8. Military expenditure

Summary

World military expenditure in 2005 is estimated to have reached $1001 billion at constant (2003) prices and exchange rates, or $1118 billion in current dollars. This corresponds to 2.5 per cent of world GDP or an average spending of $173 per capita. World military expenditure in 2005 presents a real terms increase of 3.4 per cent since 2004, and of 34 per cent over the 10-year period 1996–2005. The USA, responsible for about 80 per cent of the increase in 2005, is the principal determinant of the current world trend, and its military expenditure now accounts for almost half of the world total.

The process of concentration of military expenditure continued in 2005 with a decreasing number of countries responsible for a growing proportion of spending: the 15 countries with the highest spending now account for 84 per cent of the total. The USA is responsible for 48 per cent of the world total, distantly followed by the UK, France, Japan and China with 4–5 per cent each. The rapid increase in the USA’s military spending is to a large extent attributable to the ongoing costly military campaigns in Afghanistan and Iraq. However, in 2005 the effects of hurricanes Katrina and Rita also played an important role. Most of the increase in US military spending resulted from supplementary allocations administered outside the regular budget, moving control of funding decisions from the Congress to the President.

A factor that has aided the upward trend in military expenditure is the high and rising world market prices of minerals and fossil fuels. This is reflected especially in Algeria, Azerbaijan, Russia and Saudi Arabia, where increased proceeds from oil and gas exploitation have boosted government revenues and freed up funds for military spending. The boost in the military expenditure of Chile and Peru is directly resource-driven, because their military spending is linked by law to profits from the exploitation of key natural resources.

China and India, the world’s two emerging economic powers, are demonstrating a sustained increase in their military expenditure and contribute to the growth in world military spending. In absolute terms their current spending is only a fraction of the USA’s. Their increases are largely commensurate with their economic growth.

Petter Stålenheim (Sweden) was in 2005–2006 acting Leader of the SIPRI Military Expenditure and Arms Production Programme and is Head of the Military Expenditure Data Sub-Project.

Damien Fruchart (UK) is a Research Assistant with the SIPRI Military Expenditure and Arms Production Programme.

Wuyi Omitoogun (Nigeria) is a Researcher with the SIPRI Military Expenditure and Arms Production Programme.

Catalina Perdomo (Colombia) is a Research Assistant with the SIPRI Military Expenditure and Arms Production Programme.