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Analysis
  The return of hard power

The return of hard power

Governments increase defence spending

by David Skilling in Singapore

Wed 19 Jul 2017

France celebrated Bastille Day with a military parade in front of Presidents Emmanuel Macron and Donald Trump. France has one of the largest military forces in the world and spent 2.3% of GDP on defence in 2016. This is among the highest in Europe, according to the Stockholm International Peace Research Institute, although less than the US, which committed 3.3% of GDP.

Military spending is increasing strongly in many parts of the world, notably Asia and the Middle East. In part, this reflects economic growth in large emerging markets. China’s military outlay has increased by around 120% since 2007 in constant dollar terms, according to SIPRI. 

The rise in expenditure reflects, too, a changing global context in which hard power is back: Russia and the Gulf have increased spending over the past 10 years. In contrast, many advanced economies have cut back, from 3-4% of GDP in the 1980s to around 2% on average in 2016. But this reduction has flattened off, and it appears to be reversing.

In recent decades many small countries have spent less than their larger neighbours on defence as a share of GDP. Across advanced economies, small countries – defined here as Austria, Belgium, Denmark, Finland, Israel, Netherlands, New Zealand, Norway, Singapore, Sweden and Switzerland – have particularly low levels. In 2016, Denmark spent 1.1%, Sweden 1%, and Austria and Switzerland 0.7% each. The exceptions are those with specific security risks, such as Israel and Singapore, which commit substantially more (5.8% and 3.4% of GDP respectively). 

Many of the small countries banked the peace dividend from the 1990s. Excluding Israel and Singapore, their military spending declined from an average of 2% of GDP in 1990 to 1% in 2016. But over the past few years, small countries have become concerned about adverse developments globally, from the risks of protectionism to the return of big-power politics. The group’s military spending has stopped declining as a share of GDP. It grew by over 4% in 2016, even in a period of fiscal constraint. Part of this may be due to pressure to meet Nato’s 2% target for defence spending, but it also reflects the need to take greater national responsibility in the face of growing risks.

Indeed, in addition to these spending decisions, there is a marked increase in strategic focus on military issues. Non-Nato countries, notably Sweden and Finland, are debating membership options in response to Russian actions, such as repeated incursions into air and maritime space.

Sweden is reintroducing conscription from next January, having abolished it in 2010. It plans to station troops permanently on Gotland, a strategically important island in the Baltic Sea, for the first time since 2005. Neighbouring Denmark is investing $3bn in 27 F-35A stealth fighters. Singapore has added new ships and submarines to its capacity, and is continuing to upgrade its air force. Even New Zealand, which is insulated from direct military threats by its physical isolation, is becoming more active. It released a defence white paper last year committing to spending $10.25bn on new equipment over the next 15 years. Nevertheless, at 1.2% of GDP in 2016, its military spending remains shy of Australia’s 2% commitment.

Some of these decisions reflect idiosyncratic national exposures: to a more assertive Russia or a more complex security environment in Asia. But the consistent pattern of military spending increases and the intensity of activity in small countries is noteworthy, suggesting a complete change in the interpretation of the strategic environment.

Small countries have a reputation for strong economic and social outcomes. From Switzerland to Singapore, they have high levels of soft power. But to an increasing extent this is not seen as sufficient. The increased military spending across small countries is a signal on the changing world environment that should be taken seriously.

David Skilling is Director of the Landfall Strategy Group, a Singapore-based economic advisory firm.

 

 

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