Nr 4-5  2011


“The Economy, Stupid”

President Bill Clinton, during his election campaign in 1992, famously hung a sign in his campaign headquarters, suggesting “The Economy, Stupid” as the generic answer to almost any issue of interest.

Defense spending has traditionally been exempted from such thinking, but these days are over. Substantial reductions in defense budgets have been seen in Europe, and will continue here, and, more surprisingly, in the US.

The buzz word at last year’s NATO Allied Command Transformation conference in Prague was interoperability. This year’s conference, in London, had, understandably, a strong focus on the effects on defense of the financial crisis and of the ever decreasing defense budgets. Where, traditionally, defense was determined by, in order of priority, 1) threats 2) politics, and 3) economy, most speakers argued that the economy was now the overarching issue. The words “al-Qaeda” and “terrorism” were hardly heard at the conference. The economy as a security threat was exemplified by one speaker, stating that the French sovereign debt first exceeded 80% of GDP in the year 1788, maybe contributing  to a well-known event one year later.

To combat the financial austerity, NATO has launched the “smart defense” concept, in many ways reminiscent of the European concept of “pooling and sharing”.  Without anyone really having an idea what this implies, the desire is to produce “more with less”, instead of the obvious “less with less”. The Strategic Airlift Capability program, with jointly used C-17s based in Hungary, was promoted as an example of a way forward. Industry voiced support for the idea, but there’s bound to also be losers among industry, no matter how the “smart defense” concept is implemented.

In 1999, 3.9% of European GDP was devoted to defense, in 2011 the number is 1.9%, and decreasing. Such fiscal realities will unavoidably provide new thinking when it comes to defense acquisition.