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.
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.
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.