CO08135 | Defence Spending and Military Modernisation: Should It Be Recession-Proof?

The Case for “Sparing the Pain”

There is a strong argument to be made that defence spending should be sacrosanct, as national defence is the first order of business of any nation-state. Any country that cannot secure its territorial viability may soon cease to be one. Military spending, therefore, must be tied to external threats and national security requirements. and not to impermanent economic circumstances, no matter how bleak they may be at the time. In other words, defence, like banks and the US auto industry, is simply “too big to fail.”

There is something to be said about maintaining a steady level of defence spending through good times and bad. The predictability in the amount of funding that the armed forces receives helps make planning for the future less risky. It also ensures that defence projects that have long periods of gestation and high initial sunk costs are not subjected to the vagaries of the economic climate. This is especially pertinent with so-called big ticket items such as combat aircraft and naval vessels, which typically have very long procurement cycles. Terminating any such procurement in mid-stream makes neither strategic nor economic sense. The question is how bad must the broader socio-economic climate be before cuts in defence spending are contemplated, much less implemented.

The Case for “Sharing the Pain”

That said, defence budgets can never be totally recession-proof. No part of government expenditures should ever be permanently off the table. Bankrupting one’s country for the sake of so-called “national security” can be just as damaging as under-funding defense. All rational defence policies have always been a careful balancing act between what is strategically needed and what can be afforded. And what can be afforded then determines strategic priorities, as much as strategic priorities drive budget- making – probably more so, in fact.

Additionally, one should not treat defence spending as something special in government budgets. Bureaucratic politics, inter-service rivalries, and even personal ambitions influence decisions in militaries as much as in other government agencies. Even in tough economic times, therefore, militaries should not be given a “bye” when it comes to spending.

In particular, one should question the wisdom of linking defence spending to some magic number. There are some in the United States, for example, who are arguing that the US defence budget should be directly pegged to four percent of GDP, arguing that current defence needs (the global war on terror, the ongoing wars in Iraq and Afghanistan, etc.) require a “stable and predictable” level of funding. And yet these advocates provide no sound military rationale for linking it to this particular percentage point; if the situation is so dire, then why not five percent or even ten? Ultimately, such an approach is a distortion of military planning – and would they accept a budget cut if the GDP fell?

The Economic Myth

Finally, the idea that defence spending should be protected for its economic benefits is not only morally wrong but often based on false arguments. In the first place, defence budgets are not a welfare programme; they are for protecting the country, not creating jobs. Secondly, the macroeconomic gains of military spending are often greatly exaggerated. Arms manufacturing in many countries is often an inefficient and poorly run affair, prone to cost overruns and low production runs.

The defence sector makes little overall contribution to a country’s economic development while sucking up considerable public resources in the process. Meanwhile, anticipated spin-off or economic multiplier benefits – such as expanded resource utilization, commercially useful technologies, and workforce education and training – usually do not manifest themselves in large enough quantities so as to be worthwhile.