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Financing the global sharing economy, part three (3): divert military spending

01 October 2012

Key points:

  • Global military expenditure has risen by more than 50% since 2001, reaching over $1.7tn in 2011 – 12 times more than global spending on aid.

  • Diverting only a quarter of this amount would free up $434.5bn each year that governments could instead use to save lives and prevent extreme deprivation.

  • Strengthening United Nations peacekeeping efforts is an important way to reduce both conflict and military spending. The financial gains of such initiatives may be 39 times greater than their cost.

  • Given the threat to peace and security posed by climate change, poverty and inequality, countries need to adopt a new security strategy based on international cooperation and economic sharing in order to address the underlying causes of conflict.

There is no better example of humanity's dangerous misuse of financial resources than the vast sums of money spent each year on the machinery of warfare. World military expenditure has risen steadily in recent years despite the global financial crisis of 2008 and the austerity and deficit-reduction measures implemented in the US and Europe. The world as a whole spent an estimated $1,738bn on the military in 2011, an increase of over 50% since 2001 and equivalent to 2.5% of world Gross Domestic Product (GDP) - approximately $249 annually for each person in the world.[ii]

The phenomenal rise in military spending over the past decade was largely fuelled by the United States, whose activities accounted for nearly half of all global military expenditure in 2010, and still 41% of the world total in 2011 [see figure 1].[iii] Although two-thirds of countries in Europe have cut military spending to some degree since 2008, other countries around the world have increased their spending considerably - especially China (6.7% increase in real terms in 2011) and Russia (9.3% increase in 2011, making it the third highest global military spender - with further increases of around 50% planned up to 2014). Overall, military spending is significantly rising in the Middle East and Africa, and still modestly growing in most of Latin America, Asia and Oceania.[iv]

The continuing magnitude of military budgets reflects how dangerously misguided are current global priorities, especially in light of the devastating impact of armed conflict on individual lives, communities and entire nations. There remains a huge gap between what countries are prepared to spend on military activities and how much of their national income they redistribute to help prevent the unnecessary loss of life, whether by alleviating global poverty or through the active promotion of peace and security. While overseas development assistance from donor countries provided US$133.5bn in 2011, donations continue to fall far short of urgent global needs and are equivalent to less than 8% of global military expenditure [see section in this report on International aid].[v]

Misguided spending priorities

In comparison, the cost of achieving the Millennium Development Goals on poverty, health and education by 2015, recently estimated at approximately $120bn in additional annual expenditures globally, is under 7% of current world military spending.[vi] The entire operational budget of the United Nations amounts to less than 2% of the world's military expenditure, less than a quarter of which is directed to UN Peacekeeping operations.[vii]

Major armed conflict is increasingly concentrated in a small number of countries, mainly in the Global South. Spending significant proportions of national income on armaments and military operations is particularly controversial in these developing countries where it shifts public funds away from the provision of essential services, such as healthcare or water and sanitation infrastructure. There is also sufficient evidence to suggest that additional military spending does not reduce the risk of further conflict, especially in developing countries where it can be better employed to increase economic stability.[viii]

Military spending also diverts resources away from pressing budgetary needs in Northern countries, such as reducing national budget deficits, increasing social protection or investing in the transition to a green economy. Findings suggest that there is little justification for the view that military spending is a cornerstone of the economy, or that it can create stable employment opportunities for millions of citizens. A study in the US concluded that $1bn spent on sectors such as clean energy, healthcare and education will create significantly more jobs - and of better average quality and overall compensation - than would the same $1bn spent on the military [see figure 2].[ix]

Another study by the Institute for Economics and Peace also contradicts the enduring belief that war and its associated military spending has generated positive outcomes for the economy. By examining five major wars involving the United States over the past 70 years, it showed that higher levels of government spending associated with war did tend to generate some positive economic benefits in the short term, particularly through increases in economic growth, but negative unintended consequences harmed the US economy in the longer term, such as increased levels of public debt and taxation, decreased investment as a percentage of GDP, and increased inflation as a direct result of conflict.[x]

The cost of war

According to research by the Institute of Policy Studies, viable expenditure cuts to only the US military budget in three areas - ending the war in Afghanistan, reducing overseas military bases and eliminating programs that are obsolete or wasteful - would free up $252bn.[xi] Such measures would reflect a less aggressive approach to foreign policy by the US and other governments, as long demanded by civil society and voiced most prominently in response to the impending invasion of Iraq in 2003. Aside from the unacceptable and massive loss of life inflicted by this single conflict, its economic costs were - and continue to be - significant. A recent estimation by Professor Linda Bilmes, who co-authored the book ‘The Three Trillion Dollar War' with Nobel-laureate economist Joseph Stiglitz, calculated that the total cost of the wars in Iraq and Afghanistan are now likely to exceed $4tn for the US government alone.[xii]

Reducing spending on nuclear weapons is another key budget area ripe for cuts. Despite near universal membership to the Non-Proliferation Treaty (NPT) since its inception in 1968, progress on nuclear disarmament remains limited. It is crucial that India, Pakistan, North Korea  and Israel finally join the NPT and, in line with the basic tenets of the treaty, that all states in possession of nuclear weapons go much further in ending the development, purchase or deployment of these highly destructive and incredibly costly weapons. US military spending on nuclear weapons remained high in 2010 at almost $31bn, but these figures increase significantly when environmental, health and other costs are fully accounted for - totalling $91bn for all countries with nuclear weapons. A report by Global Zero has conservatively estimated that these countries will spend at least $1tn on nuclear weapons and their direct support systems over the next decade.[xiii]

Diverting a quarter of all financial resources away from military spending could not only save lives and make the world more secure, but avail a significant peace dividend of $434.5bn each year.[xiv] Alongside reducing military budgets, nations should end the influence that the defence industry exerts over governments [see box]; abolish nuclear weapons; establish an effective international arms trade treaty; assist conflict prone nations to develop economically and maintain social and political stability; and reinforce the work of the UN Department of Peacekeeping Operations.

It is high time governments adopt a different approach to maintaining international peace and security by working cooperatively with the wider international community and seeking alternatives to armed conflict. This is increasingly crucial in light of the very real threats to international peace and security posed by climate change, global poverty and inequality.[xv] With these ever-present dangers facing humanity, it is only prudent that the colossal financial resources currently spent on military budgets are redirected to provide alternative national and global public goods for economic and social development in order to further reduce human displacement, suffering and unnecessary death.

How much revenue could be mobilised?

Even small reductions in global military spending can provide a significant peace dividend that could instead be spent on humanitarian operations and poverty eradication programs. The majority of these savings would accrue to the US, which is by far the largest single financier of the world's military activity. As a first step towards reordering their distorted priorities, governments need to redirect at least 25% of their military budgets to urgent human needs as campaigned for by peace groups worldwide. In the longer term, military budgets should be reduced much further in line with the incontrovertible moral, economic and humanitarian arguments.

25% reduction in global military spending = $434.5bn each year.[xvi]

The global call for demilitarisation

Despite hopes for a new era of global cooperation following the dissolution of the Soviet Union, military spending now exceeds Cold War levels and governments continue to rely on military force to protect their national interests. Largely in response to a misguided ‘War on Terror', the global anti-war movement reached an historic milestone in 2003 when 10 million people demonstrated in cities across the world demanding that their governments do not invade Iraq. In spite of the contention that these momentous public protests have had little or no impact on government decisions to go to war, civil society groups continue to press governments to reduce military spending and have found plentiful evidence that drastic cuts in military expenditure are both viable and necessary.[xvii]

A report by a Task Force on a Unified Security Budget for the United States has outlined reductions of over 10% of US military spending, detailing $77bn of the "lowest hanging fruit."[xviii] The figures show that reducing wasteful military spending alone can yield significant budgetary savings. Such findings bolster the viability of a growing US-based campaign that seeks to reduce military spending by 25% on a state-by-state basis, which could free up almost $178bn in public finance.[xix] The campaign has the support of public representatives and organisations across the country and calls for the savings to be redirected to secure urgent domestic priorities, including jobs and access to housing, healthcare, education and clean energy.[xx]

Civil society has long been calling for the international community to adopt a range of measures that can mitigate military spending and conflict. The problem isn't just about the production of weapons and war machines, but also their sales in overseas countries. A major area of focus has been curbing the global arms trade which helps sustain violent conflict, particularly in developing nations whose governments are the primary importers of conventional arms from the US and other foreign countries.[xxi]

The non-proliferation and decommissioning of nuclear weapons is another issue that civil society has been campaigning on for decades, in which advocacy work is increasingly focussed on easing domestic budgetary constraints.[xxii] The International Campaign to Abolish Nuclear Weapons is also mobilising support for a coordinated global campaign to discourage financial institutions from investing in nuclear weapons companies.[xxiii] Despite the existence of a number of treaties between nations to limit nuclear capabilities and various agreements to control the use of conventional arms, many have yet to be enforced and there is considerable scope for civil society to push for more decisive measures.[xxiv]

The road to peace

Strengthening United Nations international peacekeeping efforts is another important way to reduce both conflict and military spending, especially in post-conflict situations. A cost-benefit analysis conducted for the Copenhagen Consensus Centre calculated that spending relatively small amounts each year on a peacekeeping intervention can significantly diminish the occurrence of further conflict, making it a highly cost effective way to reduce expenditure on further military activity.[xxv] Given the massive costs associated with war, the study revealed that the greater the amount spent on peacekeeping initiatives the greater the reductions in global military spending. The authors suggest that if security forces are kept at optimal levels, the financial gains - in terms of preventing further conflict and promoting economic growth - could be up to 39 times more than the cost of peacekeeping.[xxvi]

A further important measure under consideration is the regulation of armaments through an international Arms Trade Treaty (ATT) which could crack down on the illicit trade and introduce greater transparency in the import and export of conventional arms. According to civil society advocates, an effective treaty could stop transfers of arms and ammunitions that fuel conflict, poverty and serious violations of human rights and international humanitarian law.[xxvii] After six years of protracted negotiations, more than 170 countries began negotiating a treaty at a UN conference in July 2012 that failed to produce a final text, although hope still remains for a legally-binding treaty to be agreed at the UN General Assembly in late 2012.[xxviii]

As a first step toward reducing armed conflict and war, all governments must introduce substantial reductions to their military spending budgets. Redirecting these freed up financial resources can not only fund international efforts to end poverty, but also enable member states to immediately furnish the UN with the $2bn they owe the Department of Peacekeeping Operations (DPKO).[xxix] With simmering tensions in the Middle East and the increasing prospect of further global conflict, it is essential that civil society continues to mobilise ardently against warfare and the use of military force as a means of achieving foreign policy objectives. 

Box 11: War is Big Business

Since George W. Bush told the United Nations that you are either "with us or against us in this fight against terrorists," the post-9/11 world has entered an uncharted era of conflict and tension. The reality of war may well parallel the history of human civilization, but we now live in an age of increasing global militarisation, the ongoing proliferation of nuclear weapons, and the threat of pre-emptive conflicts in the name of security.

History is in many ways defined by the evolution of mercantilism, colonialism and imperialism, or the ‘plunder by trade' of stronger countries that sought the conquest of less developed nations. All empires since the Roman era were based on the expansion of societies through financial, technical, and military superiority in order to control more of the earth's wealth and technology. Today, the unequal trading relationship between resource-poor wealthy nations and resource-rich impoverished nations remains central to an understanding of heightening global warfare.[xxx]

A major factor in the military policies of many governments is the growing impact of resource scarcity. In particular for the world's reigning superpower, the need for a vigorous military role in protecting energy assets abroad has been a presiding theme in American foreign policy since 1945. The US continues to officially maintain 662 military bases in 38 countries around the world (though unofficial estimates are far greater),[xxxi] and spent over $711bn on military expenditures in 2011 alone - a sum larger than the gross domestic product of most countries.[xxxii] According to Michael T. Klare, Professor of Peace and World Security Studies and author of ‘Resource Wars', no strategic objective has so profoundly influenced American military policy as the determination to ensure US access to overseas supplies of vital resources. Since the end of the Cold War, almost every major government has assigned a greater strategic significance to economic and resource concerns. The result is a new global landscape in which competition over vital resources is becoming the governing principle behind the disposition and use of military power.[xxxiii]

The Military-Industrial Complex

It was President Eisenhower, in his final address to the nation in 1961, who coined the phrase ‘military-industrial complex' to forewarn of an overbearing relationship between the economy, big business and war. Some commentators now use the expression 'military-industrial-congressional complex' to reference the interplay of large military corporations and politics in the phenomenal war machine of America. Even if no serious economist would hold the view that war is good for the economy, the US is tellingly the largest military producer, spender and employer, as well as the leading exporter of arms to the developing world.

A largely invisible yet powerful bastion of commercial forces now dominate the policies of economically-advanced states and push governments towards increased foreign aggression and military adventurism. The US-led invasion of Iraq in 2003 has become the most flagrant example of corporate involvement in war. Within months, private military contractors penetrated western warfare so deeply that they became the second biggest contributor to coalition forces after the Pentagon. The private sector, often involved in the most controversial aspects of warfare such as the Abu Ghraib prisoner abuse scandal, is now an integral part of US military might.

The opening of new markets to foreign-owned multinational companies in the aftermath of war is widely described as a form of ‘economic colonisation' to advance the ideological agenda of globalisation. The strongest economies of today view economic and security interests as inextricably linked, which in the case of Iraq involved fundamentally altering its economic laws to US corporate advantage. Many state-owned entities were rapidly privatised and trade restrictions were suspended in order to facilitate the dramatic inflow and outflow of goods, services and natural resources for the benefit of overseas businesses.[xxxiv]  

The growing gulf between rich and poor in both developed and developing nations - a phenomenon largely ascribed to corporate globalisation - is commonly acknowledged as a key reason for the growth in demagogues, fundamentalists and extremists who threaten mass terrorism in the economically-advanced countries. Even in the grip of an economic downturn, the average purchasing power of the bottom 10% of Americans remains higher than around two-thirds of the rest of the world's population.

Almost any war, armed struggle or sectarian clash can be traced to its economic roots. The choice facing humanity in the twenty-first century is whether to continue along the road of international competition for wealth and power, or to share the world's resources more cooperatively and secure basic human needs for all. Such a strategy - based on international cooperation and economic sharing rather than acquisition and the use of force - would naturally acknowledge the underlying cause of conflict and dramatically reduce the prospect of future global warfare. 

Learn more and get involved 

Campaign Against Arms Trade (CAAT): A UK-based campaign to end the deadly and corrupt business of the international arms trade. <www.caat.org.uk>

Campaign for Nuclear Disarmament: Working to secure an international Nuclear Weapons Convention which will ban nuclear weapons globally, among many other campaigns. <www.cnduk.org>

Control Arms: A global civil society alliance campaigning for an international legally-binding Arms Trade Treaty that will stop transfers of arms and ammunitions that fuel conflict, poverty and serious violations of human rights and international humanitarian law. <www.controlarms.org>

Demilitarize.org: Website resources and organizing for the annual Global Day of Action on Military Spending that coincides with the release of the Stockholm International Peace Research Institute's (SIPRI) new annual figures on world military expenditures. <www.demilitarize.org>

Deterring Democracy: An online book by Noam Chomsky on the differences between the humanitarian rhetoric and imperialistic reality of United States foreign policy and how it affects various countries around the world. <www.books.zcommunications.org/chomsky/dd/dd-overview.html>

Economists for Peace and Security: An international network of organizations promoting economic analysis and appropriate action for peace, security and the world economy. <www.epsusa.org>

Global Burden of Armed Violence report: Published in Switzerland by the Geneva Declaration Secretaria in 2008 to provide comprehensive, reliable, and up-to-date data on international trends and patterns of armed violence. <www.genevadeclaration.org/measurability/global-burden-of-armed-violence....

Global Peace Index 2011: The world's leading measure of global peacefulness, produced by the Institute for Economics and Peace. It gauges ongoing domestic and international conflict, safety and security in society, and militarisation in 153 countries by taking into account 23 separate indicators. <www.visionofhumanity.org/info-center/global-peace-index-2011>

Global Peace Index Map: a table of the 'states of peace', with an interactive map of GPI-ranked countries from 2007-2011. Provided by Vision of Humanity. <www.visionofhumanity.org/gpi-data/#/2011/scor>

Global Zero: The international movement for the elimination of all nuclear weapons, launched in 2008 with more than 400,000 supporters worldwide. See their acclaimed documentary film, Countdown to Zero. <www.globalzero.org/en>

No-Nonsense Guide to the Arms Trade: An accessible history of the arms trade, including information on recent controversial deals as well as case studies on Saudi Arabia, Iraq and Darfur. Written by Nicholas Gilby for the New Internationalist, 2009. 

Peace Action: A US-based grassroots organization committed to organizing a citizen movement around a vision of world peace. <www.peace-action.org>

Stockholm International Peace Research Institute: An independent international institute dedicated to research into conflict, armaments, arms control and disarmament. <www.sipri.org>

The '25 Percent Campaign: A coalition of community and peace groups in eastern Massachusetts, USA, who campaign to fund jobs and community needs by cutting total military spending by 25%. <www.25percentsolution.com>

The United Nations Peacebuilding Commission: Established in 2006 as an intergovernmental advisory to support peace efforts in countries emerging from conflict, and as a key addition to the capacity of the International Community in the broad peace agenda. <www.un.org/en/peacebuilding>

War Resister's International: Promotes nonviolent action against the causes of war, and supports and connects people around the world who refuse to take part in war or the preparation of war. <www.wri-irg.org>



[i] See the Military Expenditure Database at the Stockholm International Peace Research Institute (SIPRI), <milexdata.sipri.org/> 

[ii] Stockholm International Peace Research Institute (SIPRI), SIPRI Yearbook 2012: Armaments, Disarmament and International Security, Summary, 2012. 

[iii] SIPRI, Recent trends in military expenditure, April 2012, <www.sipri.org/research/armaments/milex/resultoutput/trends

[iv] SIPRI, Recent trends in military expenditure, op cit; SIPRI, 'World military spending levels out after 13 years of increases, says SIPRI', press release, 17th April 2012. 

[v] See section in this report on Official Development Assistance (ODA).

[vi] Vararat Atisophon et al, Revisiting MDG Cost Estimates from a Domestic Resource MobilisationPerspective, OECD, Working Paper No. 306, January 2012, see table 1, p. 12.

[vii] Global Policy Forum, UN Finance in Comparative Perspective, March 2011, <www.globalpolicy.org>

[viii] Paul Collier, War and military expenditure in developing countries and their consequences for development, The Economics of Peace and Security Journal, Vol. 1, No. 1, 2006; see also Paul Collier, Lisa Chauvet and Haavard Hegre, The Security Challenge in Conflict-Prone Countries, Copenhagen Consensus 2008 Challenge Paper, April 2008, <www.epsjournal.org.uk>

[ix] Robert Pollin and Heidi Garrett-Peltier, The US Employment Effects of Military and Domestic Spending Priorities: 2011 Update, Political Economy Research Institute, University of Massachusetts, p. 5.

[x] Institute of Economics & Peace, Economic Consequences of War on the US Economy, February 2012, <www.visionofhumanity.org>

[xi] Sarah Anderson, John Cavanagh et al, America is not Broke: How to Pay for the Crisis While Making the Country More Equitable, Green, and Secure, Institute of Policy Studies, November 2011.

[xii] Linda Bilmes, ‘What Have We Learned From Iraq?', Boston Globe, 7th December 2011.

[xiii] Bruce G. Blair & Matthew A. Brown, World spending on nuclear weapons surpasses $1tn per decade, Global Zero Technical Report, Nuclear Weapons Cost Study, June 2011.

[xiv] Calculation based on a quarter of the figure of $1,738bn spent on the military worldwide in 2011. See SIPRI Yearbook 2012, op cit.

[xv] For example, see the International Institute for Sustainable Development (iisd), Environment, Conflict and Peacebuilding, Climate Change and Security <www.iisd.org/ecp/es/climate>; Susan E. Rice, ‘The Threat of Global Poverty', The National Interest, Spring 2006.

[xvi] Calculations based on the figure of $1,738bn spent on the military worldwide in 2011. See: SIPRI, Recent trends in military expenditure, op cit.

[xvii] People in 40 countries and more than 100 cities around the world participated in the second annual Global Day of Action on Military Spending on 17th April 2012. See: Global Day of Action on Military Spending, GDAMS 2.0 Call to Action!, <demilitarize.org/general/engdams-20-call-action>

[xviii] Lawrence Korb and Miriam Pemberton, Report of the Task Force on a Unified Security Budget for the United States, Institute for Policy Studies, June 2007.

[xix] Figure based on the latest SIPRI figures for US military spending, at $711,421m. See the SIPRI Military Expenditure Database, <milexdata.sipri.org>

[xx] The 25 percent campaign, Fund Our Communities, Reduce Military Spending 25 percent campaign,www.25percentsolution.org

[xxi] Richard F. Grimmett, Conve ntional Arms Transfers to Developing Nations, 2002-2009, Congressional Research Service, 10th September 2010.

[xxii] For example, see Campaign for Nuclear Disarmament, Cut Trident Not Public Services, Accessed October 2011, <www.cnduk.org>

[xxiii] Jan Willem van Gelder et al, Don't Bank on the Bombs: A global report on the financing of nuclear weapons producers, International Campaign to Abolish Nuclear Weapons, March 2012.

[xxiv] Nenne Bodell, Annex A. Arms control and disarmament agreements, in SIPRI Yearbook 2010: Armaments, Disarmament and International Security, June 2010; United Nations Office for Disarmament Affairs, Multilateral Arms Regulation and Disarmament Agreements, Accessed October 2011, <http://unhq-appspub-01.un.org/UNODA/TreatyStatus.nsf>; The United Nations Disarmament Yearbook, Volume 35 (Part II): 2010, Office for Disarmament Affairs, New York, 2011.

[xxv] Paul Collier, Lisa Chauvet and Haavard Hegre, The Security Challenge in Conflict-Prone Countries, Copenhagen Consensus 2008 Challenge Paper, April 2008, p. 4.

[xxvi] Paul Collier and Bjørn Lomborg, ‘Does Military Intervention Work?', Project Syndicate, 30th April 2008.

[xxvii] See: Control Arms, a global civil society alliance campaigning for an effective Arms Trade Treaty. <www.controlarms.org>

[xxviii] United Nations, Arms Trade Treaty,  Preparatory Committee, <www.un.org/disarmament/convarms/ATTPrepCom>; see also <www.controlarms.org>

[xxix] Global Policy Forum, US vs. Total Debt to the UN: 2011, Accessed October 2011, <http://www.globalpolicy.org/images/pdfs/US_vs._Total_Debt_May_11.pdf>

[xxx] J. W. Smith, The World's Wasted Wealth 2: Save Our Wealth, Save Our Environment, Institute for Economic Democracy, 1994.

[xxxi] US Department of Defence, Base Structure Report Fiscal Year 2010 Baseline, 2010. Note that unofficial estimates are far higher; see Nick Turse, ‘Empire of bases 2.0', Asia Times, 12th January 2011.

[xxxii] See the SIPRI Military Expenditure Database, <milexdata.sipri.org>

[xxxiii] Michael T. Klare. Resource Wars: The New Landscape of Global Conflict, Henry Holt, New York: 2001.

[xxxiv] Antonia Juhasz, The Economic Colonization of Iraq: Illegal and Immoral, Testimony to the World Tribunal on Iraq, International Forum on Globalization, New York, 8th May 2004. 

Image credit: Getty Images