Higher income countries such as the United States and those in Western Europe are expected to continue to decrease spending on defense during the next five years due to increasing demands for social services or austerity while lower income countries such as China and Russia are expected to increase defense spending to modernize their military capabilities, according to a new study by the consulting firm Deloitte.
“Higher income countries are slowing defense spending as regional conflicts end and as domestic demands for austerity and social investment erode previous commitments to high levels of defense spending,” says the study, Global Defense Outlook 2013: Balancing Security and Prosperity. “In contrast, lower income countries, braced by continued economic growth and lower levels of debt, are confronting instability and regional security challenges with higher levels of defense spending.”
The United States is the world’s largest spender on defense, representing 41 percent of all military spending, and despite budgetary austerity will continue to spend at high levels due to its defense strategy and strategic force deployments, the study says.
The study says that following the United States, China, France, Japan, Russia and Britain are the next five largest defense spenders, accounting for 23 percent of total worldwide military spending.
U.S. defense spending is five times higher than its next closest competitor, China, it adds. The report points out that while the U.S. military forces deployed an average of nearly 12 percent of its active duty personnel between 2006 and 2012, China and Russia deployed less than 1 percent of their active forces outside their respective countries during this period.
The report divides the top 50 countries into four categories based on their per capita gross domestic product (GDP) in U.S. dollars and defense spending as a percentage of GDP. The higher income countries are divided into spenders, those that spend more on defense as a percentage of GDP, and economizers, those that spend less on defense as a percentage of GDP. Lower income countries are categorized similarly.
Of the lower income countries in the spender category, Russia spends the most on defense yet its “armed forces have suffered from age and have not kept pace with the technological advancements of their NATO and Chinese counterparts,” Deloitte says. The study says that given internal security threats and Russia’s shortcomings versus NATO and China, the country is emphasizing research and development, training and education.
Of the lower income economizer countries, China is the top defense spender, the study says, with the rise in defense spending tracking its rising GDP.
The report says there are five new strategic realities that are shaping policy, investment levels and force structures. One is the increasing defense spending in lower income countries that are becoming more active in weapons R&D and trade.
“While devoting less than 3 percent of GDP to defense spending, the lower income economizers will make significant investments in defense capabilities, particularly as China seeks to solidify its position as a regional hegemon,” the study says.
As for Russia, the top lower income spender, it is “determined that defense spending will triple by 2015 in order to modernize 30 percent of its military units” and to boost weapons R&D, the report says.
Denuclearization represents another strategic shift as the number of operational nuclear warheads has been reduced by 64 percent since 2006, Deloitte says. The study notes though that China plans to deploy mobile nuclear missile launchers and missile launching submarines and that Pakistan continues to test new short-range nuclear systems while North Korea continues efforts to acquire nuclear capabilities.
A third strategic change is a declining emphasis on general purpose forces among the top 50 defense spending countries, in part due to budget pressures but also to non-traditional threats. The total active end strength of these countries declined by 11 percent between 2006 and 2012 and the top 50 inventories of Main Battle Tanks have fallen by 40 percent during that period, Deloitte says.
While general forces are on the decline, special operations forces (SOF) are increasing worldwide as part of counterterrorism and counterinsurgency missions. The report says that two-thirds of countries that have added SOF forces are lower-income countries, “where many terrorist-related attacks occur.”
Finally, the report cites cyber as a military operational domain, noting that “More than half of the top 50 [defense spending countries] now include cyber capabilities in defense force structure and policies.” It says the United States “appears” to spend the most on its cyber capabilities.