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Nov 14, 2012

Defence spending: the most expensive ‘free ride’ in history

Australia is not "free-riding" on the US. Instead, we're doing what everyone else, including the US itself, is doing and cutting unnecessary expenditure. Only US contractors lose.

One of the biggest disasters to befall the world’s major arms companies was when, entirely without meaning to, the United States won the Cold War.

That victory was an appalling accident that not merely prompted dramatic cuts to defence spending, but deprived an entire generation of intelligence officers and defence officials of the excuse of an apocalyptic conflict to justify their behaviour. The clash of freedom and communism, as it turned out, didn’t quite measure up to the biblical loading it had received for so long, when our opponent was revealed as a hollowed-out bankrupt whose own controlling party was desperate to reform it.

To lose one excuse for running a Security State is a misfortune. To lose two is downright careless. Ever since, the United States has been struggling to devise a reason for continuing to support one of its most important industries. The War on Drugs did good duty for a time; the phrase “narcoterrorist” was coined and even that cool avatar of Cold War propaganda, James Bond, took on the cartels. But it was the War on Terror that provided the best excuse for reflexively ramping up military spending and encroaching on citizens’ basic rights, not merely in the US but across the West.

The great appeal of the War on Terror is its self-perpetuating quality that guarantees this is one war where the danger of accidentally winning is slim: our invasion of Iraq proved a potent recruitment tool for terrorists, though not as much as Osama bin Laden hoped, while Barack Obama’s remorseless drone war continues to outrage the communities targeted, particularly given a policy of follow-up strikes intended to kill emergency and rescue personnel.

Nonetheless, scarred by the terrible experience of the early 1990s, there is a continuing effort to identify looming threats that demonstrate the need for more defence expenditure and further restrictions on rights. Cyberwar, or cyberterrorism, the threat of the “digital Pearl Harbour”‘ is now a favoured plea of governments and corporations. And then there’s China (a key part of the cyberwar threat, conveniently), a country that combines the ruthless dictatorial brutality of the Soviet Union at its worst with the intense spirit of capitalist competition the US knows so well.

All that is by way of laboured context for the debate that lurched back into life this week about Australian defence expenditure, including drawing two unlikely armchair generals in John Birmingham and Christopher Joye, both normally eminently sensible commentators, to call for an end to our “free ride” on the US military and, in Joye’s case, the investigation of nuclear submarines. Can’t wait to see backbenchers on both sides of politics putting their hands up to host a nuclear submarine base in their electorates.

If Australia is indeed free-riding on the US military, it has to be one of the most expensive free rides in history. As I showed in August, over the last decade Australian taxpayers have handed $22 billion to US defence firms for major procurement projects, including for some of the worst procurement debacles. Billions more have gone to the local subsidiaries of the big US firms, which employ plenty of Australians but funnel profits — often for standard consultancy, catering and maintenance services performed within Australian defence facilities — back to the US. Australia is deeply enmeshed in the US defence contracting industry, something sold to us as a boon but which often locks us into a narrow range of procurement options.

And those who complain that we’re free-riding might like to go and ask the families of the 39 Australian soldiers killed in Afghanistan whether we’re not paying any price for our reflexive support of the War on Terror.

These huge defence contractors are, in a very real sense, state-owned enterprises. They are run by former senior military officials, or former high-ranking intelligence and foreign affairs bureaucrats or well-connected politicians, many of whom circulate between such positions and public service. They rely heavily on US defence spending, and their overseas sales are facilitated by a vast government-run arms sales network that has representatives in scores of countries. They also act as vast cash-churning machines in Washington. Lockheed Martin has spent more than $22 million in lobbying in Washington in the last two years, and made $3 million in donations. Boeing has spent $24 million on lobbying and made over $2.6 million in donations; Northrop donated the same amounted and spent $21 million on lobbying.

Lobbying will become more important for the big contractors because they face an enemy that may vanquish all attempts to confect threats justifying continued exorbitant defence spending: austerity. Cuts to US defence spending — which will be exacerbated by the fiscal cliff if no taxing and spending deal is done by Congress and the White House — are occurring at the same time as many other developed countries are slashing their defence spending. Indeed, US officials have already complained about cuts in other countries. Hillary Clinton publicly expressed concern at cuts by the new Tory UK government in 2010. Another conservative government, that of Canadian Prime Minister Stephen Harper, earlier this year announced massive defence spending cuts to address Canada’s budget deficit.

Conservative governments in the UK and Canada ripping into defence spending demolishes the suggestion that somehow cutting defence spending is a thing peculiar to Australia or to Julia Gillard. Compared to the cuts demanded by Harper, Gillard’s austerity — primarily aimed at delaying or stopping overseas procurement — is innocuous.

Indeed, the most vociferous criticism of defence spending cuts has been directed at the US itself, with Mitt Romney unsuccessfully trying to make spending an issue of the Obama administration’s own cuts in his presidential bid.

Spending cuts in all countries have been accompanied by a cacophony of complaint from former military officials, think tanks, foreign policy and defence institutes and defence commentators who form a potent cheer squad for the military-industrial complex, all of whom obsess about the themes of leaving freedom unprotected and failing to do the right thing by Our Boys. Oppositions usually join in too: one of the biggest critics of the UK spending cuts has been the Labour opposition.

Sometimes it’s an odd fit given the conservative orientation of many commentators. Take The Australian Financial Review, for example: normally our most dependable foe of big government and industry protectionism, when it comes to defence spending The Fin is outraged at cuts to defence procurement expenditure and wants to see more taxpayer dollars being spent in our defence budget.

On defence spending, the government is only doing what virtually every other western government is currently doing, and for the same reasons. Indeed, compared to the likes of the US and Canada, the Gillard government’s defence cuts looks like a trim and tidy-up. It could, and should, go a lot deeper. The only losers will be big US defence companies.

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30 thoughts on “Defence spending: the most expensive ‘free ride’ in history

  1. Wombat

    What about the $40 billion put aside to spend on locally-built submarines? I’d rather see those sourced cheaply from a country that actually knows a thing or two about building submarines rather than South Australia.

    http://logicisstupid.blogspot.com/2012/07/yellow-submarines.html

  2. zut alors

    That the US believes they have the right to dictate to an Oz government how to apportion taxpayers’ money is deeply disturbing. No doubt the average Aussie would appreciate the US minding their own business.

    And it convinces me that Assange has absolutely no hope if they get their nefarious claws into him.

  3. Gavin Moodie

    Great piece, thanx.

    As I was reading I was wondering whether BK would mention the ‘military-industrial complex’, and I’m glad he did. Incidentally, Wikipedia gives this origin of the term:

    ‘The first public use of the term was by the Union of Democratic Control, formed by Sir Charles Trevelyan in the United Kingdom on 5 August 1914. Point Four of their pacifist manifesto declared: “4. National armaments should be limited by mutual agreement, and the pressures of the military-industrial complex regulated by the nationalisation of armaments firms and control over the arms trade”.’ (DeGroot, Gerard J. Blighty: British society in the era of the Great War, 144, London & New York: Longman, 1996, ISBN 0-582-06138-5).

  4. mutatedwombat

    Pretty sure people were saying the same things in 1938, which coincidentally is the last year that our defence spending was this low as a percentage of GDP.

  5. Gavin Moodie

    @Wombat

    Good point. But it depends whether you actually want the subs or not. Since I don’t think they’re needed one might as well spend it locally on an activity which might have some incidental benefit.

  6. Bill Hilliger

    For all the spend more on defence people out there; don’t worry, there is now a never ending spend on national security from terrorists, illicit drugs, and demonising Iran thereby ramping up a reason to start a war with Iran. Luckily for the U.S. the terrorism and illicit drugs thingy will never go away; they have finally found the perfect enemy. To me, the greatest impedance to world peace and economic well being is our so called best friend, the United States of America. The US has nominated by default China as our new possible enemy in the SE Asia region and we as a nation foolishly accept that notion. We will keep spending our dollars to placate American insistence to spend on military hardware and help their economy. Just think – the cost of one state of the art fighter jet equals one well equipped hospital or school. We Australians know, it is very expensive to kill people in foreign lands, especially if we’re seen as the invaders. Remember Vietnam, still a Communist country since the 1960’s despite our involvement in that war, we go there for great holidays nowadays – but we lost the war. Just as well the Vietnamese government forgives and maybe forgets. I wonder if the Iraqis and Afghans will?

  7. John Bennetts

    I have said it before…

    Spending less on war and more on peace makes very good sense to me.

    Australia must have the reputation of being a difficult neighbour – in which case, it has well earned, especially due to the “turn back the boats” fanatics which we harbour.

  8. klewso

    “What are mates for if you can’t use them?”?
    The US was in the squirrel grip of the GFC, we weren’t as much – who better to give their financial bottom line (underwritten by ordnance production) a fillip, buying that product?

  9. Mike Smith

    WHo would want to serve in a noisy submarine if war did break out? Kit them for automation, oops I forgot, the software doesn’t work properly either. Perhaps we could sell them to Waterworld for tourists?

  10. klewso

    “The Search for Red October”?
    Jaws – with a nuclear head?

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