SIPRI on recent trends in military expenditure

Jurriaan Bendien bendien at
Thu Jul 24 23:07:56 MDT 2003

World military expenditure, which has been increasing since 1998,
accelerated sharply in 2002, increasing by 6% in real terms to $794 billion
in current prices, accounting for 2.5% of world GDP, and $128 per capita.a
The current level of world military expenditure is 14 per cent higher in
real terms than it was at the post-cold war low of 1998, but is still 16 per
cent below the level of 1988, when world military expenditure was close to
its cold war peak.

The increase in 2002 is dominated by a 10% real terms increase by the USA,
accounting for almost three quarters of the global increase, in response to
the events of September 11 2001, and to cement US global military dominance.
Further substantial increases are planned up to 2009. Furthermore, the
budgets for fiscal year (FY) 2003 and FY2004 do not include the cost of the
war in Iraq, for which an additional $80 billion has so far been
appropriated. A stated goal of the increased spending is to pursue the
'transformation' of the US armed forces to better meet the challenges of
warfare in the 21st century. This has been questioned, however, given the
continuation of a large number of 'legacy' systems designed during the cold

The US now accounts for 43% of world military expenditure, when currencies
are converted at market exchange rates (MERs). The top 5 spenders: the USA,
Japan, the UK., France and China, account for 62% of the world total, and
the top 15 account for 82%. These comparisons depend strongly on the choice
of MER to convert other currencies to US dollars. If purchasing power parity
(PPP) rates, which reflect the actual volume of goods and services that can
be purchased in each country with its currency, are used the US remains the
top spender by far, but the next three are then China, India and Russia.
This is because MERs tend to undervalue the purchasing power of money in
developing countries and economies in transition. However, lack of reliable
PPP data means that SIPRI has chosen to use MERs to convert all currencies
to US dollars.

There are marked regional disparities in the share of economic resources
devoted to military expenditure (the 'defence burden'). In 2001, the most
recent year for which data is available, the Middle East spent an estimated
6.3% of GDP on the military compared to a global average of 2.3%, while at
the other end, Latin America spent only 1.3% and Asia and Oceania 1.6%.
North America at 3%, and Central and Eastern Europe at 2.7%, were somewhat
above the average, while Africa at 2.1% and Western Europe at 1.9% were
slightly below.

While the 'war on terrorism' is a major factor in the increase in US
military expenditure, this has not been the case elsewhere, except for a
handful of countries, such as Israel and Colombia, which face specific
internal conflicts. In particular, military expenditure in Western Europe
remained flat in 2002, with no substantial increases in any major country
there. On the other hand, the UK and France have announced substantial
increases from 2003, some of this linked to developing 'network-centric'
warfare which is seen as important in the 'war on terrorism'. However these
increases are not matched by most other countries in the region, including
Germany which has frozen military expenditure in nominal terms until 2006.

Other major spenders increased military expenditure in 2002 for a variety of
reasons including Russia, China and India. While Russia is a strong
supporter of the 'war on terrorism', to which it links its conflict in
Chechnya, its 12% real terms military spending increase in 2002 relates to
longer-term objectives that have seen spending rise since 1998, namely
military reform and the maintenance of defence technological capability in
Russian industry. China increased military spending by 18% in real terms in
2002, in pursuit of military reform and to strengthen its position as a
regional and global power. India's 9% real terms increase is the result both
of heightened tension with Pakistan and regional power ambitions, where it
is in competition with China. These increases are the main cause of modest
regional increases in East Asia, South Asia, and Central and Eastern Europe.

Elsewhere, most countries in the Middle East increased military spending due
to heightened tension in the region over Iraq and the Israeli-Palestinian
conflict. African military spending rose slightly, with armed forces
modernization tending to become a more important driver than conflict in
most cases. In South America, economic difficulties in Argentina, Brazil and
Venezuela are expected to offset increases in Colombia because of the
escalation of the civil war there, with budgets showing a slight overall
regional fall. Furthermore, economic problems are likely to lead to military
spending falling below budget in some cases. In the Balkans, some countries
appear to be reducing military spending as the region gradually returns to
normality, while prospective NATO members in Central and Eastern Europe have
been increasing military spending in pursuit of their candidacies, and to
promote NATO-interoperability.

Planned increases by the USA are likely to ensure a continuing rise in world
military expenditure over the next few years, with other major powers also
seeming inclined to raise spending to try to keep pace. However, increases
in most parts of the world are likely to remain on a smaller scale than
those in the US.

Source and further data:

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