LETTER: Neglecting defence can have unpleasant results
Military spending is always a grudge purchase
I will not correct the misperceptions regarding Armscor and Denel contained in Terry Crawford-Browne’s diatribe (“Armscor was irredeemably corrupt”, September 15). Those who developed the systems can do that themselves if they wish to bother with him. But I would like to touch on his statements regarding the World Bank.
The origin of the idea of 2% of GDP as a safe defence spending level seems to have been a paper presented at the 1991 World Bank annual conference on development economics. That paper, by the Independent Group on Financial Flows to Developing Countries, argued that “when decisions concerning allocations of foreign aid are made, special consideration be given to countries spending less than 2% of their GDP in the security sector”. I do not recall it going much beyond that.
A 1993 study of The Economic Impact of Military Expenditures carried out by the World Bank’s policy research department (WPS 1,138) found that generally “military spending (typically about 4% of GDP) is not associated with lower rates of economic growth, of capital formation or of government spending on health, education and infrastructure, or with higher rates of inflation”. In fact, it found some evidence that “(a)s military spending increases, the growth rate at first increases and then decreases”.
Defence is always a grudge purchase but, as with insurance, underspending can have an unpleasant negative payoff. The advantage of having a defence industry is that a proportion of that “defence premium” will go to creating and sustaining employment, establishing processes, skills and technologies and reducing hard currency outflows. Depending on the capability levels, that industry can also generate export revenues.
Those who believe in the 1,000-year peace might argue there is no need for armed forces, let alone a supporting industry. Those who must deal with reality, understand the need for armed forces and the economic advantages of a supporting industry.
Helmoed Römer Heitman,Via e-mail
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