National Security

The French Connection

Why is the United States paying for its ally's adventures in Africa?

French forces launched a military offensive last week in Mali to push back Islamic militants and help the nascent government assert control in the northern part of that former French colony. Although senior U.S. officials have expressed interest in the fight because of the militants' connection to al Qaeda's North African franchise, the White House declined to intervene directly. Instead, the Defense Department has dispatched surveillance, refueling, and transport aircraft to aid the French effort, providing their troops with the capability to conduct sustained combat operations roughly 2,500 miles from Paris. Since then, the U.S. and French governments have tussled over what, exactly, the United States would do to support the Mali campaign, and how much, if anything, France would pay for this support.

However, this diplomatic row obscures a much larger issue between the U.S. and its European allies. Put bluntly, France and NATO countries spend too little on their defense to afford the kind of global power-projection capability they need to support missions like Mali. This problem will likely grow worse as U.S. defense budgets go down and European countries continue to spend their funds on other priorities. The Mali campaign shows both the problem, and also a possible solution, blending French willingness to put their boots on the ground with the substantial global capabilities of the U.S. military.

At a very fundamental level, every nation must identify its interests and choose the best ways and means to pursue them. For decades, the United States has chosen a robust defense strategy, providing its military with trillions of dollars to develop the capabilities it has today. For better or worse, the French have invested their money differently, opting to spend a much smaller percentage of its GDP on defense, dedicating public spending to other priorities such as social welfare programs. France currently spends 2.2 percent of its GDP on defense, compared to U.S. defense outlays that equal 4.7 percent. The French level of spending gives them the capability to act -- such as their deployment of ground troops to Afghanistan or ground-attack planes to Libya -- but not the capacity to sustain such action for weeks and months.

Enter the U.S. Air Force, with a fleet tied together by a global network of command, control, communications, and computing systems. Although Washington's immediate dispute with Paris was triggered by a request for approximately $20 million to cover the operational costs of supporting French forces, these costs represent a tiny fraction of the investments it takes to build the capability and capacity to deploy forces around the world, command them, sustain them logistically, and provide precision strike capabilities to support them in combat.

The biggest costs are the aircraft themselves. The C-17 cargo aircraft is the workhorse of the Air Force, capable of conducting transoceanic flights with mid-air refueling en route, and delivering an infantry company (sans equipment) with every planeload. Each C-17 costs roughly $225 million; during the past three years alone, the Pentagon spent $4.5 billion on procuring new C-17s and maintaining older ones. The per-plane costs include some of the extensive research and development that went into these aircraft, but not all of it. The C-17 leverages decades of Air Force investment in previous aircraft such as the C-130, C-141, and C-5, as well as the broader U.S. aerospace industry. The end result from all these billions of dollars is an ability to project power around the world that is unparalleled by any other country -- in large part because no other country spends what is necessary to develop and maintain these capabilities.

However, planes without people are nothing. Even though it takes only three people to fly a C-17, maintaining and operating a fleet of cargo aircraft means the Air Force must recruit, train, house, pay, and care for thousands of pilots, technicians, mechanics, and support personnel. The average cost per active U.S. servicemember is $385,000 per year -- and pilots are significantly more expensive because of the millions of dollars necessary for initial and refresher training. And that figure does not include military retirement costs, nor the long-term care and benefits provided by the Department of Veterans Affairs. France does maintain a sizable military force, but its air force lacks the size and transport capability to truly give France a capacity to sustain global deployments like the current mission to Mali.

In addition to planes and people, there are substantial operations and maintenance costs. Here again, the U.S. global transport capability rests on decades of multi-billion dollar investments in military training exercises, operations in Iraq and Afghanistan, and continuous maintenance for its aircraft. The C-17 costs roughly $12,000 per hour to fly, and U.S. airmen have logged many millions of miles, particularly over the past 12 years of war. These expenditures, combined with the procurement of people and machines, are necessary investments for any country if it wants to have the ability to move men and materiel around the world on a moment's notice, as the United States has done in Iraq, Afghanistan, Haiti, Korea, and countless other locations in the past decade.

For years, Republicans and Democrats alike have asked our allies (particularly those in NATO) to shoulder more of the cost for providing security in our interconnected world. To their credit, many allies -- including the French, Germans, British, Italians, Canadians, Australians, and Poles -- maintain robust ground forces and have provided significant numbers of troops in Afghanistan. However, these same countries have largely refrained from the types of long-term investment in their defense capabilities necessary to secure their interests (and ours) in places like Mali, Libya, or Syria. And, for better or worse, the United States enables this behavior by continuing to backstop these missions, whether with precision-guided munitions for the Libya campaign, or strategic airlift for the Mali offensive.

This tradeoff may be worthwhile in the short term. French forces are, after all, bravely sallying forth into the heart of northern Mali, where they are fighting Islamic militants who may, one day, seek to export violence to the West. This serves our interests as well as those of the French. And it may be the case, as Kori Schake writes, that denying such support now would merely antagonize our allies, and do nothing to force the French (or other allies) to pay for more of their foreign policy.

However, in an age of fiscal austerity and declining defense budgets, we cannot afford this arrangement indefinitely, or justify such expenditures for future conflicts where we have a tangential interest at best. At some point the United States must force this issue with its allies, lest we create a moral hazard by allowing France and other friends to construct a foreign policy that's built on a foundation of U.S. military capability and funded by U.S. taxpayers. We need a new business model for NATO, one in which our allies share their security burdens more smartly, with greater complementarity and collaboration between allies than we have today. To date our allies have resisted this model, largely because they think it will diminish their sovereignty. This must change, and only a "tough love" policy, such as the one being pushed by the White House on France now, will incentivize our allies to shoulder their share of the task, whether in Mali or the next place where we act in the world.


Democracy Lab

India's Missing Ingredients

Indian growth is slowing. But there are two key reforms that will help.

Using its obligations to the IMF as political cover, India's government kickstarted the long-delayed process of liberalizing the economy back in 1991. The reforms -- and the economy -- have largely been a good news story ever since. Indeed, with growth averaging seven percent annually until the worldwide financial crisis in 2007, there was even talk that India would give China a run for its money as an emerging market powerhouse. But lost somehow in the tide of enthusiasm was the reality that two key IMF-prescribed reforms -- fundamental changes in labor and tax laws -- were left incomplete.

It's become increasingly evident by now that the bloom is off the rose. Last year, India recorded the lowest growth rate in a decade (4.9 percent). The Kelkar report on fiscal consolidation also warned of adverse consequences in light of the widening fiscal deficit (6.1 percent of GDP in 2012-13). While the failure to complete the reforms explains in part why growth has slowed to a shuffle (by Asian standards, anyway) it also represents an opportunity: Finishing the job now would sweep away a variety of barriers to business development, helping to pull the economy out of its slumping trajectory. The big question is whether the changes are possible in the teeth of rising inflation, massive corruption scandals, and populist blowback led by opportunistic politicians.

In a large fractious democracy like India, reforms are always difficult to pass. And arguably more difficult than usual given current political circumstances: India is ruled by the Congress party-led coalition, United Progressive Alliance (UPA), that has been forced to include innumerable parties that oppose reform in order to stay in power. It doesn't help, of course, that few in the UPA leadership have the motivation or communication skills to sell the benefits of reforms to a skeptical public.

But I get ahead of myself. Since the 1991 reforms, national income has quadrupled but employment rates have stagnated. While growth has reduced poverty and added tens of millions to the middle class, a shockingly high portion of working age adults are either unemployed or underemployed in low-productivity tasks. That's in large part because India's labor laws are complex and highly restrictive.

The Industrial Disputes Act, adopted in the wake of independence by India's Fabian socialist leaders, dictates what employers can and cannot do, which can be summarized as "very little." Among other provisions, businesses employing more than 100 can't hire or lay off workers without government permission. Thus taking on workers means you probably have to keep them unless you go bankrupt -- a very good reason to make do with as little labor as possible.

By the same token, the tax laws are far from business-friendly. Rates are high and provisions are complicated enough to puzzle the lawyers in Bleak House, a reality that gives businesses incentives to develop convoluted avoidance strategies or simply to bribe the tax man. At the beginning of its second term in 2009, the current government promised to lower the corporate tax rate from 30 percent to 25 percent. However, the initiative is stalled in Parliament. Today the World Bank ranks India 152 out of 185 countries on tax practices in its Ease of Doing Business Index.  

By no coincidence, a shocking 90 percent (not a misprint) of the Indian work force is employed in the informal sector, where labor laws are largely irrelevant and taxes can be easily evaded. But this flexibility comes at a high cost to both employers and employees who face, among other problems, the loss of social safety nets. Informal-sector workers also miss out on government training schemes that could increase their productivity and wages. Plainly, the government should be using labor and tax reform to coax as many informal businesses as possible into the formal sector and encouraging the growth of businesses to more efficient scale. The World Bank's 2013 World Development Report, which focuses on labor issues, surveyed businesses in 102 countries, finding (among other things) that larger firms are likely to be more productive and thus to pay more, innovate more and compete in export markets.

But deregulation is still a hard sell in India. The loudest voices in opposition are those with a vested interest in business-as-usual -- trade unions protecting job security in the formal sector, legal businesses avoiding competition from new entrants, corrupt bureaucrats preying on the informal sector. And advocates of reform have struggled to make the case for changes that will add considerable risk as well as opportunity to the lives of most.

This struggle is a familiar one. In most political systems, small groups with focused, clearly defined interests can typically veto change that would serve the majority. What's more, myopia all too often trumps long term thinking. In India, after all, even privileged insiders have much to gain from rapid, sustained growth. If you doubt it, compare Indians' wages to those of South Koreans, who were among the least productive workers on earth in the 1960s.

Note, too, that luring businesses into the formal sector would broaden the tax base, generating revenue that could be used to extend the social safety net beyond the 8 to 9 percent of the workforce that is currently covered. Today, about 4 percent of Indians pay 70 percent of the total tax in India. Friendlier labor laws combined with tax reform could undoubtedly increase the tax-to-GDP ratio.

The stakes in the battle to complete the reforms sooner rather than later will be particularly high in the coming decade. As India's birth rate falls and life expectancy stabilizes, the portion of the population that is of working age will grow. This will yield what economists call a "demographic dividend" -- a period in which the burden of supporting the dependent young and old will be relatively light, leaving more income to plow back into investment.

But there's an obvious catch: To harness the dividend, jobs will have to be created to accommodate the seven million workers added annually to the workforce. The UPA introduced the New Manufacturing Policy to this end, aimed at increasing the share of manufacturing in GDP from a strikingly low 16 percent (the figure is above 45 percent in China) to 25 percent and to add 100 million jobs by 2022. This is a classic case of putting the cart before the horse -- those jobs won't be created if tough labor restrictions remain in place. An analysis by CRISIL, an Indian consulting group, concludes that, without major reforms, the share of manufacturing in GDP will only reach 17 percent.

One strategy for disarming popular opposition for further reform is to try it in individual states that are more receptive. India's 28 states, which have widely diverse political and economic cultures, could serve as mini-laboratories to test what works and to make a case for reforms accordingly. There's already some evidence of the benefits of reduced labor regulation from interstate comparisons. A 2012 survey by the Indian government's labor bureau concluded that "some of the states having pro-labor rights policies have not performed well in terms of unemployment rate."

That said, the best of worlds would still be one in which labor and tax reform law were fast-tracked. But is that world possible? The state of Indian politics offers little room for optimism. Consider, for example, the fate of the initiative for opening Indian retailing to foreign direct investment by big-box establishments like Walmart and Tesco that could dramatically cut consumer costs.

When Prime Minister Manmohan Singh introduced the foreign direct investment (FDI) initiative in 2011, nobody was surprised when parties of the left denounced it. What was dismaying, though, was the opposition of the Bharatiya Janata Party (BJP), the leading right-wing opposition party. It had championed FDI when it was in power in 2004, but apparently couldn't resist the chance to attack the government in a moment of vulnerability. The government did prevail -- but only after a year of delay. And the battle, needless to say, bodes ill for passage of even more controversial -- but necessary -- labor law reform.

In September 2010 The Economist predicted that the Indian economy would soon outshine China's, considering its advantages in "democracy" and "demography." Two years later it seems that, once again, Indian politicians have snatched defeat from the jaws of victory. A billion people are worse off for their incompetence and venality. It would be a shame if India had to wait for another crisis and another intervention by the IMF to unleash reforms when we already know what needs to be fixed.    

Photo by SAM PANTHAKY/AFP/GettyImages