THE $54-billion, 9.4-percent increase in American defense spending, trumpeted by President Donald J. Trump and his aides last week, including his speech atop the USS Gerald Ford, the most technologically advanced aircraft carrier on the planet, is sure to keep generals, admirals and accountants, too, worldwide up nights doing sums.
Bullet counters in Moscow would figure that the proposed hike amounts to four-fifths of Russia’s annual defense budget. Their counterparts in Beijing, with the second-largest military spending after Washington’s, would calculate the planned boost to US defense outlays at about a quarter of the People’s Liberation Army’s (PLA) budget of about $220 billion, though analysts routinely note that the PLA hides a big chunk of its kitty.
Where will all those wads of added greenbacks go, assuming the Republican-controlled Congress goes along with the unpopular, even painful, nondefense budget cuts, including State Department and foreign-aid allocations, needed to finance the Pentagon’s new toys?
Well, first of all, about two-thirds of the spending lift is actually already spoken for. That’s how much the United States military exceeded budgetary caps this year. Keeping those over-the-cap programs and projects going would consume $35.5 billion of Trump’s proposed boost in the 2018 budget.
That still leaves a hefty $18 billion, and defense experts interviewed by Wired magazine want to see much of it go to just keeping current equipment working, not buying new stuff. Basic maintenance gets pared down every budget crunch; that’s why half the FA-18 fighter squadrons, among other gear, are grounded.
The guys using the gear now want upkeep funding up. By how much? Wired cites $8 billion as one estimate. And Defense Secretary James Mattis may be of the same mind, if not that exact amount. He recently outlined a plan stressing force readiness over new battalions and weaponry.
Follow the guns and the money
Assuming the Wired numbers check out, the $10 billion left in Trump’s proposed increase, while not peanuts at all, would hardly budge global arms spending of around $1.6 trillion a year. Nor would it shift what a McKinsey article called the center of gravity in world defense spending.
As explained by Andrew Erdmann of McKinsey’s Washington office, that gun-buying fulcrum has bounced around between America and Russia, depending on the nations fighting wars, as well as the ones getting wealthier or less wealthy (see https://www.mckinsey.com/industries/public-sector/our-insights/global-defense-spending-the-shifting-center-of-gravity?cid=other-eml-alt-mip-mck-oth-1703).
For much of the last century, it stayed in Europe, as the continent’s powers fought two world wars. The gravity hub moved west to the mid-Atlantic when the US ramped up its forces and defense industries to muster men and materiel for the two conflicts in Europe. Then the center moved back to Europe after Uncle Sam went home to wartime victory celebrations and wound down its military outlays.
In the past decade, the gravity of gun spending has drifted further east and, for the first time, southward, as Western nations cut defense budgets amid global recession and financial rescues in 2008 to 2009, and conflict-spooked, oil-bankrolled Middle East states and economically robust Asian nations upgrade and upsize their militaries.
Those twin trends of increasing frictions and rising wealth on the Asian continent seem likely to continue, keeping the center of gravity for defense spending pretty much where it is, for now. But expect it to shift if, as expected, Trump pumps up the US military, and pressures its European allies to spend more for their security.
More bang and byte for the buck
Now if one expects that more guns, tanks, ships and planes would make nations feel safer, think again. Gearing up by one army and navy invariably worries the neighbors, and often fires the starting gun for an arms race. Which can only make arms makers ride their tanks laughing all the way to the bank. A McKinsey survey of defense contractors worldwide in 2014 tipped that military sales won’t fall much in the coming years, with the outlook for Asia Pacific and the Middle East remaining most
positive among all regions.
The McKinsey survey cited the Middle East, the US and India as the top markets this year. But rather than purchasing top-dollar state-of-the-art weaponry, more and more armies want affordable items, due to budgetary pressures, as Arab oil revenues slip, and maturing East Asian economies see slower growth and increased social spending needs.
So, don’t expect Arab and Asian generals to line up for the most advanced jet or rocket. But there is one area where topnotch technology is a must. Cyber security, reports McKinsey London, is forecast to show strongest growth, with nearly nine out of every 10 respondents in the 2014 survey seeing high potential for hardware and software for conflicts in cyberspace, up from just over half two years before. The cyber-security boom is understandable. Hacking and other such incidents have tripled to more than 60 million between 2011 and 2015, according to data cited by the World Economic Forum (WEF) last year. And the cost of cybercrime attacks are surging, at some $16 million in America two years ago, and about half that much in Germany, Britain and Japan. The WEF adds that America, China, Russia, Israel and Britain are the top cyber-war powers, with Iran and North Korea rapidly developing capabilities, too (see https://www.weforum.org/agenda/2016/05/who-are-the-cyberwar-superpowers/). And The Wall Street Journal lists more than 60 nations developing cyber weapons.
Even if he doesn’t buy a single plane, Trump, like other world leaders, will find much to spend on in keeping America safe from threats on land, at sea, in the air—and online.
Ricardo Saludo, former Cabinet secretary (2002-2008) and Asiaweek Magazine editor (1984-2001), heads the Center for Strategy, Enterprise & Intelligence, CenSEI.