudi Arabia (-10 percent), Turkey (-5), Iran (-3) and Pakistan (-2.8). These declines were caused by severe economic problems. Saudi Arabia has to devote more money to maintaining living standards since world oil prices fell sharply after 2013 and have not recovered to 2013 levels. Saudi Arabia is still the biggest spender in the region, spending $57.5 billion in 2020 compared to Israel ($21.7 billion), Turkey (17.7), Iran (15.8) and Pakistan (10.4).
Global defense spending hit a plateau after 2010. This was the result of the 2008 worldwide economic recession followed by the sharp decline in oil prices after 2013. Global defense spending increased 25 percent between 2008 and 2010, from $1.28 trillion to $1.6 trillion. Since then, it has barely kept up with inflation. Put another way, defense spending went from 2.5 percent of world GDP in 2007 to 2.6 percent in 2010. At that point, the United States was responsible for about 43 percent of that spending. That has changed as U.S. spending is now under 40 percent of global spending. During the first decade of the 21st century American defense spending increased 80 percent and accounted for most of the worldwide increase during the first decade of the new century. During that period military spending declined in Europe while it was up nearly everywhere else. That included Africa and South America. Russia was rearming in a big way, and China's increase was smaller in 2010 because of the recession, but there was still an increase.
India and China are in something of an arms race, although it is mostly India trying to catch up with an economically much stronger China. Currently China spends over three times more per year than India. Since 2010 defense spending in Asia, especially China, has accounted for most of the increase in overall spending, followed by Europe and the Middle East. In all three regions the increases are caused by the growing military threats from China, Russia and Iran. The United States has allies in all three regions in addition to being a target for Chinese, Russian and Iranian aggression.
Despite the increases since 2010, spending as a percentage of GDP is still less than during the Cold War (1947-91), which reached a peak in the late 1980s when spending (adjusted for inflation), went past $1.9 trillion a year. After the Cold War ended, worldwide spending fell by nearly half, to about a trillion a year. Since then, especially since the war on terror and growing aggressiveness by Iran, China, and Russia, global defense spending has been rising. It was just over a trillion dollars in 2005. From 2010 to 2018 global defense spending went from $1.6 trillion to $1.8 trillion. That trend continues.
Defense spending is dangerous, even if you never use all those weapons. The Soviet Union, which started the arms race in the early 1960s, couldn't keep it up and disintegrated in 1991 partly because of its excessive military spending.
Global defense spending began to rise again in the late 1990s, not because of threats from China, Russia and Iran, but to replace aging Cold War era equipment. Then came September 11, 2001 and annual global military spending began rising steadily. But it's not the same as before. In fact, it's very different. Back during the Cold War era, there were over a hundred million people under arms, and each year, factories turned out thousands of tanks, hundreds of warplanes and dozens of warships. No more, not even close, even though current spending is nearly back to its Cold War peak.
There are fewer than 40 million people under arms now, and tank production rarely exceeds a few hundred a year, with annual warplane production of less than a hundred a year, and only a few dozen warships. When the Cold War ended, so did the era of huge conscript armies equipped with equally large numbers of armored vehicles, artillery and trucks. The Soviet Union had over 50,000 tanks when the end came. No one tries to put that many tanks into service and the number of combat aircraft and warships have declined as capabilities, and cost per aircraft or ship, have risen sharply.
Some situations with manpower. Conscripts were replaced by far fewer professionals, who got paid a lot more money. This was something the British pioneered in the 1960s, followed by the United States in the 1970s. After the Cold War ended most everyone followed.
When the Cold War ended, and the world saw what pros could do in the 1991 Gulf War, everyone began to dismantle their conscript armies. Smaller armed forces, staffed by professionals and equipped with less, but more capable, gear, were the new norm. Another change has been the growth in U.S. defense spending between 2003 and 2010, to support operations in Iraq and Afghanistan. This included lots of money for bases in Iraq, and the hiring of over 100,000 civilians, including about 20,000 security contractors who were armed and veterans of military service, to help with the war effort.
Patterns of defense spending have changed. Much more of it now goes for payroll, and for buying far fewer, but higher quality, weapons. More money goes into equipment, notably high- tech stuff like satellite-based communications and computers. Billions of dollars a year is spent on satellite communications alone, and not just by the United States.
With the Soviet Union gone, no one else out there wants to try and match the United States spending levels. The war on terror also has American spending going up again. According to SIPRI, an independent defense research organization, one largely unnoticed trend has been in African spending, mainly to deal with persistent and growing Islamic terrorist violence. While nearly 40 percent of the spending is by the United States, most of that money is not buying weapons, but payroll, benefits and materials needed for training and operations, like food, fuel, spare parts and services.
For most of the 1990s, not many new tanks, warplanes or combat ships were built, as everyone continued to live off the Cold War surplus and what was called the “Peace Dividend”. That inevitably changed by 2000 as many countries wanted to build or buy new stuff, despite the fact that everything was now so much more expensive. That's because computers and powerful sensors and all manner of nifty new technology make possible the greater lethality in new weapons. For example, your basic $500 assault rifle becomes far more lethal when you add several thousand dollars’ worth of computerized accessories.
Countries are spending more on defense, but they aren't buying the same kind of stuff they were two decades ago. Everyone, including the Russians and Chinese, have agreed that the Western way of warfare, with a small number of well-trained volunteers using high-tech weapons, is the way to go. Israel, ironically, is an exception. But Israel has a compelling reason to continue with conscription. Israel exists in a violent neighborhood and every Israeli is well aware of that. For Israelis conscription is not seen as an unfair disruption, but rather a contribution to keeping everyone in Israel safe from very obvious and persistent threats. A small number of Israelis are on active duty with most of the armed forces consisting of former conscripts who remain in the trained and organized reserves for over a decade, and never forget how to be a soldier because the threat was always there for everyone. This system was pioneered by Switzerland and later adopted by Sweden to discourage aggressive neighbors from attacking them. It worked but required a high degree of popular support to maintain. A few other nations in the Middle East, particularly the UAE (United Arab Emirates) are trying to adopt the Swiss model. That’s one reason why the UAE established formal diplomatic and military relations with Israel in 2020.