2008/10/21

Public debt & Military expenditures diagrams

The Arms and Influence blog reacted to my Japan and the risks of huge government debt article and inspired me to dig a bit into (easily available) statistics.

It's a plausible assumption that the ability to spend much on the military is being limited by debt obligations - and I wanted to check the statistics.

Unfortunately, a simple comparison of public debt and military expenditures offers only a snapshot and suggests rather a causality (high expenditures may cause high debt) than to tell about the sustainability of the situation. The ultimate test will be the future. We've got enough countries for a meaningful observation in the next decades.

The debt/spending comparison yielded some interesting diagrams, though.
The data is exclusively from the CIA World Factbook this time, only countries with both data given were included. Debt data was mostly of 2007, whereas the available military spending data was usually 2005, 2006 or 2007. Note that this time debt is being expressed as what the CIA defined as "Public debt".
At least it's all the same source.

Most countries have clearly less than 70% GNP public debt and 4% GNP military spending. Another group has up to 110% and 7% respectively, but there are conspicuously few countries in the upper right part of that group.
Finally, there are several exceptions with more extreme spending or debt, but none combines both.

These were all countries, but I was only interested in the industrialized nations. I used the IMF's list of "advanced economies" to focus on that group.

Israel is a special case in this graphic because U.S. military aid to Israel equals about a quarter of its military spending. It's in a very special situation as well.
Singapore is an exception because of its small size as a city-state.
Japan is an exception due to its constitutional (theoretical) limitation on self-defence forces.

Military spending and public debt levels seem not to be very correlated among the advanced economies - up to about 3% military spending and 70% public debt seems to be usual.

An analysis over time (since 1992, for example) would offer hints about sustainability - this diagram is only useful to differentiate between usual and unusual spending/debt levels among advanced economies.

My best guess is that Italy (104% and 1.8% according to CIA) and Belgium (84.6% and 1.3% according to CIA) are good representations for a nation with high public debt.

(By the way - the CIA World Factbook data is partially weird. Norway's public debt is being given as 83.1%, which is much too high. I didn't exclude such questionable cases, though. The diagrams were made with a very quick/short research.)

The Excel sheet for the diagrams is available upon request.
 
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