Deciding How Much to Spend on Defence

(This is an archived extract from the book Patterns of Power: Edition 2)

Defence spending is normally subject to political governance (6.7.1).  Several factors affect the decision upon how much to spend:

·      A country’s assessment of how strong it needs to be to defend itself is directly related to its lack of confidence in other countries’ observance of international law and its lack of confidence in the UN’s willingness or ability to keep the peace.

·      Formal alliances ( and ad hoc coalitions ( can increase the effectiveness, and share the cost, of self-defence.  Some countries have negligible military capabilities because they can rely upon being protected by others.

·      Countries have to make difficult assessments: of the threats facing them, and of the likely value of increasing their defence capabilities:

      Military force may be of limited utility (7.4.1).

      Deterrence (7.4.2) is ineffective against terrorist threats.

      Gathering intelligence (7.2.8) might be more cost-effective than increasing a military capability whose use could be avoided if there were more time to find a political solution.

      As noted at the end of this chapter, adopting a posture of being militarily powerful is likely to lead to symmetrical responses by other countries and is not conducive to long-term security (7.4.7).

·      Some defence capabilities can be useful in domestic emergencies, such as natural disasters, breakdowns in public services, or violence on the streets – though military personnel may not be equipped or trained for crowd control (

·      As described in the next section, some governments rely on military spending to prop themselves up (

·      The economic impact of a government’s policy has to be considered in its entirety:

      The costs of equipment, the people in the armed services and the associated public servants all form part of government spend.  On average, America was spending more than 7% of its Gross National Product on defence during the Cold War arms-race.[1]

      Wars create other economic liabilities, which include the costs of government borrowing, the cost of treating injuries and the loss of productive labour.  The total cost to the US of the invasion of Iraq will exceed $3 trillion, compared to “the Bush administration's 2003 projections of a $50 billion to $60 billion war”.[2]

      The costs of defence and wars have to be paid for by taxation.  Affordability is a problem, since a government has to balance its books (, and defence spending competes with other priorities. 

      Defence spending, including the employment of people in the armed forces, might act as a ‘Keynesian stimulus’ to reduce overall unemployment and stimulate demand in a country which has spare productive capacity (  It has been argued that the Second World War helped to end the Great Depression in this way, though this is contested.[3]

The need for peace and security is a very high priority for most people, and they expect their government to protect them (2.1).  Defence spending is popular if it is perceived as increasing people's safety.

© PatternsofPower.org, 2014                                                 

[1] America’s defence spending, as a percentage of GNP, during the Cold War varied considerably, but the average was 7.7% according to an Independent Institute article entitled The Cold War Economy, which was published in July 1994 and was available in May 2014 at http://www.independent.org/publications/article.asp?id=1297.

[2] The Washington Post published an article by Joseph E. Stiglitz and Linda J. Bilmes on 5 September 2010, entitled The true cost of the Iraq war: $3 trillion and beyond; the article was available in May 2014 at http://www.washingtonpost.com/wp-dyn/content/article/2010/09/03/AR2010090302200.html.  In a footnote it referred to the book published by these two writers, which was entitled The Three Trillion Dollar War: The True Cost of the Iraq Conflict.

[3] An article by Louis Hyman on 25 August 2011, entitled How Did World War II End the Great Depression?, attributed much of America’s economic recovery to the government’s founding of the Defense Plant Corporation to ensure that there would be sufficient military capacity.  This article was available in May 2014 at http://www.bloomberg.com/news/2011-12-16/how-did-world-war-ii-end-the-great-depression-echoes.html.

Bill Flax expressed a dissenting opinion in an article on the same day, entitled No, Paul Krugman, WWII Did Not End The Great Depression; in this article he attributed some economic benefit to “the demise of the New Deal” and said that “Living standards didn’t regain 1929 levels until America restored a market based economy in the aftermath of victory” when “tax rates were slashed”.  He did not deny that defence spending had boosted the economy, though, but denied that government intervention was beneficial.  This article was available in May 2014 at http://www.forbes.com/sites/billflax/2011/08/25/no-paul-krugman-wwii-did-not-end-the-great-depression/.