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| by
Elisabeth
Sköns,
Wuyi
Omitoogun,
Sam
Perlo-Freeman
and Petter Stålenheim About the authors |
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* Chapter
summary from the SIPRI Yearbook 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. It accounted for 2.5% of world GDP and was
$128 per capita. The current level of world military expenditure
is 14% higher in real terms than it was at the post-cold war
low of 1998, but is still 16% below its 1988 level, 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 11 September 2001. Further substantial
increases are planned up to 2009. Furthermore, the budgets for
fiscal years (FYs) 2003 and 2004 do not include the cost of the
war in Iraq. A stated goal of the increased spending is to pursue
the ‘transformation’ of US armed forces to better meet
the challenges of 21st century warfare. This has been questioned,
however, given the continuation of a large number of ‘legacy’
systems designed during the cold war. The USA now
accounts for 43% of world military expenditure, when currencies
are converted at market exchange rates, as is the SIPRI practice
in this Yearbook. The top five spenders—the USA, Japan,
the UK, France and China—account for 62% of total world
military expenditure and the top 15 account for 82%. These rankings
depend strongly on the choice of exchange rate for conversion
to US dollars. Market exchange
rates tend to undervalue the actual purchasing power of money
in developing countries and economies in transition. When military
expenditures are compared using purchasing power parity (PPP)
rates, which reflect the actual volume of goods and services
that can be purchased in each country with its currency, the
USA remains the top spender but China, India and Russia become
numbers two, three and four, respectively. SIPRI has chosen to
use market exchange rates because of the lack of reliable PPP
data for all countries and a need to apply a consistent methodology
for currency conversion. There are
marked regional disparities in the share of economic resources
devoted to military expenditure. In 2001, the most recent year
for which data are available, the Middle East spent an estimated
6.3% of gross domestic product on the military compared to a
global average of 2.3%, while Latin America spent only 1.3%.
Africa, Asia (including Oceania) and Western Europe also spent
less than the world average (2.1%, 1.6% and 1.9%, respectively),
while North America, at 3%, and Central and Eastern Europe, at
2.7%, spent somewhat more. While the
war on terrorism is a major factor in the increase in US military
expenditure, this has not been the case elsewhere—except
in a handful of countries. In particular, military expenditure
in Western Europe remained flat in 2002. On the other hand, the
UK and France have announced 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. Other major
powers increased military expenditure in 2002 for differing reasons.
Russia’s 12% real terms increase in military spending relates
mainly to efforts at military reform and the maintenance of technological
capability in Russian industry. China increased military spending
by 18% in real terms in 2002, also in pursuit of military reform
and modernization. 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. In the Middle East most countries made only
modest increases in military spending in deference to public
opinion, which was against further increases in spite of tension
in the region over Iraq. However, escalation in the Israeli–Palestinian
conflict drove up Israeli spending. African military spending
rose slightly, with armed forces modernization tending to become
a more important driver than conflict in most cases. In South
Asia, continued regional political rivalry and armed conflict
between India and Pakistan pushed up military spending, reinforced
by Pakistan’s role in the US-led war on terrorism. Appendix
10A contains tables of military expenditure in local currency
and constant dollars, and as a share of gross domestic product
for the period 1993–2002. Appendix
10B contains data on NATO military expenditure. Appendix
10C explains the sources for and methods of data collection. |
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