The 2% fetish: NATO's military expenditure debate

The basis to gauge an appropriate defense budget should be a rational defense strategy but not a randomly chosen economic criteria.

President Donald Trump lived up to feared expectations at the 2018 July NATO summit in Brussels. It did not take any great prognostic capabilities to predict that the US President would attack a number of NATO member countries, particularly Germany, for their allegedly too small military expenditures and abuse them as free riders. The result was clear before the summit. The point of dispute is the aim, promised among the NATO countries in 2014 and reinforced in Brussels now, to spent at least two percent of Gross National Product (GNP) for defense.

Already in anticipation of the quarrels at the summit all member states, NATO’s Secretary General Stoltenberg, many think tanks and commentators had obediently assured the US President, who criticises NATO members to live at the expense of the US-tax payer, to certainly uphold the two percent aim and promised to do better in future.

The intended increase in military expenditure is by no means based on a solid defense analysis or military strategy, it is an arbitrarily chosen aim. It could have been 1.8, or 2.5 or even 4 percent as Donald Trump suggested off the cuff during the summit in Brussels. The two percent goal was meant to be a signal to NATO members that spend less to start increasing the budget, however, without overburdening them with doubling it in short period of time.

In economic terms, the two-percent goal is an input indicator, informing about the size of the resources going into the armed forces. This measure is totally inadequate for measuring the usefulness or the efficiency of the armed forces.

Military activities should rationally only be judged by its outcome, namely how the military avoided, managed or ended violent conflict. That is what security is about. Neither the input (finances, personnel, weapons), nor the output (the tons of bombs dropped, the number of drones flown) are relevant indicators for judging the efficiency of the armed forces.

The basis to gauge an appropriate defense budget should be a rational defense strategy but not a randomly chosen economic criteria. What is the mission of the armed forces? How much and what type of personnel is required for that mission? How should they be equipped? But these are exactly the questions NATO avoids at present, not to speak of giving answers. Instead, all state representatives speak after the mouth of Donald Trump to desperately wanting to appease him, who provokes them with his often-irrational comments.

When it comes to NATO’s mission there is general agreement to fight terrorism, without, however explaining what exactly military forces can do against terrorists. NATO has intervened in the Balkans on the basis of dubious interpretations of international law; the two-decade old war in Afghanistan cannot be won militarily and the Libya intervention for regime change was a failure. NATO finds no answers to Russia’s military provocations in the Ukraine nor to the war in Syria. The reason for the tense relations between NATO and Russia are not entirely caused by Russia’s aggressive military posture. It is partly due to NATO’s expansion Eastwards and modernising programs within NATO, especially in the US. Increasing expenditures in one place are followed by reactions in another.

In other words, the two percent goal will remain an economically oriented criteria, of course, in the self-interest of the armed forces and the arms industry, if NATO is not prepared for a critical analysis, and particularly a critical self-assessment, evaluating its own role, its strengths and weaknesses. How absurd such a percentage goal is can easily be illustrated in comparing the Greek and the German defense budget. Greece has a fine spending record according to the two percent criteria, namely presently 2.5 percent of GNP. The Greek economy has been all gloom and doom during the last few years, with double digit negative growth rates. Defense expenditures were cut, but not as drastically as the dramatic downturn in the economy. In Germany, in contrast, the defense expenditure/GNP ratio stagnated at 1.2 percent of GNP for the last five years, despite great increases of defense expenditures which grew at the same rate as the booming economy.

The partly miserable state of weapon supplies to the German Bundeswehr is not due to the lack of finances in the past. It is the result of poor and late supplies of the arms industry who promised more than they could deliver in quality and quantity. It is doubtful that this dysfunction of the arms industry can be rectified by increasing funding. This raises the question on the efficiency of the armed forces and its suppliers. Again, such questions cannot be avoided just by elevating the two percent figure to a dogma.

It is the fundamentally wrong philosophy to orient military expenditures on economic performance.

Instead of promising higher expenditure in the future and finding all sorts of arguments to try to please and calm President Trump – like arguing that economic cooperation funds should also be included in the two percent goal, one should not accept this two percent-fetish. It looks like dancing around the golden calf and NATO members fall into the trap of President Trump’s arguments about free riders. By the way, the US President does not mention that US military expenditures, roughly 3.5 percent of GNP, is only partly spent in NATO. Quite a big chunk serves US global interest.

President Trump considered NATO as obsolete already before his inauguration. Even if he is less blunt now and calls NATO a well-oiled machine there can be no doubt that this alliance is of minor relevance to him. The US government has left already several multi-lateral forums and in case of doubt, this government will pursue its policies bilaterally and without NATO. With President Trump in the driver’s seat, NATO is presently not a functional organisation. Therefore, European members should, when formulating a rational security strategy, look less towards NATO and more to Europe.

European military capabilities, their budgets, manpower etc. are not as hopeless as the two percent-protagonists want to make believe. Globally, 29 NATO member countries spent 60 percent of military expenditures. In other words, the rest of the world, some 170 countries, including China, Russia, India, countries of the Middle East, the whole of Africa and Latin America etc. spend much less. The global share of the four European countries France, Germany, Italy and United Kingdom alone amounted to 20% in 2017. So, why the meaningless and fetishised call for an increase of defense expenditure to the two percent level of GNP. Whether the budgets are at the magic figure of two percent or below or above should be the result of a thoughtful concept and not the outcome of an arbitrarily chosen economic criteria.

NATO wishes it to be made known that it does not associate itself with the contents of the article.

Herbert Wulf

Economists on Peace

Herbert Wulf is Professor of International Relations (retired) and was Director of the Bonn International Center for Conversion (BICC). He is presently a research associate at BICC and an Adjunct Senior Researcher at the Institute for Development and Peace at the University of Duisburg/Essen, Germany. He served as consultant to the United Nations Development Programme in Pyongyang, Democratic Peoples’ Republic of Korea on capacity building in disarmament in 1991 and on several occasions between 2002 and 2007.

Economists on Peace

Economists on Peace is a collaboration between IEP and EPS, presenting some of the latest thinking on pressing issues relevant to the policy, practice and theory of economics and development in conflict and crisis-affected contexts from leading academics and experts in economics, peace and security.

Economists on Peace aims to stimulate global discussion and shared learning on economic aspects of peace and conflict leading to appropriate action for peace, security and the world economy.

Economists on Peace

Economists on Peace is a collaboration between IEP and EPS, presenting some of the latest thinking on pressing issues relevant to the policy, practice and theory of economics and development in conflict and crisis-affected contexts from leading academics and experts in economics, peace and security.

Economists on Peace aims to stimulate global discussion and shared learning on economic aspects of peace and conflict leading to appropriate action for peace, security and the world economy.

Close