6. Military expenditure

Summary

World military expenditure in 2001 is estimated at $839 billion (in current dollars), accounting for 2.6 % of world gross domestic product (GDP) and a world average of $137 per capita. This estimate is based on adopted defence budgets and is likely to be revised upwards when supplementary expenditures resulting from the 11 September attacks on the USA and the ensuing war on terrorism have been taken fully into account.

Five countries account for over 50% and the 15 major spenders account for over 75% of world military expenditure. The high-income countries—the industrialized countries and those in the Middle East—have the highest per capita spending. The developing countries—particularly those in Africa and the Middle East—have the heaviest economic burden in terms of its share of GDP.

After the decline from 1987 to 1998, military expenditure began to rise again, both globally and in most regions of the world. Over the 3-year period 1998–2001, it increased by around 7% in real terms. The increase of 2% in 2001 is smaller than the increases in 1999 and 2000, but world military expenditure is likely to rise much faster in the coming years, owing primarily to a substantial increase in US military spending.

The increase in military spending since 1998 is primarily the result of the change in trend in the Middle East, CEE, North America and East Asia. The most marked change in trend has taken place in Russia, where the rapid reduction of military spending changed into growth in 1999 and stabilized in 2001 at a level comparable to that of some major West European countries. In Western Europe, military expenditure has increased only slightly.

There are different reasons for the change in trend. Military expenditure can be seen as a function of driving forces within prevailing economic and political constraints. Determinants of military expenditure are of four broad types: security-related; technological; economic and industrial; and more broadly political. One of the factors behind the change into growth in Europe and North America is the assumption of new military tasks in the form of peace support operations while at the same time inertia in existing procurement programmes continues to absorb large-scale funding. In Russia, the main explanation for the change in trend is economic: the earlier economic constraints, the primary reason for the reduction in Russian military expenditure, have eased since the late 1990s. In East Asia, economic factors also seem to be a determinant of the trend in military spending. There is also a strong security-related element in China and on the Korean peninsula. External security factors play a major role in South Asia and the Middle East, while in Africa the acceleration in military expenditure is primarily due to domestic armed conflict and restructuring of the armed forces.

The 11 September terrorist attacks raised the profile of NATO burden sharing. A US Congressional Budget Office study has concluded that, while US military expenditure is higher in terms of GDP share and population, the gap has narrowed. Moreover, the gap reflects US global security interests in addition to its contributions to NATO. As regards specific contributions to NATO peacekeeping operations and donations of economic aid, the European allies are taking on a more than proportional share of the burden.

A US General Accounting Office study concluded that while total US military expenditure is higher than European expenditure, the cost of the US supporting its military presence in European NATO countries in 2000, estimated at $11.2 billion, was 50% lower than in 1990. The shortcomings of European countries were in specific military capabilities, such as mobility of forces and the technological level of their equipment.

Evamaria Loose-Weintraub (Germany) is a Research Assistant on the SIPRI Military Expenditure and Arms Production Project. She is responsible for data on military expenditure in Europe and Central and South America. She is the author of chapters in the SIPRI volume Arms Export Regulations (1991) and co-author of a chapter in SIPRI Research Report no. 7, The Future of the Defence Industries in Central and Eastern Europe (1994) and of ‘Overview of world military expenditure’ in the UNESCO Encyclopedia of Life Support Systems (forthcoming 2002). She has contributed to most editions of the SIPRI Yearbook since 1984.

Wuyi Omitoogun (Nigeria) is a Researcher on the SIPRI Military Expenditure and Arms Production Project. He is the coordinator of a new project on the Defence Budgeting Process in Africa. He is the author of ‘Arms control and conflict in Africa’ in Arms Control and Disarmament: A New Conceptual Approach (UN Department for Disarmament Affairs, 2000) and the forthcoming SIPRI Research Report no. 17, Military Expenditure in Africa.

Elisabeth Sköns (Sweden) is the Leader of the SIPRI Military Expenditure and Arms Production Project. She is the author of chapters on the economics of arms production and the internationalization of arms production for the SIPRI volume Arms Industry Limited (1993) and other publications. She is also the author of chapters on military expenditure and their determinants and economic impact, including in New Millennium, New Perspectives (UN University, 2000). She has contributed to most editions of the SIPRI Yearbook since 1983.

Petter Stålenheim (Sweden) is a Researcher on the SIPRI Military Expenditure and Arms Production Project. He is responsible for data on military expenditure in Asia and Oceania and for the maintenance of the SIPRI Military Expenditure Database. He has contributed to the SIPRI Yearbook since 1998.