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.     

Country survey XVII: New zealand's defence policy

New Zealand's current defence strategy, first expressed in NZ Government (1991), is one of "self-reliance in partnership". We outline the country's defence policy in historical context, examine its current defence expenditure and capabilities, and document the genesis of recent major changes in security policy. We pay particular attention to the role of explicit economic analysis and advice in the formation of these policy changes.     

Optimal versus required defence expenditure: The case of the Greek-Turkish arms race

The aim of this paper is to indicate the extent to which the arms race against Turkey, in which Greece and Cyprus have been entangled, imposes a defence expenditure burden that is tough for the two allies to bear. To do so we have resorted to evaluating the optimal military expenditure for the two countries, allied in the context of the Integrated Defence Doctrine, which is compatible with the constraints imposed by the resources of their economies. All experiments and scenarios examined lead to the conclusion that the current defence burden of the two allies seems to be driving their economies beyond capacity limits. The fact remains, however, that under the circumstances, a one-sided disarmament policy like the one currently followed by Greece, is a risky choice given that the long-term armament programmes pursued by Turkey, whose role in this arms race has been proven as leading, leave very small room to the Greek and Cypriot sides to reduce their own defence expenditure.     

AN ECONOMIC ANALYSIS OF SECURITY POLICIES

This paper analyses public policy choices in the security economy from an economic perspective. It discusses the role of public goods for national and global security and identifies the importance of the first‐ and second‐order indirect effects of insecurity on economic activity, which include the behavioural responses of agents and the government to security measures, akin to such effects in insurance economics. Furthermore, key public policy trade‐offs are outlined, in particular between security and efficiency, globalisation, equity and freedom. The analysis identifies suitable policy options for raising security in the national and international contexts and in view of these trade‐offs. A balance between market and non‐market instruments in achieving security should be aimed for in order to minimise the adverse effects of aiming for higher security. In addition, the public good nature of security implies that international coordination of security policies is important, despite this process being fraught with enforcement problems.     

Reward,punishment or inducement? US economic and military aid, 1946–1996

If the US has wielded power as global hegemon, then there should be evidence of a linkage between American resources and the ability to influence behavior. However, there is widespread disagreement on how this power is manifested (see Krause, ). Methodological and epistemological issues have hampered empirical studies of US hegemonic behavior. For example, does the US reward past behavior or does it offer inducements for future behavior? We document and discuss these issues in terms of the aid–foreign policy compliance nexus. The empirical portion of our paper tests whether US military and non‐military aid are correlated with foreign policy similarity. The main merits of our study are that: (1) we test a new measure of foreign policy similarity developed by Signorino and Ritter () and compiled by Gartzke et al. (); (2) we relax the causality issue and test using vector autoregression (VAR) for 76 developing countries; and (3) our time horizon is a minimum of 30 years for each country. Our central finding is that aid is most often used as a reward. More specifically, foreign policy similarity leads to greater economic aid for most African countries, foreign policy similarity leads to greater military aid for a majority of Latin American states, and there are no overarching patterns for Asia and the Middle East. We discuss the implications of our findings in the context of the bargaining and structural approaches to statecraft.     

Domestic political and external security determinants of the demand for greek military expenditure

By European Union and NATO standards, Greece consistently allocates substantial human and material resources to defence. The Greek defence burden (i.e. military expenditure as a share of GDP) has invariably been appreciably higher than the EU and NATO averages. The paper applies an autoregressive distributed lag model (ARDL) to present cointegrated estimates of the demand function for Greek military expenditure, in which domestic political factors and external security determinants are incorporated. Our empirical findings suggest that Greek defence spending over the period 1960-1998 has been influenced by both external security concerns, namely Turkey, as well as changes in the domestic political scene.     

AGENDA FOR DEFENSE AND PEACE ECONOMICS

This brief introduction celebrates the 20th Anniversary of the Journal, Defence and Peace Economics. Suggesting elements of an agenda for the future of this branch of economics, I raise several topics that are new and that seem to indicate that the field will expand and shift focus substantially in future years.     

COURTING THE GLOBAL SOUTH WITH “DUAL-BENEFIT” NONPROLIFERATION ENGAGEMENT

President Barack Obama and an array of other Western leaders continue to assert that the spread of weapons of mass destruction (WMD) to non-state actors is one of most pressing challenges to global security today. Yet, Western efforts to engage governments—particularly governments across the global South—in a practical nonproliferation dialogue have largely yielded disappointing results. This viewpoint examines the need for a new strategy to engage the developing world in nonproliferation programs. It argues that strategies focused strictly on WMD nonproliferation are unsustainable, and ultimately are destined for failure. An alternative “dual-benefit” nonproliferation engagement strategy utilizes the enlightened self-interest of partner governments needed to achieve broad-based buy-in among all partners. In a concluding section, we recommend that the “Group of 8” Global Partnership Against the Spread of Weapons and Materials of Mass Destruction standardize this model of nonproliferation engagement as it sets out to identify and fund WMD nonproliferation capacity-building initiatives beyond the states of the former Soviet Union.     

THE PROLIFERATION SECURITY INITIATIVE

The Asia-Pacific is emerging as a critical region in the fight against the proliferation of weapons of mass destruction. The Proliferation Security Initiative (PSI) is an aggressive global strategy designed to interdict the transport of these weapons and associated technologies. However, some observers have suggested that the Asia-Pacific has given the PSI a less than enthusiastic reception. The authors posit a more sanguine view. They caution against taking such a holistic approach to the region. Asia does not speak with one voice when it comes to security, and opposition to the PSI is not as widespread nor deep-rooted as may have been anticipated. In addition, the PSI's informal structure encourages flexibility, enabling states to participate in certain activities while eschewing others that may be technically or politically untenable.     

THE ORIGINS OF AND PROSPECTS FOR RUSSIAN NUCLEAR DOCTRINE

This article explores Russia's increasing reliance on nuclear weapons from three perspectives. First, it seeks to demonstrate that the phenomenon is not exclusively limited to Russia and represents a broader trend, which is ultimately rooted in the nature of the contemporary international system or, more precisely, the uncertainties of the transitional period between the Cold War system and a new emerging one. Second, it analyzes the role assigned to nuclear weapons in Russia's doctrinal documents, in particular the emergence of a new mission—limited-use of nuclear weapons to deter or, if deterrence fails, to de-escalate large-scale conventional conflicts. Discussions of the new doctrine, which have begun recently, suggest that this new mission will likely remain unchanged. Finally, this article looks at the apparent discrepancy between Russia's nuclear modernization programs and the roles assigned to nuclear weapons in the military doctrine, as well as the causes of that discrepancy.