But there is also a fiscal explanation for the divergence of the two systems, so different from the convergence predicted by so many contemporary commentators. To revert to the theme developed in Chapter 4, a crucial advantage enjoyed by the United States was the ability to finance increased arms spending by selling bonds to the public. The big rise in the federal debt under Reagan may have worried the prophets of overstretch; but as a way of paying for increased military spending, borrowing has the benefit of ‘tax smoothing’ and hence minimizes economic distortions. What Kennedy overlooked was the ease with which the United States financed its increasing debt burden. At its peak in 1991, US net government interest payments amounted to a trivial 2.2 per cent of GDP. By contrast, after the suspension of domestic bond sales in 1957, the Soviets relied on much more distortionary forms of finance to cover their rising defence budget (such as credits to state enterprises and forced loans from ordinary savers), and these almost certainly played a part in the economy’s declining productiveness. When Moscow belatedly turned to the international capital markets under Gorbachev, it had to pay a substantial risk premium (though it was not high enough, as the lenders later discovered to their cost). A good parallel can be drawn here with Britain’s victory over ancien régime France in the eighteenth century. In each case, the state with the most developed bond market had the deeper pockets and hence could sustain its military effort at a relatively lower economic cost.73
THE PRECAUTIONARY MOTIVE
Of course, a true cost-benefit analysis of defence spending must go beyond simply adding up the burden represented by the military budget and offsetting the value of any positive spin-offs from R&D. For to estimate the economic value of a given defence policy it is necessary to compare actual costs with the potential costs of doing less or more. As so often in historical analysis, only a ‘counterfactual’ approach will get us close to a sufficient answer. As comparisons have been made in the past between the Pax Britannica and the Pax Americana, the United Kingdom and the United States will be the focus of what follows.
Was the British Empire ‘a waste of money’, as strict liberals at the time and since have argued? It seems unlikely. No doubt it is true that, in theory, ‘the benefits from imperial trading blocs were sub-optimal solutions compared to open international trade’;74 but in practice ‘open international trade’ has not been naturally occurring. It has been asserted that after around 1846 – though not apparently before – Britain could have withdrawn from Empire with impunity, and reaped a ‘decolonization dividend’ in the form of a 25 per cent tax cut.75 Yet the challenges to British hegemony from protectionist rivals were in many ways greater in the late nineteenth and early twentieth centuries than in any previous period. Abandoning formal control over Britain’s colonies would almost certainly have led to higher tariffs being erected against British exports in their markets, and perhaps other forms of trade discrimination. The evidence for this need not be purely hypothetical: it is manifest in the highly protectionist policies adopted by the United States and India after they secured independence, as well as in the protectionist policies adopted by Britain’s imperial rivals France, Germany and Russia between 1878 and 1914. Britain’s military budget before the First World War can therefore be seen as a remarkably low insurance premium against international protectionism.76 And the economic benefit of enforcing free trade could have been as high as 6.5 per cent of GNP.77 (Another way of looking at the problem is to consider the benefits Britain derived from the Empire when the world became even more protectionist in the 1930s: in that decade the share of British exports going to the Commonwealth and colonies rose from 44.4 to 47.6 per cent; the share of her imports coming from there rose from 30.2 per cent to 39 per cent.78) In any case, the burden of defending the Empire before 1914 was relatively low (see Chapter 1): as a proportion of net national product, the British defence budget was just 3.2 per cent in 1913, less than that of Russia, France, Italy and Germany.79
On the other hand, it is far from certain that the cost of the First World War to Britain was justified in view of the relatively limited threat posed to British interests by German aggression on the continent in 1914. The crucial defect of British policy in the decade before the First World War was that it identified a serious German threat to the continental status quo but made no serious attempt to prepare to check that threat by the only viable means: the creation of a comparably large land army. By going to war before that army was ready, Britain condemned herself to four extremely expensive years of learning ‘on the job’ how to fight a modern land war.80 The earlier adoption of conscription – which was ruled out not by its cost, which was affordable, but by liberal ideology – might well have deterred the Germans from risking war in 1914.81
By contrast, the costs of British involvement in the Second World War need to be compared with the hypothetical costs of either defeat by, or compromise with, Nazi Germany. Given what we know of Hitler’s plans for global domination, it is highly unlikely that Britain would have been better off seeking peace in 1939 or 1940.82 On the other hand, it seems plausible that an earlier and more bellicose reaction to Hitler’s demands for Czech territory in 1938 might have been a better strategy than the eleventh-hour guarantees to Poland and the other East European countries issued in 1939 after the partition of Czechoslovakia. None of the arguments advanced by Chamberlain’s defenders succeeds in showing that appeasement was the only policy available to the government. Least persuasive of all are the arguments that higher spending on defence would have destabilized the economy, creating labour shortages and other problems. The dangers of a mild upturn in inflation in 1937–8 were infinitesimal compared with the dangers of complete isolation in the event of a Nazi victory on the continent in 1939–40. It was the most false of economies to ‘play for time’ against Hitler in 1938: between Munich and the outbreak of war, Germany’s position was strengthened no less than Britain’s, and in some respects (such as the conclusion of the Nazi–Soviet Pact) more so.
British foreign policy in the twentieth century was therefore punctuated by a sequence of grave failures of deterrence. Neither in the 1900s nor in the 1930s did Britain succeed in convincing Germany and her allies that the risks of a war against Britain were excessive. In other words, the root cause of Britain’s problems was ‘understretch’: the failure to spend enough to deter a potential aggressor, which led inexorably to the need for far more expensive full-scale war just a few years later. (Something similar happened, albeit on a much smaller scale, with respect to the Falkland Islands prior to an Argentine invasion.) It is at least arguable that Britain would have declined less rapidly in the twentieth century if successive governments had been willing to spend more on deterring potential enemies. Only after the debilitating costs of two world wars did defence cuts and decolonization become imperative.
Does the British experience of strategic vulnerability through understretch have any relevance to the United States today? There are of course fundamental differences between the two powers, a number of which were pointed out in Chapter 10. Britain was a capital exporter; America is a capital importer. Britain ‘sent forth the best she bred’; America sucks in immigrants.
Plainly, it is highly unlikely that any state would contemplate a direct attack on the United States in the foreseeable future, though a terrorist campaign against American cities is quite easy to imagine. Even after big defence cuts, the United States is still the world’s only superpower, with an unrivalled financial and military-technological capability. Its defence budget is fourteen times that of China and twenty-two times that of Russia. The real issue, however, is whether or not any state is capable of attacking one of America’s allies – or indeed of using violence anywhere in the world where American interests are deemed to be at stake. In this context, it is significant that while the United States, Europe and the countries of the former Soviet Union have been disarming since the mid-1980s, other parts of the world have been rearming. According to the Stockholm Internatio
nal Peace Research Institute, arms exports to northeast Asia and the Middle East have risen significantly since 1994. Some Asian powers now possess a nuclear capability (China, India and Pakistan); while Iraq continues to resist international efforts to curb its chemical and biological weapons programme. The Pentagon estimates that at least twenty countries possess either short- or medium-range ballistic missiles.83
The shifting military balance is most easily illustrated by comparing military budgets over the past decade (see Table 25). The difference between East and West illustrated in the table is worth pondering. In North America, Europe and the former Soviet Union, there have been dramatic cuts in real expenditure since 1989: the US budget is down by a third, Britain’s by a quarter, and Russia’s by more than 90 per cent. Among American countries, including the smaller ones not shown in the table, only Mexico and Brazil have increased their military spending; in Europe, only Finland, Greece and Turkey. But in the Middle East, every state except Egypt (and Oman) has increased spending, in the case of Iran by as much as 70 per cent. And the trend is even more pronounced in Asia, where every major power has cranked up its military budget: by 70 per cent in China, by more than 100 per cent in Singapore.
This is not to imply that increased defence spending necessarily increases the risk of war. If two potential adversaries both increase their military budgets, the increases may simply cancel each other out. The point is merely that the rush to disarm which has been evident since 1989 in most NATO and former Warsaw Pact countries has not happened in Asia. Moreover, the table shows only the world’s biggest military spenders. When the same calculation is done for smaller states, some important regional divergences emerge. In Africa, Algeria, Botswana, Burundi and Uganda have all substantially increased their defence spending in real terms, while Ethiopia, South Africa and Zimbabwe are among the biggest cutters of spending. In Latin America, while Brazil and Mexico have increased spending, Chile and Argentina have cut by comparable amounts. And it is worth remembering that reliable figures are simply not available for the most notorious ‘rogue states’: Libya, Iraq, Serbia and North Korea.
Table 25. Military expenditure of the world’s principal powers (in US $millions, at constant 1995 prices and exchange rates)
Source: SIPRI Yearbook, 1998 (showing only countries with budgets over $5 billion and for which figures are available).
COSTING KOSOVO
These differentials in military expenditure would signify less if they had not occurred at a time when the scope of US foreign policy has been widening. But as we have seen, the idea that the United States and her allies have the right to intervene militarily in the internal affairs of a country to protect the rights of persecuted minorities implies a radical extension of the American role as ‘global policeman’. Is this a role the United States can afford to play?
One way to begin answering that question is to work out what it has cost since 1999 to get the Serbs out of Kosovo and the Albanians back in. The answer is in fact not much. According to estimates by Jane’s defence analysts, Operation Allied Force – which involved flying 36,000 air sorties, dropping 25,000 bombs and assembling a land force numbering close to 50,000 men – cost NATO £4.8 billion, or £62 million a day. However, this was only the first item on the bill. To arrive at the true cost of the war, it is necessary to add in three further items: the costs of relief to refugees from Kosovo, which ran at around £6 million a week in the immediate aftermath of the war (making around £24 million in all, given the unforeseen speed of the refugees’ return); the costs of reconstructing the province, which the European Union estimated at £2.5 billion;84 and the costs of occupying it with a 50,000-strong army for the foreseeable future, around £10–£15 million a year for Britain alone. Of that figure, £4.8 million is the UK’s contribution to the international mission in Kosovo (UMIK), the total budget for which is £77 million.85 Assuming that a force will have to stay in Kosovo for at least five years, that brings the total cost of the war to £7.7 billion. This is far less than the cost of Operation Desert Storm, which came to £63 billion in all – though admittedly that war was effectively paid for by rich non-combatants like Saudi Arabia and Japan, who had an interest in getting Iraq out of Kuwait. Financially as well as strategically, the 1999 war represented a return to the era of low-cost gunboat diplomacy.
But what was achieved for that £7.7 billion? According to NATO estimates released in September 1999, there were direct hits on some 93 tanks, 153 armoured personnel carriers, 339 other military vehicles and 389 artillery pieces and mortars.86 Some journalists who witnessed the Serbian withdrawal estimated that this was little more than a third of their forces. On the other hand, not a single NATO serviceman was killed by enemy action. Two US helicopter pilots died in a training accident, and three foolish GIs got themselves captured, but otherwise this was probably the safest army in history – safer, in fact, than some American high schools. By comparison, NATO claimed that the Yugoslav army lost 5,000 men and that a further 10,000 were wounded. Those figures were guesses, but even if they were treble the true body count, NATO was still ahead. Indeed, NATO won even if the official Serbian figure of 576 killed was correct. The main defect of the air campaign, however, was that it was extended to civilian targets. According to the Economist Intelligence Unit, the NATO bombardment may have killed as many as 1,500 civilians, mostly Serbs, not including a substantial number who were killed or maimed after the war was over by cluster bombs that had failed to explode on impact. We do not yet know for sure how many Kosovan Albanians were killed by the Serbs: one estimate by the International Crime Tribunal’s forensic expert suggests a total of around 2,500. But however high the figure, the number of civilians killed by NATO was unjustifiably close to it.
What constrained the United States and her allies from using ground forces directly against the Serb army and special forces instead of bombing civilians? Patently, it was not the financial cost, which could easily have been afforded. What the war over Kosovo revealed – or, rather, what it confirmed – is that American power is not inhibited by the expense of military intervention, but by public aversion to the human cost.
British Foreign Secretaries before 1914 often claimed that their room for manœuvre was circumscribed by ‘public opinion’; but in practice this usually meant little more than the post-prandial sentiments of the denizens of gentlemen’s clubs. The wider public, in the modern sense of the adult population, had only limited influence; and was in any case as often agitated by jingoism as by pacifism. Even today – partly because of thirty years of Irish terrorism, partly because of victory in the Falklands War – the British electorate is not averse to military action, even when casualties are sustained. The Russian populace has also shown itself willing to tolerate at least some military casualties in its war against Chechnya, provided Russian forces are seen to be winning. By contrast, and in large part due to the bitter memories of Vietnam, many Americans today seem unwilling to expend any American lives in foreign wars, no matter how noble the cause. As President Clinton put it to his press spokesman George Stephanopoulos in 1993, at the height of the crisis in Somalia: ‘Right now the average American doesn’t see our interest threatened to the point where we should sacrifice one American.’87 ‘We look after our own people,’ was his public response to the news that three GIs had been captured by the Serbs in Kosovo.88 Few politicians during the war in Kosovo were as frank about what a ground war in the Balkans would have meant as the Vietnam veteran and Republican Senator John McCain; privately, however, most politicians shared his fears, picturing planeloads of bodybags and collapsing poll ratings. For a twenty-first-century democracy, it appears, any military casualties are unacceptable. High-altitude bombing of Serbcivilians was a strategy adopted to minimize the risks to American servicemen.89
Partly for this reason, the American strategy in Kosovo was a bluff. It was not just the air campaign that persuaded the Serbs to pull out of the province. Nor was it only the Russians’ decision to end their
early diplomatic support for the Milošević; government. A key factor was the steady build-up of NATO troops around Kosovo; for without the possibility of a ground invasion after the bombing it seems unlikely that the Serbs would have withdrawn; and without those forces there could certainly be no credible talk of a NATO protectorate after the Serbian withdrawal. Yet if Milošević; had decided not to withdraw his forces, it is hard to believe that President Clinton would have authorized an invasion that would certainly have cost some American lives. Even as it was, public support for further bombing had slipped below 50 per cent by the last week of the operation.90
Nor is it possible to describe the outcome of the Kosovo war as an unequivocal victory for NATO. Under the terms of the ‘military technical agreement’ that ended the war, the Serbs improved on the Rambouillet proposals which had been the original casus belli. The UN Security Council was given ultimate control of the international force in Kosovo; the plan for a referendum in the province after three years was dropped; the Kosovo Liberation Army was excluded from the negotiations – unlike at Rambouillet – and was supposed to be disarmed.91 True, Milošević probably hoped for more from Russia’s equivocal support. It may well be that, in agreeing to withdraw his forces, he was banking on the Russians gaining control of north-east Kosovo, allowing that to become a Serb enclave.92 Yet the fact remains that, a year and a half after the air strikes, the status of Kosovo was still unresolved, despite Milošević’s fall from power; while Saddam Hussein was still in power a decade after his abortive annexation of Kuwait. This suggests that the policy of ‘surgical’ interventions with over-hasty ‘exit strategies’ is directed at symptoms, rather than the diseases that cause them.
The Cash Nexus: Money and Politics in Modern History, 1700-2000 Page 49
