The Indian Economy Blog

August 18, 2007

Global Military Spending

Filed under: Basic Questions,Growth,Miscellaneous — Pragmatic @ 11:51 pm

The Military Balance 2007 estimates world military expenditure in 2005 to have been approximately $1.2 trillion. A plausible estimate for current world spending is $1.35 trillion. By contrast, the SIPRI yearbook estimates 2006 world expenditure to have been around $1.2 trillion. The estimates differ largely because The Military Balance relies more heavily on Purchasing Power Parity when comparing nations’ expenditures, while the SIPRI volume uses exchange rates.

If we go by SIPRI figures, the global military spending amounts to about 2.5 percent of the world GDP. This is, however, still less than the peak Cold War numbers, which reached a peak in the late 1980s, when spending (adjusted for inflation) went past $1.6 trillion a year. After the Cold War ended in 1991, worldwide spending fell by nearly half, to about $900 billion a year.

Whereas the United States accounted for 28 percent of world defense expenditures in 1986 and 34 percent in 1994, it today accounts for approximately 50 percent. The $647.3 billion US defence budget (excluding around $215 billion for homeland security, veterans’ affairs and outstanding 2007 war costs) represents a 75 percent real increase over the post-Cold War low-point in US defense spending, which occurred in 1996. Today’s US defence expenditures are higher in inflation-adjusted terms than peak spending during the Vietnam and Korean wars — as well as higher than during the Reagan buildup.

In comparison, all of Europe has an annual defence expenditure of over $200 billion; all of Asia, about the same; the Middle East, over $100 billion; while Africa and the rest of the Americas account for another $30 billion or so. [The Indian defence budget for the year 2007-08 is approximately $23 billion.]

During the Cold War, there were over a hundred million people under arms; there are fewer than 40 million people under arms now. Then, factories turned out thousands of tanks, hundreds of warplanes and dozens of warships each year. Now, tank production rarely exceeds a few hundred a year, with annual warplane production of less than a hundred a year, and only a handful of warships being produced every year. It should mean that a major portion of global defence spending is not on buying weapons, but on payroll, benefits and materials. But the legacy of cold war ensures that it is not so; piles of surplus tanks, warplanes, warships and weapon platforms left after the cold war continue to be transacted in the global arms market even today.

There is little solace, if any, in the words of Dwight D. Eisenhower

Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the clouds of war, it is humanity hanging on a cross of iron.

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  1. For all that I think the number of deaths or serious disabilities as a result of warfare as well as the number of hostile engagements has steadily come down. That holds out hope. While mankind’s capacity for mass destruction has multiplied, maybe there are some balancing factors at work here- some civilizational force underlying all of this.

    As we get more civilized and find non-violent ways of competing, we might shift our spends in the direction of alleviating poverty, improving education, healthcare and productivity, not to speak of the environment protection and climate change.

    Comment by little Ram — August 19, 2007 @ 5:36 pm

  2. I’m less optimistic than my previous commenter.

    The reason why there are no major wars at the moment is, that there is only one nation which has the power to make a war abroad and for most people can have hope for a better future.

    As soon as there are serious shortages in resources like water, oil, copper and other industrie metals, and sufficient power in more countries to make war without being punished for low cost by the USA, there will be new wars.

    It is a lucky moment in history not an evitable developement which will go forever, that we have a relatively peaceful time.

    Comment by mheck — August 20, 2007 @ 8:02 pm

  3. According to the CIA factbook as quoted on a popular statistics site the US military expenditure as 37.3% of the world expenditure in 2005. Looks like there has been a very steep rise in the US military expenditure over a period of two years. Considering the very real danger posed by the current global terrrorism crisis, this is understandable. Security is parmount and no amount of wishy-washy ideological grandstanding can be allowed to override security concerns. The Latin expression “Epitoma Rei Militaris”, “If you want peace, prepare for war” holds true even today.

    Comment by Vivek — August 29, 2007 @ 3:04 pm

  4. Countries need to invest in defence as a deterrent to nations hostile to them. From a manufacturing and economic point of view defence expenditure is good. A lot of the money is churned back into the economy.

    The recent Defence Procurement Procedure-2006 (DPP-2006), mandates that 30 per cent of the cost of military purchases exceeding Rs 3 billion has to be reinvested in the country. Just yesterday Requests for Proposals (RFP) were issued for 126 fighter aircraft for the IAF in a project that is likely to be worth $10 bilion (Rs 42,000 crores). The Defence Acquisition Council (DAC) has set the offsets to be 50% which means that approx $5 billion is going to be churned back into the economy as services, technology transfers and spare component manufacturing.

    Comment by Nikhil Nayak — August 30, 2007 @ 7:34 pm

  5. @ Little Ram:

    ‘The number of deaths or serious disabilities as a result of warfare as well as the number of hostile engagements has steadily come down’. I would give the credit(whatsoever) to ever developing technology which has made a war possible without less and less contact. And if you include the counter insurgency or the ‘war on terror’ (more below in response to mheck), I think the numbers will speak otherwise. I think never before there has been such continued loss of life and property except the two world wars.

    @ mheck:

    1. A little correction: There are no major wars ‘between any two nations’ at the moment. The face of the war has changed. Now it is mostly waged as a ‘proxy war’ (or guerilla war?) as no nation wants to become or be seen directly involved in a war due to the huge economic and political costs involved in a large scale war. As you correctly mentioned, USA has been able to wage such direct, unilateral wars in the past and will continue to do so because they have been able to cleverly tweak the public opinions and minimize their economic and political costs (Some even argue that they have benefited out of their wars).

    2. Though I agree with your reasoning for a possible war for natural resources (which has caught much attention of the intellectuals in recent past), I however feel that a more plausible reason for continued large military expenditure and may be a large scale war would be terrorism. In the past decade or so, the clout and power of extremists (not only Islamic but otherwise also) has only grown, so has the size of the ‘war on terror’, the spending on the militaries and the cost of reconstruction. And this war is not being fought only in Afghanistan and Iraq today, many developed countries are already increasingly being drawn into it, not to forget the now-regular ‘victims’ like India, Sri Lanka, UK and now Pakistan. And if you consider the linkages of the extremists with the conflict-torn regions like Palestine, Sudan, Chechnya, Kosovo, Bosnia and Lebanon, the problem reveals its size.

    The access to natural resources certainly has the potential to become a reason for the next world war, but at present and for some time to come extremism will continue to be the most tangible threat on the minds of the generals.

    3. I also want to mention the growing power and clout of China and again Russia here. Though many would put India in this list, I don’t yet count India as a super power in military context. I feel that a new cold war is in the becoming with USA being challenged by China, openly or covertly supported by Russia. This cold war will seriously question the loyalty of regular allies of USA. Nevertheless, this cold war will again create some high tension moments as in the last one.


    Comment by Prabhat — November 26, 2007 @ 8:07 am

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