The World’s Military Expenditure

June 9th, 2010 - by admin

Stockholm International Peace Research Institute / SIPRI Yearbook 2010 – 2010-06-09 00:12:02

The financial crisis and economic recession that have affected most of the globe appeared to have little effect on levels of military expenditure, arms production or arms transfers. On the other hand, the crisis probably did undermine the willingness and ability of major governments and multilateral institutions to invest other, non-military resources to address the challenges and instabilities that threaten societies and individuals around the world.

In this crosscutting background material for media, SIPRI offers several aspects of the SIPRI Yearbook dealing with military expenditure from various perspectives.

Global Economic Crisis Yet To Slow World Military Expenditure Growth

The global financial crisis and subsequent economic recession, triggered by the United States banking collapse in September 2008, have seen the worst falls in Gross Domestic Product since the 1930s, rapidly rising unemployment and soaring public sector deficits. In the face of this, the continuing rise of world military expenditure — up 5.9% in real terms in 2009–may appear to be something of a paradox — some might say an outrage.

The USA led the rise, but it was not alone. Of those countries for which data was available, 65% increased their military spending in real terms in 2009. The increase was particularly pronounced among larger economies, both developing and developed: 16 of the 19 states in the G20 saw real-terms increases in military spending in 2009.

How can governments continue to spend so heavily on the military in such economic circumstances? First, some countries did not experience an economic downturn. China’s growth rate of 8% was lower than in recent years, but still strong. India also enjoyed continuing economic growth.

Second, most developed and some larger developing countries have, far from cutting back, been boosting public spending to tackle the recession, through large economic stimulus packages. Typically, military spending has played a small role in such packages, if any — dollar for dollar, it is an inefficient way of creating jobs, especially when it comes to highly capital-intensive arms production. However, at the same time, the desire to boost demand has meant that public spending in general — military or otherwise–has been increased or at least maintained.

Third, rising military spending for the USA, as the only superpower, and for other major or intermediate powers, such as Brazil, China, Russia and India, appears to represent a strategic choice in their long-term quest for global and regional influence; one that they may be loath to go without, even in hard economic times.

On the other hand, when it comes to smaller countries–with no such power ambitions and, more importantly, lacking the resources and credit-worthiness to sustain such large budget deficits–many have cut back their military spending in 2009, especially in Central and Eastern Europe.

Countries that made big crisis-related cuts in 2009 include Bulgaria (down 7.6% in real terms), Croatia (8.3%), Estonia (9.1%), Lithuania (11%), Romania (13%), Serbia (5.8%), Slovakia (6.7%) and Ukraine (11%). The largest cuts in Europe were in Moldova (25%) and Montenegro (19%).

In some countries that are highly dependent on commodity exports, the fall in the price of oil and other commodities resulting from the crisis has led to cuts, or at least slower rises than before, in military spending.

For many countries, the need to cut deficits will mean a reckoning in 2010 or 2011, in which military spending will likely be one area that comes under scrutiny for potential cuts. Not surprisingly, Greece has announced a substantial cut in its military budget in 2010.

For others, however, this reckoning may be delayed, or may not come at all. In the USA, the Obama Administration’s budgets for financial years 2010 and 2011 show US military spending — boosted by the escalating conflict in Afghanistan — continuing its seemingly inexorable rise — crisis or no.

No Let-up in US Spending Growth under Obama
Obama’s election created hopes among many for a more consensual and multilateral approach to foreign policy than that of his predecessor. In the area of military spending, however, the Obama Administration has shown little sign of a change of direction, with the Nobel Peace Prize winner presiding over record levels of spending since World War II.

US military expenditure rose by 63% in real terms between 2000, just before George W. Bush took office as president, to 2008, his last full year in office. Although much of this was due to the conficts in Afghanistan and Iraq, the continuing efforts to maintain and extend US global military dominance through the development of advanced weapon systems also played a major role. Outlays for “National Defense” increased a further 7.7% in real terms in Financial Year (FY) 2009 over FY2008, reaching $661 billion. This is still mostly the result of decisions taken under the Bush Administration.

For FY 2010 Obama’s first defence budget proposal requested a more or less unchanged level of budgetary authority, but this was still projected to lead to another significant increase in actual spending, as spending continues on existing programmes. This was true even before the December 2009 announcement of a further troop “surge” in Afghanistan.

The Obama 2010 budget did bring some changes: one reform was to end the practice of mid-year “emergency” war supplemental appropriations, much-criticized for reducing opportunity for congressional scrutiny.

Instead, a single Overseas Contingency Operations budget was put to the Congress alongside the main defence budget — but as it turned out, the Afghanistan surge has led to Obama asking the Congress for a supplemental after all.

Meanwhile, some major weapon programmes were canceled in the main budget, such as the F-22 stealth fighter, with increased spending on some current priorities such as increased troop strength, unmanned aerial vehicles (UAVs), cyberwarfare, and other current priorities. There were also increases in some traditional major weapon programmes such as the F-35 Joint Strike Fighter.

As a result of the budget and the congressional changes, US military spending is now projected to reach $719 billion in 2010. Overall, the budget involved some “rebalancing” of priorities, but no major strategic shift.

The FY2011 budget was announced in February 2010, and shows yet another increase both in the budget and in projected outlays, expected to rise to $739 billion in 2011. Despite the administration’s urgency to begin reducing the budget deficit, security-related expenditure was excluded by Obama from a planned three-year squeeze in discretionary expenditure.

How is it that US military spending, already far exceeding that of any other country and at record real-terms levels since World War II, is continuing to increase in the face of a dire economic crisis and a president committed to a more multilateral foreign policy approach? One factor remains the conflict in Afghanistan, to which Obama is committed and where the US troop presence is increasing, even as the conflict in Iraq winds down.

Another is that reducing the military budget can be like turning round the proverbial supertanker — weapon programmes have long lead times, and may be hard to cancel. Members of the Congress may also be resistant to terminating programmes bringing jobs to their states; some programmes, such as the C-17 transport aircraft, which Obama wanted to end in the FY 2010 budget, were restored by the Congress.

However, the fact that military expenditure is continuing to increase even as other areas are cut suggests a clear strategic choice: the fundamental goal of ensuring continued US dominance across the spectrum of military capabilities, for both conventional and ‘asymmetric’ warfare, has not changed.

It’s about the Oil:
Natural Resources Help Drive Military Spending and
Arms Imports in the Developing World

The Middle East has for a long time been the region with the highest level of military expenditure relative to GDP (the “military burden”) in the world. This is a factor of the high level of conflict in the region and the low level of democracy but also, arguably, the vast oil revenues enjoyed by many countries in the region.

However, in recent years increasing oil revenues in other parts of the developing world have also been accompanied, in many cases, by rapid increases in military spending and arms imports. Rising prices and new oil and gas exploitation have given governments in parts of Africa, South America, East Asia, the Caucasus and Central Asia windfall revenues, some of which have found their way into military spending.

In recent years, the “resource curse” — the cycle of conflict and poor governance that can be created when resource revenues are not managed in the interests of the population as a whole — has been widely noticed by academics, non-governmental organizations and policymakers. There are many reasons also to believe that high levels of resource revenue dependency may also lead to high levels of military spending and arms purchases:

• Natural resource revenues provide a direct source of income to a government, in the form of foreign currency that can be used to fund imports. New resource discoveries or rising prices produce “windfall” revenues that can be more easily spent on potentially controversial expenditures such as large foreign arms purchases, unlike tax revenues taken from the general population which therefore carry a much higher political cost.

• Natural resources can be a source of international tension and conflict, as in the Middle East, or domestic conflict, as in Nigeria where the massive environmental damage caused by oil extraction and the lack of benefit to oil-producing regions has generated grievances. Such conflict inevitably leads to higher military spending.

• Likewise, the desire to protect oil and gas infrastructure from internal or external enemies, real or imagined, can be a motive for military spending. Brazil has justified its planned purchase of submarines in terms of the need to protect newly discovered underwater oil fields.

• Resource revenues are often managed non-transparently and without proper accountability, which may lead to large off-budget military spending and corrupt arms purchases.

The downturn in oil and commodity prices in 2009 somewhat slowed the rising trend in military spending in some countries with a high level of resource dependence. Some countries, such as Iraq and Venezuela, reduced their spending in 2009 as a result of lower revenues; others, such as Nigeria and Russia, increased spending, but at a much slower rate than in recent years. But the long-term trend of oil and other natural resource revenues driving increased military spending in many developing countries seems set to continue.

This material is based on extracts from SIPRI Yearbook 2010 assembled for media reporting purposes.

Key Trends in World and Regional Military Expenditure, 2009 (Africa, the Americas, Asia, Europe and the Middle East)

World trends in military expenditure
• Estimated total world military expenditure in 2009 was $1531 billion (at current prices).

• Spending increased by 5.9% in real terms over 2008 and by 49 % compared to 2000.

• The USA’s real-terms increase of $47 billion accounts for 54% of the world increase.

• Significant increases also by regional powers such as China, India and Brazil.

• Spending increased in all regions and subregions except in the Middle East.

• The region with the fastest real-terms increase in 2009 was Asia and Oceania, at 8.9 %.

• The subregion with the fastest real-terms increase in 2009 was South Asia, at 10.9 %.

• The global financial crisis and economic recession had little impact on world military expenditure.

Trends in Military Spending in Africa
• Estimated total military expenditure in Africa in 2009 was $27.4 billion ($10.0 billion in North Africa and $17.4 billion in sub-Saharan Africa).

• Spending increased by 6.5 % in real terms over 2008 (7.7 % in North Africa and 5.1 % in sub- Saharan Africa) and by 62 % compared to 2000 (107 % in North Africa and 42 % in sub-Saharan Africa).

•The regional increase was partially offset by a substantial fall in Chad, from an unprecedented high level of spending in 2008, due to oil revenues.

• The trend in Africa is overwhelmingly determined by five major-spending countries: Algeria, Angola, Morocco, Nigeria and South Africa.

• Increases in 2009 by these major spenders continue longer-term trends: over the decade 2000– 2009 military spending rose in real terms by 127 % in Morocco, 105 % in Algeria, 101 % in Nigeria, 53 % in South Africa and 40 % in Angola.

• Oil and gas revenues are a significant factor behind the military spending in many countries. Note: Estimates for Africa and its subregions in 2009 are uncertain due to missing data for some countries.

The SIPRI Military Expenditure Database

Military expenditure data provides an easily identifiable measure of the scale of resources absorbed by military activities. Military expenditure is an input measure. As such it is not directly related to the output of military activities, such as military capability.
SIPRI military expenditure data are entirely based on open sources, and as much as possible on official data.

The SIPRI definition of military expenditure is used as a guideline in the compilation of SIPRI data but is not always possible to apply. If another definition is used, it is applied over the entire country time-series in order to achieve consistency over time.

Military expenditure data from different volumes of the SIPRI Yearbook should not be combined because of data revision between volumes. Revision can be significant; e.g., when a better time series becomes available, the entire SIPRI series is revised accordingly. When data are available in local currency but not in constant US$ or as a share of GDP, this is due to lack of economic data. Revisions in constant dollar series can also originate in significant revisions in the economic statistics of IMF that are used for these calculations.

Contributions of military expenditure data, estimates and advice are gratefully acknowledged from the SIPRI Military expenditure network.

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