Reconsidering publicness in alliance defence expenditures: NATO expansion and burden sharing

Over the past several decades, NATO allies have debated the relative burdens and benefits of NATO membership. Recently, this concern surfaced as members debated the magnitude and distribution of NATO expansion costs. This paper presents an economic model of defence alliances to identify the benefits and burdens of alliance membership. It suggests that defence expenditures provide public benefits if alliance members share common interests and mutual commitment; defence expenditures provide private benefits if countries lack common interests and mutual commitment. The model's results are used to discuss NATO's evolving roles and missions, NATO expansion and burden sharing across NATO members.     

Country survey XII: South Africa

This article examines the relationship between defence expenditure and economic performance in South Africa, both prior to and after that country's first fully democratic election in 1994. Prior to 1994 defence expenditure decisions were largely dominated by non‐economic factors; since then defence spending has declined in reaction to, inter alia, the need to address a number of socio‐economic inequities.

After 1975 in particular, military industrialisation in South Africa placed a disproportionately high burden on the country's industrial resources and natural economic and technical capabilities. However, although this suggests that the opportunity cost of domestic arms production has been fairly high, the country's poor economic and development performance since the mid‐1970s is a function of underlying structural deficiencies and institutional constraints rather than the consequence of inordinately high defence spending levels.     

The Demand for Turkish Defence Expenditure

Although a number of studies concerning Turkish defence-growth relation have been published in recent years, little attention is given the demand for Turkish defence expenditure. This is an important issue for understanding which variables contribute to the determination of the demand for military expenditure. However, it is difficult to develop a general theory or a standard empirical approach for the determination of the demand military expenditure. This study models and estimates the demand for Turkish defence expenditure for the period 1951-1998 using autoregressive distributed lag approach to cointegration (ARDL) following the methodology outlined in Pesaran and Shin (1999). This procedure can be applied regardless of the stationary properties of the variables in the sample and allows for inferences on long-run estimates, which is not possible under alternative cointegration procedures. The findings suggest that Turkish defence spending is determined by NATO's defence spending, Greece's defence spending and some security considerations.     

The Effects of Defence Spending Reductions: A CGE Estimation of the Foregone Peace Dividend in the Case of Greece

With the collapse of bipolarity and the end of the East-West armaments race, defence budgets have shrunk and military expenditures across many countries have fallen, opening-up the prospect of potential beneficial economic spin-offs. In the case of Greece, a country with a higher than average defence burden, military spending has not exhibited similar downward trends as it has done in other members of NATO and the European Union. The paper, using a Computable General Equilibrium model, estimates through simulations the effects on the Greek economy had reductions in current defence spending been equal to the NATO average. The results from the CGE estimations suggest that a shift of expenditure from defence into non-defence public spending would have an appreciable beneficial impact.     

Budgetary trade-offs of security expenditures in Turkey

This paper investigates the budgetary trade-off structure of security (defence+internal security) expenditures in Turkey for the period 1983-1998. A modified version of Todaro's distributive share index of social welfare is used to quantify the impacts on the growth of primary budget expenditures of Security, Education, Health, General Administration, Infrastructure, and Social Services. We find that defence expenditures dominate overall security expenditures and are less affected in times of bottlenecks in the economy. A systematic pattern of negative budgetary trade-offs of security expenditures in terms of other components is not identified. We also analyse the expenditures of the Defence Industry Support Fund in an attempt to find the cost of the modernisation program to the economy.     

Are the Baltic States and NATO on the right path in deterring Russia in the Baltic?

ABSTRACT

The aim of the current study is to discuss which particular factors Russia considers as sufficient deterrent capabilities and whether the national defence models implemented in the Baltic countries have the potential to deter Russia's military planners and political leadership. Whilst the existing conventional reserves of NATO are sizeable, secure, and rapid, deployment is still a critical variable in case of a conflict in the Baltic countries because of the limited range of safe transportation options. However, whilst the Baltic States are developing their capabilities according to the priorities defined by NATO in 2010; which were updated after the invasion of Crimea in 2014, Russian military planners have meanwhile redesigned both their military doctrine and military forces, learning from the experience of the Russo-Georgian war, the Russia-Ukraine conflict, and other recent confrontations. Accordingly, there is a risk that the efforts of the Baltic countries could prove rather inefficient in deterring Russia.     

Evasion costs and the theory Of conscription

This paper examines the trade and military relationship between two countries which have a common military enemy. The paper explains how the former two countries, which are military allies and trading partners, share the burden of defence against the third country. It demonstrates how the defence production of a country may hurt its ally because the latter country's terms of trade can be deteriorated. Whether or not a smaller ally spends less on defence is analyzed. Also analyzed is the effects of the reactions of the enemy country on the trade between the two allies and their welfare.     

The Serbian defence institution: the need for clear policy guidance to improve the Serbian defence planning,management, and command processes

ABSTRACT

The uncritical layering of western liberal defence governance norms and concepts on top of existing legacy concepts has impeded achieving coherent military capabilities and capacities when Serbia’s political and military leadership tried to reform the defence system using Western benchmarking principles and Western countries’ best practices. The process of this change has been more valuable than its actual output, as defined by increased capabilities. Such outcomes should be reflective of policy guidance, and can be thought of as closing the trinity loop of a defence planning system: plans, money and execution. This article addresses two key functional areas of the Serbian defence institution. First, it assesses the current state of defence planning to discern its strengths and weaknesses to ascertain if plans are tied to financial decision-making. Second, a full examination of current Serbian defence management is conducted to discern whether weaknesses exist that distract from producing operational capabilities. Both areas are analyzed thoroughly and some solutions for change are proposed. Also, the article analyzes the appearance of two negative phenomena in the planning process – economization and managerialism.     

Endogenous Growth and Defense Expenditures: A New Explanation of the Benoit Hypothesis

This paper develops an endogenous growth model to examine the linkage between military expenditures and economic growth. We adopt the modeling strategy where both the supply side and the demand side effects of national defense are taken into considerations. Our result finds that a rise in military spending tends to stimulate the sustained growth rate, confirming Benoit's famous empirical findings.     

Guns for Butter? Empirical Evidence from China

Abstract

This study examines the causal nexus between defence spending and education expenditure in China using the bootstrap Granger full-sample causality test and sub-sample rolling window estimation. The full-sample result indicates that there is no causality between defence spending and education expenditure. By adopting a time-varying rolling window approach to revisit the dynamic causal relationships, this article identifies a negative unidirectional causality running from education expenditure to defence spending. The finding suggests that it is the education expenditure crowds out defence spending in China rather than reverse. No causality is demonstrated from defence spending to education expenditure, indicating that an increase in military spending will not crowd out expenditure on education. The results could be partly explained by that the education expenditure in China is below the requirement of corresponding economic growth, urging for more financial budget. Whereas the findings support a negative trade-off between defence and education expenditures, they refute the theory of ‘guns for butter’.     

The Development of Military Logistics: An Introduction

Abstract

John Weston looks at the prospects for defence and security with tn a transformed Europe, concentrating on the increased importance of atr power within the military armoury. Looking to the future, he pinpoints key technologies and thetr bearing on aircraft design and spots trends in industry and the defence industrial base which are likely to have an impact wtthin the next 20 years     

Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries

There is much controversy in the literature over whether military expenditures have a positive, negative or no relation impact on economic growth. The aim of this paper is to determine the relationship between GDP and defence expenditure. The study analyses GDP and defence expenditures of the developed countries with cross-sectional ADF and SURADF unit root tests using annual data for the years 1980–2007. We conclude that in the long term, according to the Pedroni cointegration test, there exists a relationship between defence expenditure and economic growth. Furthermore, by utilizing the Granger causality test, we find that defence expenditure is a factor in economic growth. In other words, our study validates the hypothesis that defence spending by economically developed countries positively contributes to their economics.     

MILITARY EXPENDITURE AND ECONOMIC GROWTH IN MIDDLE EASTERN COUNTRIES: A DYNAMIC PANEL DATA ANALYSIS

Defence expenditures have both costs and benefits to the economy. The costs of defence expenditures are mainly emphasized as opportunity costs. On the other hand, defence spending may have growth‐promoting potential benefits: a rise in defence spending may result in a higher aggregate demand, production and employment. This paper examines empirically the effects of military expenditures on economic growth for Middle Eastern countries and Turkey, for the time‐period 1989–1999. The relationship between military expenditure and economic growth is investigated by using cross‐section and dynamic panel estimation techniques. Empirical analysis indicates that military expenditure enhances economic growth in the Middle Eastern countries and Turkey as a whole.     

DETERMINING THE DEFENCE INDUSTRIAL BASE

This paper models the determination of the defence industrial base – the number of different military systems a country decides to maintain. High R&D costs means that few countries can afford to produce major weapons systems and the producers also import systems. Non‐producers rely on imports and we assume their demand is driven by regional arms races. Military capability is determined by the number of systems and the quantity and quality of each. We examine how the defence industrial base is influenced by military expenditures, R&D costs, export controls, the nature of regional arms races and a variety of other factors.     

France and its allies: A comparative study of defence spending trends since 1985*

Within the EU France devotes to defence the largest financial and human resources although it is not the richest country, nor has it the largest population or labour force. The cost of nuclear weapons accounts for only a small fraction of this abnormally high French defence effort. If France had restructured its military capabilities at the same rate as its principal Allies during the 1985–1994 period, then French defence outlays would be about 20% less than at present. The fundamental reasons for France's excess defence outlay comprise virtual total dependence on French sources for equipment, produced in very small numbers; a military presence outside of Europe; and too many personnel. These deficiencies, and the consequent absence hitherto of a “peace dividend”, indicate a failure to identify the country's real strategic requirements, and a lack of will to reorganise efficiently French defence. The recently announced reform towards an all‐professional force is unlikely to achieve the potential and desirable improvement in cost‐effectiveness.     

Do Military Expenditures Crowd-out Health Expenditures? Evidence from around the World, 2000–2013

Abstract

The paper examines the relationship between health and military expenditures using pooled cross-sectional (197 countries) and time series (2000–2013) data. Simultaneous equation models were employed to estimate the relationship between an array of public sector expenditures in order to address potential endogeneity. Our empirical findings strongly support the crowding-out hypothesis whereby increased military expenditures reduce the capacity of government to direct expenditures to health expenditures. These findings were robust to alternative specifications explored in the sensitivity analyses. Compared with upper-middle-income countries, the crowding-out effect became more pronounced among lower-middle-income countries. Consequently, this study shows that increased military expenditures negatively impacts health expenditures, and therefore poses as an important risk factor for population health and individual well-being. Moreover, it is the poorest of nations that are most sensitive to the negative effects of increased military expenditures.     

Country survey IV: Pakistan

This paper examines the role of the military in Pakistan, particularly in regard to civil‐military relations and defence industrialisation. Pakistan's military expenditure is relatively high, but apart from investment multipliers, little of this spending filters through to the civil sector. Pakistan's defence‐industrial strategy centres on rebuild and Chinese technological collaboration. However, while this ‘capital‐saving’ approach has merit, the strategy has thus far failed to stimulate broader civil development linkages. A conclusion of this paper is that Pakistan is failing to maximise the strategic dual‐use benefits of integrating civil‐military activity.     

Country survey XVI the defence sector in the economy of a declining superpower: Soviet Union and Russia, 1965-2001

The Soviet Union was able to develop a large military-industrial complex and become the world's second superpower despite deficiencies in its centrally planned economy because defence was given high priority status and special planning, rationing and administrative mechanisms were used to attain national security objectives. However, in the period 1976-85 the effectiveness of priority protection diminished and defence institutions experienced more of the problems typical of the shortage economic system. The heavy defence burden also created growing difficulties for the civilian economy. The attempts by the Gorbachev government to reform the defence sector and improve defence-economic relationships during perestroika (1985-91) uniformly failed. For most of the transition period, the Russian military-industrial complex has been adversely affected by its low priority status, cuts in defence spending, instability of the hybrid politico-economic system, and negative growth of the economy. The armed forces and defence industry have been reduced in size and their outputs of military services and equipment have fallen to low levels. Nevertheless, the Russian armed forces still have over one million troops, significant stocks of sophisticated conventional weapons, and a large nuclear arsenal. The government of President Putin has raised the priority of the defence sector, increased real defence spending, and adopted ambitious plans to revive Russian military power. It is likely, though, that tight resource constraints will hamper efforts to reform the armed forces and to upgrade weapons. By 2010 Russia will be an important, but not dominant, military power in Eurasia.     

The Czech defence and security industry: taking the pulse to an ailing man

ABSTRACT

The paper summarises the evolution of the iron triangle of the mutual relationships amongst the ministry of defence, defence industry, and the political elite in the post-communist Czech Republic in 1990-2020. The essay stresses the oddness of this relationship. On the one hand, the government is bound by a partnership to the Defence and Security Industry Association of the Czech Republic (DSIA), a lobbying group of more than 100 organisations that conduct business in defence and security sector in Czechia. Yet, since its creation in 2000, this assemblage of industries within DSIA's market position is falling, in fact. Neither political parties in power, nor the governments have been able to support national defence industry through the small military. Just a few DSIA national members are able to compete internationally with their cutting-edge products. Others have evolved into middlemen trading intime-expired Czechoslovak equipment retired from the Czech Armed Forces.