Project on Defense Alternatives

Post-Cold War US Military Expenditure in the Context of World Spending Trends

Executive Summary

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Project on Defense Alternatives Briefing Memo #10
Carl Conetta and Charles Knight
January 1997

Despite a 21 percent reduction in US military spending between 1986 and 1994, America's share of worldwide military spending increased from 28 to 34 percent during this period. Whereas the United States spent only two-thirds as much on defense as did "potential threat states" in 1986, it spent 72 percent more than did the members of this (diminished) category in 1994. Had the United States sought to achieve in 1986 the spending edge over potential adversaries that it today enjoys, it would have had to increase its 1986 defense spending by 157 percent.

A similar trend is evident for the NATO and OECD countries as groups. Aggregate spending by these groups has declined, but their share of worldwide spending has increased markedly. NATO's share has increased from 43.4 percent in 1986 to 55.8 percent in 1994. OECD's share has grown from 48 percent to 64.4 percent. In 1994 defense spending by the 25 market democracies of the OECD accounted for almost two-thirds of all military spending worldwide. (Since 1994, the OECD has added four new members.)

The increase in spending share by the United States and by the NATO and OECD countries as groups is due largely to the collapse of military spending by "potential threat states" -- a group of 10-16 nations. Spending for this group declined by nearly 70 percent during the period 1986-1994.

Among "potential threat states" China stands out as having increased its expenditures during the period 1986-1994, but only modestly. According to the US Arms Control and Disarmament Agency, the increase was 1.6 percent. Another source, the London-based International Institute for Strategic Studies, cites an increase of six percent. Viewed in a longer time-frame, this increase appears to be a partial restoration of earlier spending levels after a period of fluctuation and decline.

Contrary to the worldwide trend, the Asia-Pacific region saw a 14.6 percent increase in aggregate military expenditures during 1988- 1994. The mainstays of this regional increase were Australia, Japan, South Korea, and Taiwan. During 1986-1994 the pro- Western states of the region dramatically increased their spending edge over the regional's "potential threat states." In 1986 China, North Korea, and Vietnam together spent the equivalent of approximately $62 billion on defense; in 1994 they spent $58.7 billion. In 1986 the pro-Western group (Australia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Taiwan, and Thailand) spent $67.5 billion on defense compared with $89.5 billion in 1994. Thus the pro-Western group outspent the "threat group" by 8.5 percent in 1986 and 52 percent in 1994.

Aggregate spending by the nations of North Africa, the Middle East, and the Persian Gulf fell by 47.5 percent between 1986 and 1994. The decline was much greater for "potential threat states" than for those states aligned with the West. Thus, as in the Asia- Pacific region, the pro-Western states have seen their relative position improve markedly. Whereas in 1986 they had spent 90 percent as much on military preparedness as did the region's putative threat states, in 1994 they outspent these states by a greater than two-to-one margin.

During the period 1986-1994, US military spending has declined substantially more than the average for NATO and OECD countries. As a result, a more equitable distribution of defense burdens among the allies has been achieved. Nonetheless, America's allies in NATO and the OECD continue to devote a much smaller portion of their GNPs to defense than does the United States. In 1994 the United States spent 14 percent more on defense than did all other OECD states combined, even though the United States produced only one-third of the aggregate OECD product. In 1994 the US devoted 4.3 percent of its GNP to defense while the Non-US OECD average was only 1.8 percent and the Non-US NATO average was 2.4 percent.

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