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The latest arms report has something for everyone

The Stockholm International Peace Research Institute (SIPRI) just released their 2012 report on trends in world military expenditures. The report -- hell, just the press release -- should please a lot of people in the foreign policy community, albeit for different reasons. 

For those decrying the global arms race, the topline figure should be cause for cheer: 

World military expenditure totalled $1.75 trillion in 2012, a fall of 0.5 per cent in real terms since 2011, according to figures released today by Stockholm International Peace Research Institute (SIPRI).

Hooray! Fewer arms, more hugs, or something like that!! 

For neoconservatives, however, the reasons behind that drop in aggregate defense spending will vindicate their worries. The press release confirms the decline in U.S. hegemony in defense spending: 

In 2012 the USA’s share of world military spending went below 40 per cent for the first time since the collapse of the Soviet Union. A declining trend that began in 2011 accelerated in 2012, with a drop in US military spending of 6 per cent in real terms to $682 billion....

US military spending in 2012 was also projected to be $15 billion lower than previously planned as a result of cuts to the Department of Defense linked to the 2011 Budget Control Act. The bulk of cuts under this legislation will begin in 2013. 

So, with the decline in U.S. military expenditures, we're in real danger of being overtaken by the Chinese, right? Well ... there's enough grist in the report for neoconservative skeptics as well. 

The fact sheet puts this decline U.S. defense spending in the proper perspective. The United States still spends four times as much on defense as the next-biggest spender (China). Furthermore, "US spending was still more than the combined spending of the next 10 countries (p. 4)." 

Will China's defense spending eventually match the United States? Assuming China grows at a healthy clip -- hardly a guarantee -- sure. But as the Economist noted a few weeks ago, tweaking those assumptions just a tad leads to some very different predictions about when defense parity will occur: 

When will China catch up to the U.S.?  It's complicated...

What's more intriguing is the effect of the Great Recession on defense spending: 

Even in those parts of the world where spending has increased, the effects of the economic crisis can still be seen: slowing economic growth in emerging regions has led to slower rates of growth in military spending. Only the Middle East and North Africa increased their rate of military spending between 2003–2009 and 2009–2012.

The average annual rate of military spending increase in Asia, for instance, has halved from 7.0 per cent per year in 2003–2009, to 3.4 per cent per year in 2009–2012. The slow-down was most dramatic in Central and South Asia, where military spending was growing by an average of 8 per cent per year in 2003–2009, but by only 0.7 per cent a year since 2009, and actually fell in 2012, by 1.6 per cent.

Here's the chart: 

The Great Recession constrained military spending

That chart massively undersells the decline in defense spending, because it measures absolute levels of military spending and not spending as a percentage of global output. If you use that metric, then defense spending's share of the global economy has fallen by about half since the end of the Cold War. 

It's almost as if the 2008 financial crisis and subsequent recession didn't trigger the arms races and general increase in political conflict that some expected would happen. It's almost as if the current threats to national security aren't as serious as they were back in the day. 

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