Charts of the Day: World Military Spending and Arms Trade

Two related charts of the day

First world defense spending

The Economist speculates that if the current rate of growth persists, China will surpass the US in terms of military budget. 

AMERICA still spends over four times as much on defence as China, the world’s second-biggest military spender. But it has been clear for some time that on current trends China’s defence spending will overtake America’s sooner than most people think. What is less clear is when that date will be reached. It all depends on the underlying assumptions. The 2013 edition of the Military Balance published by the London-based International Institute for Strategic Studies (IISS) shows convergence could come as soon as 2023. That is based on extrapolating the rate of Chinese military spending since 2001—a 15.6% annual growth rate—and assuming that the cuts in the America's defence budget required under sequestration are not modified. The latter is more likely than the former. The latest Chinese defence budget is based on spending increasing by a more modest 10.7% annually. That would mean that China overtakes America in 2032.

However, if China’s headlong economic growth stalls or if more money is needed to serve the health and social needs of rapidly-ageing population, China might slow spending on its military by something like half its current projection. If that happens, the crossover point could be delayed by up to a decade. It is also possible (though at present America’s fiscal travails suggest otherwise), that as China rises, America will feel forced to start spending more if the security guarantees it currently makes to allies such as Japan, South Korea and Taiwan are to retain their credibility into the third decade of the century. Already, China spends more on defence than all of those three together. It is all very well for America to talk about a strategic rebalancing towards Asia, but if the money is not there to buy the ships, the aircraft and all the expensive systems that go with them, it will eventually sound hollow.

The Economist is right to suggest that this trend may not continue as this will likely depend on the state of the China's economy. Of course this will really depend on priorities of the Chinese government.

But what they sorely missed is of the real nature of “strategic rebalancing”, which is not supposed to be about military buildup but about trade.

They forget about Bastiat’s wisdom where “if goods don’t cross borders, armies will”

Second chart global arms trade.

The Reuters notes that China has taken the fifth spot in arms exports with Pakistan being the main recipient.

An arms race serves as dangerous signal for world peace. Such also functions as a thermometer of the desperate state of welfare-warfare governments, who by resorting to inflationism, attempts to divert domestic political economic problems towards geopolitics. And they do this primarily through nationalist overtones.

The sad part is that instead of the remedy of channeling resources into productive uses, an arms race means more economic hardship for society, aside from greater risk of war.

As the illustrious American author Ernest Hemingway rightly admonished,

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists

Unfortunately people hardly ever learn.