12. World military expenditure

Summary

In 1993 military spending continued to fall in nearly all the industrialized countries. One of the few countries that did not reduce its military spending is China.

Within NATO, the restructuring and reduction of armed forces in response to the new security environment continued. In 1989-93, NATO military manpower declined from about 5.9 million to less than 5.1 million, or by c. 13%--a rough indication of the military expenditure trend, which also declined in this period by 13%, from $370 billion to $322 billion (in 1985 prices). Arms procurement spending has fallen more rapidly than defence budgets in general. Because of both military budget declines and procurement taking a smaller share of a smaller cake than before, NATO procurement spending decreased from about $83 billion to $60 billion (in 1985 prices, and excluding France).

Within the downward trend and in the present situation of falling budgets and inelastic personnel costs, domestic procurement levels in Russia and other countries in Central and Eastern Europe have been severely reduced. Despite the alarm generally expressed among Russian authorities in the defence sector after drastic cuts in spending in 1992, military expenditure in Russia in 1993 remained on the same level as in 1992, as a percentage of GDP. There is no evidence of a widely expected pay-off to the military for its support in the attack on the Parliament in October 1993. New efforts were initiated in 1993 to facilitate the rational down-sizing of the military-industrial complex, through utilizing excess capacities for meeting non-domestic military needs and selective support to enterprises within a broader programme of industrial policy.

In the Central and Eastern European region the inescapable process of reconstruction has become far more costly than was expected, and a growing disparity in levels of development between Western and Eastern Europe is evident. The necessary military restructuring has barely begun in most countries, and developments have been driven by economic factors.

China is one of the countries that has not reduced its military spending. Estimating Chinese military expenditure is, however, a difficult matter, as the official military budget constitutes only a small fraction of China's total military spending.

A new issue, which is playing a progressively greater role in both security and economic debate, is that of `conditionality'—the link between foreign aid and military expenditure and the question of whether such aid should be given to countries with high military spending.