The Worst Kind of Stimulus

Why a global weapons boom is the last thing we need.

By virtually all accounts, we are now in the midst of a global recession that shows no sign of improving anytime soon. During an unprecedented economic downturn like this, you might expect governments to be cutting back on unnecessary spending and pouring all their scarce resources into shoring up their economies and salvaging their imploding banking sectors. And you might think that, with the World Bank now warning that developing countries face a financing shortfall of up to $700 billion, wealthier nations would be husbanding their cash in case their help is needed.

But you'd be wrong. In fact, governments around the world are throwing billions into the one sector of their economies that will probably do the least good for the world: their military-industrial complexes.

The United States is a case in point. Last month, the Obama administration released a budget blueprint for the upcoming fiscal year that included $534 billion for the Department of Defense, as well as $130 billion for the wars in Iraq and Afghanistan. At $534 billion, President Barack Obamas Pentagon budget is $9 billion, or 1.7 percent, greater than the previous years budget after adjusting for inflation.

Rather than immediately reducing defense spending, as some U.S. liberals have called for, the Obama administration plans to institute change by providing more money for U.S. military personnel and less money for high-priced weapons systems. Given the manpower-intensive requirements of Iraq and Afghanistan, prioritizing men and women in uniform makes sense. Nevertheless, the usual complex of corporate-political interests stands ready to thwart any effort to recalibrate Pentagon spending.

Lawmakers on Capitol Hill are all too eager to aid defense industry lobbyists campaign to stifle progress; even under favorable economic conditions, members of Congress hate to cut funding for weapons built back in their home districts. Even after the Democratic partys takeover in 2007, Congresspeople have insisted on funding programs their constituents wanted but the Pentagon said it didnt need, such as the F-22, DDG-1000 destroyer, and the alternate engine for the Joint Strike Fighter. President Obama may have every intention of ending the days of giving defense contractors a blank check, as he said last week, but powerful entities block the road to reform.

The United States is hardly the only country ramping up military spending in 2009. China announced it would increase its defense budget by 15 percent over last years level. India said its increase would be a staggering 34 percent. And while Russia plans to submit a defense budget that is approximately 15 percent less than last years, it still intends to spend $111 billion over the next three years to purchase new weapons and modernize its armed forces.

Meanwhile, the United States remains far and away the global leader in overall defense spending. Consider that in 2007, the most recent year for which accurate data is available from the International Institute for Strategic Studies, the United States spent more on defense than the next 14 highest spending countries combined; accounted for 43 percent of the worlds total defense spending; and spent five times more on defense than China, eight times more than Russia, 85 times more than Iran, and 100 times more than North Korea. (These calculations were made using the highest possible budget estimates for these countries, whose precise spending levels are unknown.)

Despite its overwhelming dominance in overall spending, the United States did not have the fastest growing defense budget in the world between 2005 and 2007, the most recent period for which an accurate assessment is possible. That distinction belongs to Kazakhstan, which saw its defense budget increase by 84 percent. Other countries with booming budgets during this period included Angola (80 percent), Ukraine (57 percent), Jordan (57 percent), and Slovakia (55 percent). The United States, China, and Russia had more modest growth rates of 17 percent, 27 percent, and 33 percent, respectively.

In light of this rampant growth, the obvious question is: Why the unyielding surge in international defense expenditures? One explanation is that perceptions of threat have increased worldwide thanks to the ascension of previously inward-focused countries (such as China and India) and non-state actors into more prominent international roles. As countries survey the security environment today, they see more sources of potential danger than ever before. This fear is easy to act upon in the globalized international defense market, where armaments can be obtained from various state and private sources.

The greatest danger, of course, is that all this defense spending will set off a global arms race. History has shown that when one country elects to spend more on its military, other countries feel they have no choice but to accelerate their own defense buildups in response.

Will global defense spending slow down if economic conditions do not improve? Its doubtful. While there may be modest reductions on a country-by-country basis, economists agree that the worlds most powerful countries can still afford to spend as much on defense as they deem necessary without seriously endangering their national economic solvency even if other kinds of spending, such as for infrastructure or education, are ultimately more socially desirable ways to create long-term growth. If 2009 defense budgets are any indication, the profligate overall growth in global military expenditures does not appear likely to cease anytime soon.


Trade War

The United States depends on other countries for its military superiority, and that's a good thing.

Since U.S. President Barack Obama has taken office, the debate between economic protectionism and free trade has reemerged with a vengeance. Just this week, British Prime Minister Gordon Brown dinged the new president's allies in Congress for inserting a controversial Buy American provision in the stimulus bill passed in February.

The most important strategic decisions over trade that Obama will face will not be about French cheese or the Chinese yuan, however, but over the dozens of countries around the world that, during the past few decades, have become critical in supplying the U.S. military with the latest technologies and best equipment. These foreign suppliers are significant, and increasingly vital, contributors to America's military superiority.

Given that the purpose of military procurement is to ensure competitive advantage over other countries' technological arsenals, the idea of depending on foreign sources for military equipment might seem ill-advised, even dangerous. But in fact, virtually every weapons system used by the U.S. military today contains components that were manufactured or designed somewhere else.

Take, for example, the Army's new mine-resistant, ambush-protected (MRAP) vehicles. Designed to protect soldiers in Afghanistan and Iraq, they have a V-shaped hull that was originally developed and refined in South Africa, along with armor that was designed in Israel, robust axles from Europe, and electronics from Asia.

The Medium Extended Air Defense System (MEADS) is a joint development and production program between the United States, Germany, and Italy; the United States' Advanced Medium-Range Air-to-Air Missile (AMRAAM) is the result of the efforts of more than 20 countries and is manufactured using 14 foreign subcontractors. Even Obama's new helicopter will be based on an Italian design and partially produced in Britain. The list goes on and on.

Of course, critics argue that these arrangements are incredibly dangerous. After all, couldn't the U.S. weapons supply be cut off during wartime if the country were too reliant on foreign parts? Most of these foreign sources, however, are from NATO nations or other countries with which the United States has had enduring military and commercial relationships. For example, despite very public opposition in some of these countries to U.S. actions in Afghanistan or Iraq, at no time did foreign suppliers (including 20 German and two French suppliers) restrict the provision or sale of components.

Skeptics also worry about Trojan horses built into foreign-supplied systems, particularly in the case of software. But this potential threat can be addressed through extensive and rigorous testing and reverse engineering, just as occurs in the financial and medical communities. Still others raise serious and legitimate concerns about military technology leaking into the hands of rogue regimes or terrorists or being sold to third parties without U.S. knowledge. These are certainly excellent arguments for international arms-control treaties. But there's no reason why such treaties need preclude legal arms trade among allies, along with mutually agreed-to verification techniques.

More commonly, opponents emphasize the potential loss of jobs that might occur as a result of buying equipment from offshore firms. This was the argument critics in the U.S. Congress fell back on in March 2008 when the U.S. Air Force awarded a contract to build a midair refueling tanker to Northrop Grumman over rival Boeing.

What made Northrop's bid controversial was that it planned to convert commercial aircraft built by European conglomerate Airbus for military use. Parts would be built in Europe and then shipped to the United States for assembly in Alabama. The response from Congress was as predictable as it was wrongheaded. Members from both parties swiftly denounced the decision to reward the lucrative contract to a foreign firm.

We should have an American tanker built by an American company with American workers, said U.S. Rep. Todd Tiahrt of Kansas during a debate on the deal. I cannot believe we would create French jobs in place of Kansas jobs.

The Defense Department is not a social welfare organization, and its sole responsibility is to supply U.S. war fighters with the best equipment at the best price. Luckily, though, these two goals aren't mutually exclusive: Military globalization is in fact a blessing for Americans.

The United States is still the world's largest military customer, and it's in the interest of international weapons manufacturers to do business where the buyers are. In the past decade, a number of major international firms have set up shop in the United States. In fact, the Northrop deal would have created tens of thousands of U.S. jobs -- though admittedly not in Tiahrt's district, where Boeing happens to have a plant.

But the arguments for military globalization aren't just economic. U.S. national security policy, for at least the past five decades, has been based upon technological superiority. But it's no longer the case that the best military technology is always American (e.g., flat screens from Taiwan or optics from Germany). Therefore, for the United States to gain the best possible technologies, it often must turn to foreign sources.

It is also inconceivable that the United States would be involved in any future military operation without being in some form of international coalition. This is primarily for geopolitical reasons (rather than simply military ones), but its importance cannot be underestimated. When operating in a coalition environment, the United States must be able to operate interchangeably with its allies, and it must have the best possible equipment.

Despite the benefits that military globalization has already brought, Congress continues to pass laws blocking its expansion. And these laws can sometimes be directly detrimental to military operations. In 1998, export controls enforced by the State Department held up the production of a U.S. fighter plane for seven months while a U.S. company waited for an export license to supply technical data to a Dutch company that was building parts for it. These controls even prompted one major German defense contractor to instruct its employees to avoid U.S. defense goods at all costs.

The 1993 Buy American Act requires that 51 percent of all purchases by the Pentagon be produced in the United States. This often results in foreign-designed weapons systems being transferred to the United States for production at a significant increase in cost to the American taxpayer. Congress has occasionally flirted with expanding the act to cover all military purchases (in fact, in 2004, the House of Representatives passed a law that all parts of all weapon systems must be made in the U.S., on U.S. machine tools). This requirement would have had disastrous consequences for military procurement and in some cases would have required the government to create entirely new (subsidized) industries. (Fortunately, the Senate did not concur, so it did not become law.)

Deciding to wait on resolution of the Air Force tanker controversy, Defense Secretary Robert Gates essentially shelved the issue for the next administration to decide. It will be up to Obama -- who attacked the deal on the campaign trail -- to resolve this matter and the issue of military globalization more generally. How the United States handles the globalization of the defense supply chain will be one of the key, but unheralded military challenges of the next administration. It is critical that Obama recognize the benefits of globalization and move toward policies that ease military cooperation between trusted allies, rather than stifling them. He will likely quickly learn that the integration of foreign suppliers into the U.S. supply chain has already progressed to the point where politicians couldn't reverse it even if they wanted to.

But there are still important decisions to be made in the coming years. For example, as the United States fights alongside its NATO allies in Afghanistan, all countries will need the best possible equipment, not just equipment designed and built in their respective countries. (And, the equipment must be capable of interoperating in order to gain maximum advantage against a common enemy.) As usual, this is already happening. Because the Department of Defense has not been heavily investing in advanced helicopter technology, when the Air Force recently needed a new combat search-and-rescue helicopter, the department selected a European design as the best available.

The United States must face the fact that it no longer has a monopoly on the world's best military technology. America's path toward future stability involves cooperating with allies and taking advantage of the best they have to offer, not cutting itself off and watching as its military superiority slips away.

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