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Strategic Defence

Defence Economics And Its Application To Indian Defence Planning
By Major General Mrinal Suman, August 2011 [[email protected]]

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First published  December 2006

The links between the armed  forces and the country’s politico-economic systems and their interdependence  define broad contours of the policy governing allocation of resources for the  defence of the country. It is a dynamic process that changes with political  dispensation in power, geo-political milieu and threat perception. Investment  in defence is not carried out to utilise spare and disposable resources but is  an essential cost that a nation has to pay to obtain assurance of safety.  Defence economics encompasses  all aspects of defence that have a cost implication.

Emergence of defence economics  as a separate and distinct discipline of study has been of comparatively recent  origin. As a matter of fact, it is still in an embryonic stage trying to define  its scope and expanse. Its growth has been fragmented, sporadic and incoherent.  Keith Hartley and T Sandler have contributed immensely in its development.

According to Encyclopaedia  Britannica – “Defence economics is a field of national economic management  concerned with peacetime and wartime military expenditure.” As per Hartley,  defence economics embraces all aspects of the economics of defence,  disarmament, conversion and peace. He suggests inclusion of the economics of  wars, conflicts and non-conventional conflicts (e.g. terrorism, civil wars,  revolutions, insurrections) as well.

Intriligator, on the other hand views  defence economics as a more broad-based discipline and describes it as ‘that  part of the overall economy involving defence-related issues, including the  level of defence spending, both in total and as a fraction of the overall  economy; the impacts of defence expenditure, both domestically for output and  employment and internationally for impacts on other nations; the reasons for  the existence and size of the defence sector; the relation of defense spending  to technical change; and the implications of defence spending and the defence  sector for international stability or instability’.

Newer topics keep getting added  periodically, redefining and enlarging the scope of defence economics. Notwithstanding  the above, defence economics broadly covers the following fields:
•Defence  expenditure – both as budgetary allocation and as a % of gross domestic  product.
•Expenditure  related to inland security to contain internal conflicts within acceptable  limits and levels.
•Defence  industry, international arms trade, defence offsets and arms embargoes.
•Relationship  between defence expenditure and economic activity both domestically and  externally.
•Military  alliances, joint security pacts and informal defence understandings that have  economic ramifications.
•International  cooperation for maintaining world order, peace forces and the United  Nations.

Current  Inadequacies
  In the ancient Indian treatise Sukraniti  (ch I, 11.122-4), the relation of the armed forces to the state has been  compared with that of the mind to the man. Military is a unique and distinct  socio-economic segment of society.  It is  a vibrant organisation with its own traits and dynamics. Its real worth is  determined by the interplay of human emotions, hardware and public esteem that  it enjoys. As  Morris Janowitz said, “The study of military institutions is at the heart of  the analysis of macro-sociology – the analysis of the nation state”. Unfortunately,  the discipline of defence economics has got confined to fiscal aspects alone,  thereby limiting its utility and application.

•Lack of Focus

The  very purpose of its derivation has got mired in confusion. Instead of studying  the real issues relating to financial prudence concerning defence in totality,  it has started delving into issues that have peripheral relevance, with the  result that it is still struggling to acquire the status of a well-defined  discipline.

•Fragmented Approach

It  has become over dependent on case-studies. There appears to be a discernible  trend towards ascertaining expenditure data of every military action or policy  initiative to compile figures which contribute little to our understanding of  the major issues and their interplay. Studies are generally carried out on  piece-meal basis. There has been no concerted effort to systhesise studies and  observations to generate propositions or evolve relatable theories.

•One-dimensional Treatment of Military as an Institution

Any  attempt to measure military’s usefulness in terms of tangible gains that a  nation can draw is bound to be flawed, as military is not a profit centre in the  corporate mould. It is difficult to compute its productivity and  cost-effectiveness. Studies so far have failed to examine and explore  socio-economic issues involving the military.

Additionally, defence economics has failed to accord requisite  significance to military’s  role as a modernising force, especially in the developing nations where  civilian institutions have not fully evolved as yet. Military performs the  functions of a catalyzing agent for national integration, economic development  and social change. Military in these countries is not just a consumer of  national resources but takes on the mantle of a nation builder.

•Neglect of Developing Nations

All  surveys and analysis pertain to developed nations and their requirements.Main thrust has been towards analysing challenges  faced by the US and the European countries – cost of fighting a war, armed  interventionist actions, protection against urban terrorist strikes, military  alliances and common defence markets. Basic concerns of the emerging nations  have been totally neglected and that is the reason that defence economics has  been unable to find many adherents in the developing nations.

•Failure to Assist Decision Making

And  most importantly, the discipline of defence economics has got reduced to being an  academic exercise of theoretical value. No well founded inferences and  indicators have got thrown up with the result that it has failed to become an  instrument of decision making. There is no methodology evolved  as yet to facilitate application of economic logic to defence related subjects. 

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