An International Survey of Disarmament and Economic Conversion

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As our history demonstrates, Pakistan’s attempts to use military means to resolve its disputes with India have not borne fruit.  Instead, they have yielded a bitter harvest that Ayub Khan, with considerable prescience, anticipated almost 35 years ago.  However, no famine took place in India in 1967 or 1968, even though there was a severe crop failure.  Democracy provided a protective framework, as noted by Amartya Sen. He conducted extensive empirical research on the causes of famine, and was awarded the Noble prize in economics for that work.  Sen’s research leads him to conclude that famines rarely afflict democratic countries with the same intensity as they afflict dictatorships.  Speaking of India, he notes that “since independence and the installation of a multiparty democratic system, there has been no substantial famine, even though severe crop failures and massive loss of purchasing power have occurred often enough (for example, in 1968, 1973, 1979 and 1987).”2

The two-year drought that has affected much of the subcontinent and Afghanistan has created a grim water shortage in Pakistan.  Writes Zahid Hussain of the Associated Press,

Fishing has been decimated, farmland is parched, and rioters have smashed windows and overturned cars to protest water shortages in Karachi…The government is predicting wheat production will fall to 17.5 million tons this year, compared to last year’s record 22 million tons…Agricultural specialists also predict a bad year for cotton, which was planted late because of the water shortage…The water shortage has caused bickering between provinces…The drought means economic growth will not be as high as predicted, incomes will shrink and the unemployment rate…will rise…The troubled financial implications of the drought are second only to the political mess it is creating…The water crisis threatens the very unity of the country.3 

Such events bring out the imperative of disarmament, so that Pakistan can set aside funds for dealing with such contingencies that can impair its national security much faster than any perceived threat from foreign aggression.  To show the feasibility of disarmament, this concluding chapter reviews the experience of several countries with “converting swords into plowshares.”  It is written to dispel the argument that is often presented as a “show stopper” to disarmament: how and where are the unemployed soldiers going to be employed?  Often the skeptic is a military leader who stands to lose from downsizing of the military but in a few cases it is a civilian leader or businessman who also stands to lose from a reduction in the size of the military-industrial complex.   But in many cases it is the concerned citizen who feels that security will be compromised by disarmament.  Some have even raised the specter of an armed revolt that would occur as the disenfranchised ex-soldiers use their knowledge of military methods to create chaos and anarchy in society.4

The end of the Cold War has seen national defence budgets plummet, and resulted in a reduced demand for defence products, demobilization of millions of soldiers and the generation of thousands of pieces of surplus military hardware.  Conversion is defined as the operational process of demilitarization and the practical management of disarmament.  It can be used to cushion the impact of large-scale military draw downs.  The key to successful conversion is the realization by states that resources currently being spent on military affairs can be better spent on civilian endeavours.  Conversion has six dimensions: reallocating finances, reorienting research and development, restructuring industry, reintegrating personnel, alternative use of military bases and installations, and dismantling, reusing or scrapping surplus weapons.

Many developing countries have demobilized hundreds of thousands of soldiers without systematic reintegration or retraining programmes.  Conversion of course is not a painless process, neither can it be implemented instantaneously.  It needs to be managed carefully.  The Bonn International Centre for Conversion has been studying this topic for a long time, and much data has become available during the 1990s.  They have identified six major issues associated with conversion: Reallocation of financial resources, reorientation of R&D, restructuring of industry, demobilization, base closure and redevelopment, and scrapping of weapons.

Economic Benefits

A comprehensive econometric analysis by economists at the World Bank and IMF has found that military expenditure is economically unproductive.5 They estimate a large macro-econometric model over an international cross-section of time series data, and perform a wide range of policy simulations representing different levels of demilitarization.  They find that:

…the direct effect of higher military spending on per capita output is unambiguously negative and large.  The indirect impact of military spending on economic growth, via its negative impact on productive investment, is also found to be statistically significant.  Thus…high levels of military expenditure detract from economic growth both because they reduce productive fixed capital formation and because they act more generally to distort resource allocation.

Model simulations are performed for various regions of the world to estimate the impact of various demilitarization scenarios.  The results for Asia are summarized here.  During 1972-85, military spending accounted for 6.35% of GDP.  This ratio declined substantially to 3.88% in the 1986-90 period.  This decline served to increase the ratio of investment to GDP by .7%.  In the first model simulation, they assume that the military burden stays constant at its reduced level of 3.88%.  In such a scenario, Asia’s per capita GDP would rise by 14% over the long run, compared to a baseline forecast.  In the second model simulation, they assume a more aggressive level of demilitarization where the defence burden falls to 2%, equal to the ratio of developing countries in the Western Hemisphere.  Such countries have avoided major armed conflict throughout this period, and their ratio can be taken as an indication of the minimum level that can be attained in other regions if a lasting world peace is achieved.  In this scenario, the investment to GDP ratio rises by 1.7%, and per capita GDP levels rise by 33% over the long run.

The US Experience

The 1997 Quadrennial Defense Review (QDR) was completed under the guidance of Secretary of Defense William S. Cohen.6  It was developed by following “a path that led from threat, to strategy, to implementation, and finally to resource issues.”  The path has to be fiscally responsible.  The department’s plans are built on the premise that, barring a major crisis, national defence spending is likely to remain relatively constant in the future.  There is a bipartisan consensus that a balanced budget is essential to the nation’s economic health, which in turn is central to national strength and security.  The US defence programme is implemented within a constrained resource environment.  The fiscal reality does not drive the defence strategy that has been adopted, but it does affect the choices involving implementation.  It also has focused attention on the need to reform the defence organization and its methods of conducting business. 

Between 1985 and 1997, the US has responded to the vast global changes by reducing its defence budget by some 39 percent, its force structure by 33 percent, and its procurement programmes by 63 percent.  In 1997, the US defence budget was $250 billion, accounting for 15% of the national budget, and 3.2% of the GNP.  There are 1.5 million men and women in the armed forces.  The defence posture includes 200,000 personnel on overseas deployment, 900,000 personnel in the Reserves, and employs 800,000 civilians.

When the QDR period is completed, US forces will be down 36% from their levels in 1989, Reserves will be down 29% and civilian personnel down 42%.  The US policy is to examine the best opportunities to outsource and privatize non-core activities, i.e. to deregulate defence just as it has deregulated many other American industries, so that the cost and creativity benefits of wide-open private competition can accrue to the US economy.  It is the US position that the government should not perform private sector-type functions.

The QDR has been critiqued by a variety of different analysts, and found to be a fairly balanced and robust plan.  O’Hanlon of Brookings finds that it proposes reasonable adjustments to US strategy and the specifics of the US defence programme, even though it may result in a short fall between projected budgets and spending requirements.  He suggests some changes in US strategy that would help eliminate this budgetary gap.  These include (a) replacing the existing force structure that is appropriate to simultaneously fighting two Desert-Storm type wars with one that is appropriate for fighting one such war and engaging in another Bosnia-type operation; (b) changing naval operations and (c) establishing new nuclear weapons priorities.  Such changes would reduce the need for another 100,000 troops, bringing total troop strength down to 1.25 million troops.7

The Russian Experience

Current plans call for a reduction of 600,000 troops over the next five years, from a base of between four and five million troops.  About one-fourth of the Russian national budget goes to defence.  Yet the Russian armed forces are poorly equipped and trained.  Several soldiers are underpaid or not paid at all, and morale is at an all-time low.  It is no surprise that Russia lost its first war in Chechnya a few years ago, and has prevailed thus far in the current conflict by using firepower indiscriminately against Chechen fighters and civilians.  As the New York Times stated in a recent editorial, “Russia can no longer afford to sustain the imperial-size forces it inherited from the Soviet Union.  Conversion to a smaller, better-equipped force will allow more effective defence against any foreign threats and would decrease the risk to democracy from restive, underpaid military officers.”8  While downsizing its forces in aggregate terms, Russia plans to triple spending per soldier over the next decade.  This will produce a force strong enough to repel any external threats that may develop along Russia’s frontiers in the Caucasus, Central Asia, or Siberia.

Cost cutting is not confined to conventional arms.  Russia also wants to drastically curtail the number of its nuclear warheads, and has invited the United States to follow suit.  President Putin wants to draw down the nuclear warhead inventories in the two countries to 1,000 weapons each.  States Aleksei G. Arbatov, a member of the Russian Parliament’s defence committee, “Nuclear weapons are virtual weapons, designed and deployed never to be used.  [They provide] the best area to seek economy while using our available resources for peacekeeping, or for countering ethnic or religious extremists and the destabilization which follows them.”9 

The Chinese Experience

Chinese leader Deng Xiaoping recognized that without a strong economy, China could not become a great power.  He said that China “must grow wealthy and strong,” taking a line from Japan’s Meiji modernizers in the late nineteenth century.10 Once China had attained economic strength, it would be in a position to begin developing military capability commensurate with its new status as a great power.  It would have to de-emphasize defence spending in the near term in order to become a stronger power.  Notes a US assessment, “China’s grand strategy aims for comprehensively developing national power so that Beijing can achieve its long-term national goals. This grand strategy, which Beijing defines as “national development strategy,” has been reaffirmed by the post-Deng leadership.  

This development strategy is based on an assumption that economic power is the most important and most essential factor in comprehensive national power in an era when “peace and development” are the primary international trends and world war can be avoided. In this context, Beijing places top priority on efforts “to promote rapid and sustained economic growth, to raise technological levels in sciences and industry, to explore and develop China’s land and sea-based national resources, and to secure China’s access to global resources.”11

Consistent with this vision, China has recently issued a White Paper on China’s National Defence in 200012.  In this paper, China states clearly that national defence is subordinate to the nation’s overall goal of economic construction.  It says, “developing the economy and strengthening national defence are two strategic tasks in China’s modernization efforts.  The Chinese government insists that economic development be taken as the center, while defence work be subordinate to and in the service of the nation’s overall economic construction.”  By making economic security the centerpiece of its national agenda, the communist leadership in China hopes to avoid the fate of its Soviet comrades where political liberalization preceded economic liberalization.

The White Paper calls for implementing a military strategy of active defence that seeks to “gain mastery only after the enemy has struck.  Such defence combines efforts to deter war with preparations to win self-defence wars in time of peace, and strategic defence with operational and tactical offensive operations in time of war.”

It supports the development of a “lean and strong military force” in the Chinese way.  This involves two elements.  First, by managing the armed forces according to law, and by transforming “its armed forces from a numerically superior to a qualitatively superior type, and from a manpower-intensive to a technology-intensive type,” it hopes to comprehensively enhance the armed forces’ combat effectiveness.  Second, by “combining the armed forces with the people and practicing self-defense by the whole people, China adheres to the concept of people’s war under modern conditions, and exercises the combination of a streamlined standing army with a powerful reserve force for national defence.”

Compared to many other countries, China’s defence expenditure has remained at a fairly low level.  Currently, the share of the national budget going to defence is around 8%, down by one percentage point from five years ago.  Total defense spending in 2000 is $14.6 billion, which is only 5% of the defence spending of the United States, and 30% of Japan’s defence spending.  As a percentage of GDP, Chinese defence spending is 1.31%, compared with 3% for the US and 2.7% for India.13  To place these numbers in perspective, it is useful to note that Pakistan is spending anywhere from 25-50% of its national budget on defence, and this represents at least 6% of its GDP.  Most defence economists regard 3% of GDP the upper limit on defense spending for developing countries.

China has introduced market competition in its defence industries by the creation of ten corporations.  In addition, a major programme of “downsizing and restructuring” is underway in the armed forces.  “In September 1997, China announced an additional reduction of 500,000 troops over the next three years.  By the end of 1999, this reduction had been achieved, and the adjustment and reform of the structure and organization of the armed forces had been basically completed.”  Several corps headquarters, divisions and regiments have been deactivated.  The command structure is now leaner, more agile and efficient.  Increased emphasis is being placed on the newly emerging field of information warfare.  Additionally, to give them a sharper focus, the armed forces are being pulled out from commercial activities.  Over 290 business management bodies have been either completely dismantled or turned over to local governments.

The German Experience

The reunification of West and East Germany has resulted in a significant draw down of the military establishment in the new state.14  The most dramatic economic and social effects of the changed military environment are the number of jobs lost in the armed forces.  More than 60% of the military personnel and civilian personnel employed in 1989 had been eliminated by the mid-nineties.  In 1989, the combined military strength of the two Germanies was 653,000.  It declined to 283,000 by the mid-nineties, for a reduction of 370,000.  The combined civilian strength was 235,000 in 1989, and this had declined to 81,000 by the mid-nineties, for a reduction of 154,000.

Significant reductions are also occurring in the number of major equipment systems.  For example, total tank holdings are expected to decline from 7,000 to 4,166, artillery pieces from 4,602 to 2,705, and combat aircraft from 1,018 to 900.  Some of the equipment is being sold of to foreign countries.  The consequences of these reductions are felt mainly at the regional level, particularly in those areas where a high concentration of military activities was the backbone of the economy.  The number of new jobs created directly as a result of disarmament measures (destruction of weapons, organizing Base closings) is relatively small. It will take a long adjustment period and investments into alternative activities to compensate for the job losses.

The United Kingdom Experience 15

In the mid-nineties, the UK conducted its Strategic Defence Review “to give the Armed Forces of this country a coherent and stable planning basis in the radically changing international and strategic context of the post-Cold War world.”  The review was led by considerations of foreign policy, and derived from an assessment of likely overseas commitments and interests.  It established how British forces should be deployed to meet the requirements of foreign policy. 

It identified the “inescapable core objectives of UK defence policy” as protection from direct attack, and also identified secondary objectives over which the UK has some choice involving NATO, the UN and other activities in which the UK might have an economic, political, or security interest.  …Recognized that trade-offs had to be made in the pursuit of these objectives because of the constraints posed by the defence budget and its buying power.

Making these difficult choices demands “a thorough debate of the alternatives.”  It also recognized that “military means are not the only way in which to ensure security for the UK.  Political, developmental, cultural and trade diplomacy are complementary instruments to military means.  The Review places a strong emphasis on the quality of the armed forces and says:

‘The quality of its people is perhaps the defining characteristic of the UK’s Armed Forces.”

The size of downsizing in Britain is very significant.  Between 1970 and 1997 the number of regular personnel has fallen from 373,000 to 211,000; the number of Reservists from 425,000 to 321,000; and the number of civilian employees from 258,000 to 109,000.  Between the publication of Options for Change and April 1, 1998, manpower was down by more than 30%.

Postscript

This brief survey of international experiences with disarmament has demonstrated the feasibility of disarmament, by showing that it is being carried out by a wide range of governments in very different geographical locations, and across a variety of political and cultural regimes.   The survey also reveals that disarmament cannot be achieved overnight, nor can the process of economic conversion be expected to happen on its own.   Disarmament requires careful management to ensure that the needs of the demobilized soldiers are taken care of.   However, it represents the economically rational end that justifies the means.  As the example of Britain demonstrates, smaller armed forces are not necessarily weaker.  In the end, a smaller, well trained military will lead to improved national security.  

Both Pakistan and India need to rethink their approach to national security.  Military power is by no means synonymous with national security, and its unbridled pursuit will impair security.  As noted by Stephen Cohen, “in the last analysis, security involves the preservation of deeply held, shared values…India and Pakistan may have already compromised many such deeply held values (including some they hold in common) by the very process of acquiring and deploying large armed forces to protect them.”16

Notes:

The author is an economist in Palo Alto, California.  He lived in Pakistan during the 1965 and 1971 wars.  He has written on Pakistan’s Strategic Myopia in the RUSI Journal, and reviewed Mazari’s book, Journey to  Disillusionment for International Affairs.

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