Chart of the Day: War stimulus

A great set of charts today from The Global Issues site (h/t Rumplestatkin) on military spending around the world.

Of course, the US leads the way, taking up most of the pie:

However, a ten year breakdown of that spending shows that the endless adventures in Iraq and Afghanistan (and Pakistan and…) have added their “toll” to US spending.

And for comparison of the rate of change in spending across nations, note how China has increased their official budget (the unofficial budget is said to be twice as big) by some 256% since 2001.

How is Australia supposed to counter this? Aside from the longer term strategic considerations of a stronger China, is the US defence spending sustainable? Unless Ron Paul becomes president, and/or the country falls into a deep depression, it seems the US will continue to be the world’s policeman, defending the world’s reserve currency.

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  1. Bin Laden’s strategy of getting the USA to over-extend their global reach appears to be working well. They are so broke presently its hard to believe they will ever recover.

    Good friends of mine returned from the USA recently and commented on how broken down all the infrastructure is. New York particularly is falling into a hole, broken road pavement everywhere, people living permanently in boxes and under bridges everywhere, disconnected and unreliable public transport, tatty airports with no direct links to the actual city. 9/11 redirected lots of money to the war effort at the expense of the general population and I really doubt Obama’s ability to turn the country’s economic fortunes around.

      • Lucky their military strength and world currency status will give them an out…plus the fact that the Tea baggers and Ron Pauls are finally getting listened too. The welfare state of US will be reformed and the US will continue to prosper for the rest of the century.

        The Euro region, China, Japan and Australia on the other hand…

          • @ Coolnik.

            The US infrastructure has already fallen apart to third world levels.

            Ron Paul is just trying to stop it going down faster.

        • The major issue is the distribution of wealth across and within different countries and economies. For example, people point to the growing wealth of China but ignore the fact that 95% of China lives in abject poverty. It is a similar statistic in the USA and the shift to the extreme Right in the Western so-called democracies must eventually lead to widespread social unrest. It is not about creating a “welfare state” it is about governments ensuring that those who are under-priviledged have a fair and equitable access to housing, health and welfare services. At the moment on we who are better off can get timely access to these services! Also, look at the collection of taxes. Make no mistake about it, in the Western democracies, on a percentage of earning basis, those who are better off pay less tax, as a percentage remember, of their earnings than those at the lower end of the earnings scale! These are facts, particularly in the USA!!!!!!!

        • Stavros, were you in the crowd that enthusiastically shouted “Yeah!” when Ron Paul was asked at recent debate on whether a 30-year-old man, who chose not to purchase health insurance suddenly found himself in need of six months of intensive care, be left to die?

    • I’m a NYer living in Melbourne and the infrastructure here is crumbling. New York has a subway that is indeed reliable and train service to JFK and Newark airports. Not to mention the PATH and ferry service. Traffic in Melbourne is also worse, believe or or not.

  2. While military expenditures are a potentially important element of US decline, it should be noted that the US healthcare expenditure as a percentage of GDP exceeds that of other major western countries by 4-6% of GDP (i.e., about the same as the total military budget). And this for a system that has poorer health outcomes. Ideological commitment to private healthcare is the culprit.

    • Also Gus, medical costs in the US are elevated due to a very high litigation costs compared to other countries.

    • “Ideological commitment to private healthcare is the culprit”

      they also have the largest socialised medicine in the world nominally.

      As its been said, if you have to pay for large amounts of bureaucracy(useless calss) to administer, large levels of litigation and insurance costs, also the highest quality of treatment world over then yes it will cost more.

      Its also a heap of $h1t system so go figure.

      Blaming private health is looking at the hole in the barn door but not the whole barn itself

      • +1 TSpecncer is right…private health care is higher quality and less fat (and rorting).

        The US have trouble funding health care because they focus on cure instead of prevention. Look at the amount of fat people that get the fat sucked out or their tummy ‘tucked’.

        What a disgrace!

        • “private health care is higher quality and less fat”

          This is so wrong Stav, have you been to the US, especially lately? I lived there for eight years, so I can certainly say this is absolutely wrong. If you pay attention, you will notice that over last few years, the quality has gone down, insurance premiums are through the roof and only positive thing is that the profits made by private insurance companies are soaring.

          Not saying socialism is great, but unbridled free market capitalism is equally bad especially when one is dealing with peoples health and lives.

    • “Ideological commitment to private healthcare is the culprit.”

      I recall reading somewhere that approximately half of health care costs in the US are borne by the US taxpayer. If that is true, then the above statement is wrong.

  3. Good points Gus, we’ve discussed them previously on MB but important to realise in context nonetheless.

    Imagine if the $2-3 trillion spent on the Iraq/Afghan wars had been spent on infrastructure, or even better, not borrowed at all….and used to fund some decent healthcare reform.

  4. Rudd was in Washington this year talking about us buying 12 Nuclear subs? Can’t see that happening. We can’t even crew the current diesel ones. We’re buying “not fit for purpose” single engine F-35’s. You don’t want a single engine fighter has always been the DoD position given our locality as an island nation.

    I also read Prince that our defence expenditure as a percentage of our population and GDP is one of the highest??

    • I’ll be doing some articles on defence later Adrian, and the impetus behind them is the ideological bipartisanship and almost no debate about spending in this country.

      If it wasn’t so important to our future, it would be hilarious – the NBN and Carbon Tax have got NOTHING on the almost certainty that public funds will be destroyed via this path.

      • Prince I agree, and we really need accountability. I know some of how it works in Canberra and this is a tough issue given it’s a closed community with little understanding of fiscal restraints. Over time we had defence white papers, but we’re seeing more not less spending. We seem to want to be involved in all the US wars, and have an aggressive stance if you believe the Wiki cables. It’s a worrying trend IMO.

        • Well if some articles are to follow about defence, I’ll be very active in that.

          However there has been some falsehoods spread in this line of comment.

          Australia doesn’t spend an overt amount on defence spending as in terms of GDP%, slightly above median amongst OECD nations IIRC.

          However, the spending isn’t bipartisan, beneath the circus for the masses, both sides still remember our military state circa 1937 and will never revisit it.

          In terms of us ‘fighting the US wars’, while it costs unfortunately lives it is completely valid.

          Firstly, on the special services regiments are deployed in Afghanistan, so even the standards battalions of the Infantry Regiment or the Armoured Corps aren’t being deployed, despite the member giving constitutional consent to be sent abroad.

          Secondly, the deployment does ensure operational standards are maintained, and performance doctrines are able to be evaluated.

          Thirdly, the US looks kindly upon us and rewards us in terms of technology transfer.

          If anyone knows what has occured in Woomera for the past decade, and why we are leading the world in UAV technology, it has been bankrolled by the US. Australia made the breakthrough with a couple of biologists who specialised with mosquitoes and bats.

          Prior to that the US went full robotics. They saw our work and gave us a lot of backing.

          This has lead to another field, USV technology, and the dolphin biologists who are now also located in Adelaide.

          Anyone who understands the defence of Australia will understand why these two are critical. We are world leading, and once we have (if we haven’t already) operational USV’s, then we won’t have to worry about China for a long time.

          • The Tresury estimates and what I see in 5206.0 are quite different, and it at least 1% about the CPI for last year on estimates, and in real terms I have no idea.

            I don’t think anyone has a beef with defence, but they do with waste, and for our forces to be given the wrong equipment for the role they are thrown into.

            I don’t know the answer, but I do know most of the people I knew in the ADF left with these concerns.

            On our indigenous defence capability I say we should be proud of what DSTO, and other have done, and they need more real support IMO.

          • Hate to say it, but Australia’s UAV industry is woefully behind the 8-ball compared to the US, Israel and western Europe.

            We have a few interesting people doing a few bits of interesting work but its mostly in the academic spheres since we have close to zero industry support. Most Australian UAV companies are populated by glorified remote control enthusiasts trying to ride the coat-tails of an industry which left us behind.

          • I can’t say i agree with us being behind the Europeans in the slightest.

            The brits and Poles who are European leaders, come to us. You find them at Woomera all the time.

          • “I don’t think anyone has a beef with defence, but they do with waste, and for our forces to be given the wrong equipment for the role they are thrown into.
            I don’t know the answer, but I do know most of the people I knew in the ADF left with these concerns.

            On our indigenous defence capability I say we should be proud of what DSTO, and other have done, and they need more real support IMO.”

            My experience has been a class issue unfortuantely, whether it will be agreed to or not is a different matter.

            The biggest grief I come acorss from enlisted ranks is that the supevising officer in charge of a procurement project shortly leaves and takes up a cushy job with the same contractor.

            Invariably they seem to be ADFA graduates coming from a GPS schooling. The view their 4 years of service to be compensated with a lifetime role with a vendor, viz the public purse.

          • I’m talking strictly about the UAV industry and associated technology. This also extends more broadly to the fields of robotics and autonomous systems.

            Name an Australian produced UAV system that is in service in any armed forces around the world. Name one that is used extensively in the commercial sectors (we had one, but sold the company).

    • Can you provide a link about the Nuclear Subs story ? Even though it would make elegant sense to buy nuclear subs given the size of our country we are trapped by the illogical reasoning that we can sell uranium but cant have any nuclear facilities/subs of our own even though our strategic competitors can. ( Also now happy to export coal but not use it ourseleves but thats another story)
      It would be alot easier to crew Subs that work. Who in their right mind would want a job on a Collins Class boat ?
      In my view it would be a good idea with all the investment in LNG export sector we are going to attract a lot of attention over the next few decades.

      • The ‘legend’ the Collins class submarine is held in in absrud.

        Defence journalism in this country is of even a poorer standard than finance journalism.

        Nuclear submarines are noiser than diesel/electric, and we use ours for interdiction missions or intelligence gathering where silence is imperative.

        Nuclear subs are for being mobile missile delivery platforms, and because they have been underwater for so long their location is unknown.

        The Collins class reputation has occured mainly for the first in the class, HMAS Collins itself. its hull was built in sweden and its signal management systems were faulty.

        It was so bad, there was consideration to scrap it.

        However, there was some good technical work in compensating its hull, and Australian signal management systems are now one of the few MilTech things we export.

        I can only think of Bushmaster trucks, UAV and some transpotrt Catarmarans from Austal being the rest, maybe some small arms.

        However the HMAS Farncomb, Waller, Dechaineux, Sheean and Rankin are extremely potent platforms.

        Many rate them the best diesel/electric subs in the world for operating in swirling waters of archipelagos.

        Looking at our defence requirements to our north, you see it is a pretty good fit.

        Foreign observers do ponder why they are held in such low esteem.

        And lastly, so let the flyboys from the RAAF tell you about the F-111’s keeping Indonesia at bay during Timor Leste in 1999. Strike missions to Indonesia have been rated one way missions since the early 1990’s. They were petrified of the Collins class subs.

    • 12 Nuclear subs + F-35s should be enough to keep the boat people out, No?
      I have to echo what The Prince said – Carbon tax + boat people + NBN dominate the national debate while DoD is bleeding money on toys.

    • It’s under 2% of GDP. Whereas Singapore, for instance, spends something like 4%.

      It’s $26B for us I think, the Government bought nearly as many mortgages.

      • Singapore is in a much more vulnerable position for invasion, defense spending to ensure that they do not see a repeat of WWII is entirely reasonable.

        Unless an invading country sees fit to threaten us with a nuclear attack unless we surrender, Australia is in a very different position.

        Invading a large and geographically unfriendly country is not an easy ask- and while current trends have made easier (concentrate the potpulation in a few coastal cities and take away the firearms) it is still not an easy or subtle operation.

  5. look like ben laden and the Chinese are using the same strategy used by the US to bring down the USSR 😉

    – push them to overextend

    China spend only 7% but is a type of “PPP” adjustment ? because you do get much now in US military for even 10s billions & I am guessing the Chinese hardware is much cheaper to build/use/fly, isnt it ?

  6. Economically, the “terrorists” are kicking ass. I’m sure if you compare the dollar losses in equipment and lives the US is losing by light years. Not only have the war efforts thrown the US into insane amounts of debt, they have diverted those resources away from productive investments and taking care of the population which equals a lot of opportunity cost and lives not improved / saved. These costs will be paid for decades even if the wars stopped right now.

    The opposition haven’t really lost all that much in comparison. Lives that were arguably worth much less (suicide bombers and illiterate gunmen), inside countries that they were destroying anyway.

    Of course, the economic cost of these extremists existing at all would be cosmic if the countries in which they reside would actually develop to their full potential.

  7. Thanks Prince.

    ANy chance one of the MB writers will give us a comment on overnight’s “bank liquidity support” than has sent the ASX to the heavens? (at least that’s how i’m perceiving it…)?

  8. Why doesn’t the US start charging some form of rent or fee to the other countries for being the world’s police?

    • It gets it in contra.

      Priority over access to resources, it can commit indiscretions that will get overlooked.

    • Its called a low USD, offset by those nations (e.g Germany, Korea, Japan, Australia) not having to spend as much GDP on defence.

      Of course, that’s offset by the fact by the very actions of the USA, those nations have to increase their defence spending to counter the threats created by the USA.

      e.g anti-terrorism spending.

  9. If Netanyahu decides to pre-emptively strike Iran (and he is capable of it according to quite a few previous heads of Israeli defence & intelligence, it’s more than just sabre-rattling & pressuring the Obama administration) then you’ll see some military spending as the US gets dragged in….

    • In retaliation, Iran will flood the Strait of Hormuz with mines. Expect oil prices to rise to $400 USD a barrel, along with a lot of very pissed-off oil importing countries.

  10. “…Pentagon wastes so much money that it is almost incomprehensible. Secretary of Defense Donald Rumsfeld once publicly admitted that the Pentagon lost track of 2.3 trillion dollars and cannot tell us how it was spent…”

  11. Australia’s defense policy is best summed up as ‘wishful thinking’. We’re a vast country with a small population, which makes securing our border extremely difficult. Therefore, the Australian government seeks protection from a superpower, in the hope that they’ll come to our aid if we’re invaded. First it was Great Britian, however that didn’t work out in WW2. We switched alliance over to the US next, and it worked so far because it has not been tested. This is why discussion on the merit of military procurement is pointless. We buy what the US Defence department tell us to buy, footstop.

    The tyranny of distance works both ways. Barring some amazing discovery in flight propulsion, the only way to invade Australia is via the sea, which means the invading force needs a navy. Apart from the US, no one else in the world has such a navy, and it’ll take at least 20 years to build one up. This is the main reason why Australia can afford to be complasent.

    The bigger threat is the sea lanes to and from Australia. Australia’s economy depends heavily on foreign trade, and a shut down of the sea lane through SE Asia will be disastrous. Indonesia effectively holds the key to Australia’s lifeline, and we seriously screwed up out relationship with them by advocating independence with East Timor. All we got in exchange is a country which refuse to accept a few hundred refugees from us.

    Chinese firms have expressed interest in building ports in Indonesia. This is the beginning of a long term power play. China have always regarded SE Asia as it’s backyward, while most of SE Asia sees China as a regional bully. With the US preoccupied with the Islamic threat, Australia’s national interest requires us to form regional alliances against Chinese domination. We’re the biggest foreign aid doner to Indonesia for a reason. The ‘policy wonks’ like Julie Bishop and Kevin Rudd understand this, unfortunately they’re sidelined. Tony Abbott wants to cut foreign aid, and the Labor government banned live cattle export to Indonesia right before Ramadan. We’re endangering our long term relationship with Indonesia for a short term movement in the opinion polls.

    So ‘wishful thinking’ is all we have left.

    • An intriguing outlook there. You may be interested in reading ‘Monsoon’ by Robert Kaplan. He is a fellow at this site:

      ” I think that — as I say in the piece — Chinese leaders are not a proselytizing power. They’re not a missionary power like the United States; they’re not trying to promote any particular system of government. They’re in search of mineral wealth and oil and energy in order to raise the standard of living of one-fifth of humanity. And this makes them, as I call it, an über-realist power. That is going to be a challenge for us to deal with but is in no sense negative or evil.”


    • “we seriously screwed up out relationship with them by advocating independence with East Timor. All we got in exchange is a country which refuse to accept a few hundred refugees from us.”

      And 5 trillion cubic feet of natural gas in the Greater Sunrise gas fields that we are now partners with East Timor in.

      Gareth Evans was pretty pleased with himself on how he drew up the economic zone boundaries in that area. But everyone else (Indonesia)recognised the move for what it was.