The defence spending measure is problematic when it comes to assessing military capabilityby Lucie Béraud-Sudreau, Bastian Giegerich / March 6, 2018 / Leave a comment
In September 2014, Nato heads of state agreed at the Wales Summit to make an obligation out of what hitherto had only been a recommendation: to spend 2 per cent of their GDP on defence. Those who were spending less should undertake efforts to lift themselves to this level within ten years—by 2024. According to the IISS’ Military Balance 2018 report only two European countries met this spending target in 2017: Estonia and Greece cleared the bar at 2.1 per cent and 2.3 per cent respectively, but the United Kingdom dipped below the threshold at 1.98 per cent. Poland reached only 1.9 per cent. These figures of course pale in comparison to the United States’s 3.3 per cent.
The 2 per cent target has become increasingly prominent in debates on European defence and security, and turned into a political constraint for government leaders. But is the figure actually relevant to understanding states’ defence capabilities? There are in fact several problems with the target, which include how the 2 per cent is counted and whether the money is actually well spent.
How does one count to 2 per cent?
Given that a lot is riding on this benchmark, it is important to point out that there is no shared understanding of what makes up a defence budget. In its definition of “military expenditure” Nato includes, besides defence ministry budgets, pensions, expenditure for peacekeeping and humanitarian operations, and research and development costs. Yet the United Nations’ definition differs. And even across European countries, governments do not all have the same criteria. To decide what numbers to count is the first hurdle when considering the 2 per cent issue.
A second problem relates to the additional information needed to calculate the share of GDP. GDP data can come from a variety of sources, such as national statistics agencies, but also the International Monetary Fund (IMF) or the World Bank, the Organisation for Economic Co-operation and Development (OECD) or the European Commission. Different GDP figures may therefore lead to different results when calculating the share of GDP spent on defence.
To compare defence spending worldwide, US dollar conversions are necessary, hence exchange rates have to be applied. But here again the numbers may come from a diverse range of sources. The US State Department’s “World Military Expenditure and Arms Transfers” report shows that there can…