2011/05/29

Military budgets - an attempt to create a sane process

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I am 'annoyed' by the arguments brought forward in debates about military (don't call 'em "defense"!) budgets.

Here are some typical and outright idiotic approaches that 'some' people take:

We have x.y % GDP spending, so we can easily afford z %!
Last year we had x %, we should not reduce that!
Air force, army and navy need the same share of the budget!
The budget is full of waste, but to reduce it means to increase risks!
We are a maritime nation, so we need a huge navy!
We dreamed about a xyz ship navy for decades, so let's budget for this!
A country on the other side of earth spends x money on the military, so we need to spend x times ten money on the military!
Every department has to spend x % less this year, so has the military!
There's not enough tax revenue, so we need to spend less on the military (fuck the constant threats)!


Now let me lay out a kind of scientific approach to it, coined by knowledge about macroeconomics - especially about the concept of marginal rates:



Step One
Assess the most basic defence needs of the nation, and how much it costs to meet them.

Step Two
Make a list of proposed additional military capabilities, and assess their (neutral estimate) cost/benefit ratio.

Step Three
Look at the results from other departments, showing their proposed luxury shopping lists with attached neutral estimates of cost/benefit ratios.

Step Four
Assess the state income system and its costs (including all economical costs, not only the state's administration costs. This includes the costs caused by distortions such as legal tax evasion and tax accountants turnover).

Step Five
Now match up the most cost/benefit efficient proposals from all departments with the curve of increasing inefficiencies with increasing revenue. Spend on the most promising luxury shopping list items first, no matter which department.

At some point, to add an additional shopping list item would require the acceptance of so many economical damages from state revenue generation that it makes no sense from a national welfare point of view. Bureaucracies tend to go farther, of course.


See? I consider military budgets to be service budgets that serve the people of the nation. Expenditures on inefficient proposals hurts the national welfare and makes no sense whatsoever.
We may include the love of people for shiny fighter jets and big warships as emotional benefits in the cost/benefit assessment, but it's still subject to the analysis.

The lack of the attempt to actually optimise a budget for national welfare, instead going for various forms of bureaucratic interests and ideologies, is what annoys me.

1% GDP p.a. can be the difference between decline and prosperity if the choice is between adding it to public consumption (military) or to economic capital investment (adding to capital stock and thus to income generation over the next about 20 years).


Most -if not all- who debate on military budgets in public debate them as if those budgets were isolated. Only the basic needs can be de-coupled from other department's services. The luxury expenditures (and that's the majority in many NATO military institutions) need to compete with the services of other departments.
This isolated (and dumbed-down) discussion is the fatal flaw of most if not all debates on military budgets.


S O
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4 comments:

  1. Defence policy needs to be considered within a general strategic and political frame. "Defense needs" as such do not exist, but within this larger frame.

    For instance Saudi Arabia has a lot of money to spend on toys, but they lack the troops, the specialists and the general support of the population. The Saudi army cannot be anything else than a mercenary force, from the very structure of the state.

    France has the world's largest maritime surface, it is a nuclear power and is also a major continental player. It is impossible to satisfy every role from a purely military perspective, thus the importance of diplomacy, international cooperations, shared projects (A400, Eurocopter Tigre etc.) and alliances.

    Granted, in the case of France it also involves doing the dirty work for that alliance, like in Lybia, but that is another topic...

    From what I see, most european powers have decided to downsize their armies, reducing them to a select few core competences (air force, nuclear power, special operations) and sacrificed "the rest", that can be made either by gendarmerie forces or subcontracted to mercenaries / allied tribes etc.

    So the defense budget only has a sense within a pre-defined general strategy, and in Europe that strategy leaves less and less room for an army in the accepted meaning of the industrial age.

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  2. The problem is that all countries in Europe believe that some one else is going to defend them if the shit hits the fan.
    I think we have to take a different approach in the future or we will be in for a nasty surprise.

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  3. What is needed in a "strong" state is an national security budget, integrating military, foreign and alliance relations, foreign aid (and other forms of direct soft power), and at least coordinate indirect soft power factors like e.g. export aids, export credit guarantees, major industrial cooperations, &c &c. Military force is only one element amongst others of the political interaction with foreign states/organisations.

    In the real world the percentage of GDP approach is the only way to go. The actual percentage is primarily a domestic political compromise, and sadly only secondarily driven by threats, necessities and ambitions (or whatever you want to call that).

    Already your first step will not see a consensus in most countries. Don't look far, remember Koehler. Step two cost/benefit - you never know. And then in a country with an own and exporting weapons industry a slightly higher % of GDP can be benefitial as a hidden R&D and export support.

    Btw, talking about a reasonable process: As far as I can tell Finland has it figured out pretty nicely.

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  4. You basically advocate to throw a dice and do political decisions based on gut feeling.

    That's the no competence way of doing things, a fall-back strategy for incompetents.


    Btw, there's no consensus necessary, just a legislative majority.

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