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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.


  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


    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?

  11. NeoTheFatCat

    Ah, the reference to 1938 and the thinly veiled reference to ‘appeasement’ ie. cuts in defence spending is simply appeasement by another name.

    The issue is that by 1938 there was a clear threat to peace and the real question was not if there would be a war, but when. If anything, appeasement was the right strategy – poor tactical response, but allowed the UK to build up its arms.

    But how different is 2012! Despite all of the claims, terrorism is simply not an existential threat to Western nations. Yes, it’s a complete tragedy for those affected, but the greater inconvenience to the general public is the security response to the threat, not the action itself (and again, I don’t want to downplay the impact on those affected).

    Is cyberwarfare a major threat? Maybe, but it doesn’t require billions to be spent on a Joint Strike Fighter (unless we plan on taking out their servers).

  12. Frank Birchall

    Great piece Bernard, many thanks!

  13. Saugoof

    It’s worth looking at exactly on what sort of hardware our defence budget is spent on. You’ll find that a lot of it goes towards equipment that is far better suited to aggression as opposed to defence. E.g. equipment that helps us invade other countries rather than defend Australia.

  14. Steve777

    Australia’s defence spending of about $24 billion p.a. is being cut by about $5 billion over 4 years, I.e. about 4 or 5%. As you say, a bit of a trim and tidy-up, especially in view of our planned winding down of our Afghanistan commitments. Talk of us not pulling our weight is nothing more than a beat up by those with a political agenda to push or special pleading by rent-seekers.

  15. R Rands

    F35s are obsolete, I’d guess. To bad we ordered so many of them.

    Seems like the USA is doing lots of creative things with drones these days (well, ok, some of the things are more destructive than creative, and of dubious legality).

    How much lead time was there to the drone revolution? Enough to plan some offshore dumping of obsolete stock, just to squeeze out that last bit of profit margin?

    Then thre’s Ms Clinton, saying “We’re here to stay”.


  16. Scott

    You are right. If you ignore the budgets and track the expenditure on defense in the national accounts, both consumption and capital spending, Australias spend on defense has been increasing as a percentage of GDP since 2001. Around 2.5% of GDP at the moment and still on the up..which makes sense for a country with troops deployed in the field.

    As for the nuclear sub option, pure rubbish. We couldn’t adequately crew the 58 sailor operated Collins class. How could we crew the Virginia class? (which needs 120 sailors to man)

  17. Mark Duffett

    Don’t know that it’s quite right to tag John Birmingham an ‘unlikely’ armchair general, and contrast this with his ‘normally sensible’ output. He actually has a fair bit of form in this area (and I’m not just talking about his fiction).

  18. Karen

    Free Ride? For how long does Australia have to keep paying off the US for its assistance in the Coral Sea during WWII? We’ve gone to Vietnam, Iraq and Afghanistan. We’ve given them bases here. We’re going to have the Americans on our soil for military exercises much to the dislike of the Chinese. We’ve spent billions paying for American dinky military toys, many of which don’t suit our needs, as this article points out. We’ve given them a free trade agreement skewed to American interests. The US owes us, not the other way around. If they know too much, we’ll flirt with the Chinese and start forging closer military ties, see how they feel about that!

  19. zut alors

    Yesterday Keating used the correct word which has been missing from this discussion when he described Australia as a ‘patsy’.

  20. Karen

    And when we asked for for American assistance during the Timor issue, the Americans said no because it didn’t suit their interests. Joke!

  21. Diogenes

    @Karen (response 20) – Wrong. See Alan Ryan’s ‘Primary Responsibilities and Primary Risks’ – Forces Contributed to INTERFET (p. 129)(http://is.gd/Tq57T6)

    Maritime: 1 x Cruiser, 1 x Helo Support Ship, 2 x Support Ships.
    Land: Logistic Group, J2 & J6 Staff, CMOC Signals Company.
    Air: 4 x C130, 1 x C12, 1 x EP3.

  22. Diogenes

    Further to my original post, go to ‘Publications’ and look for Study Papers – link compressor didn’t work on http://www.archive.org link 🙁

  23. Owen Gary

    Hilary Clinton drops into town (lobbying on behalf of the U.S military complex) but reminding us of the (TPP Agreement) & dictating to us we should be forking out for more of their military hardware. Vietnam, Iraq & Afghanistan, not enough for them wanting to invade Iran to stop them establishing an oil pipline within their own region for trade with their own allies.

    As Bill Hilliger points out below, they are ramping up for a war on Iran & no doubt there will be a false flag somewhere and it will be all Irans fault. Having watched a few documentaries on the Iranian leader & his foreign minister they seem to be more reasonable than all of their Western counterparts put together. It is also a fact that there is only 3 countries left on the planet without a “Zionist Central Bankster regime” (Iran, North Korea & Cuba) of course the U.S calls all these the “Axis of Evil” with China included. The funny thing is looking at Chinese history compared to our own, the West is the one thats seems to be doing all the invading. There were 7 without this bankster regime in 2000 but Iraq & others have all been bankstered since that time. It seems their only fate is “bombed then bankstered”

    Quite interesting to watch Paul Keating on Lateline last night who advised that we move away from the Yanks & move into our own trading zone without the U.S filling the Aussie racehorses saddles with lead once again. It seems their penchant for control is unrelenting & suffocating.
    I wish for once that these supposed representatives of the people would stop pandering to the U.S, the inflation in this country due to their trade agreements is crippling us, I really believe it is time we gave them the flick like yesterday wouldn’t be soon enough.

  24. Owen Gary

    Crikey you make it hard to comment on here with your non sensical moderation of no reason, lift your game otherwise you will scare people away!!

  25. Andybob

    Bernard, tell me more about the claimed follow up policy targeting emergency and rescue personnel.

  26. Dogs breakfast

    The Defence Materiel Org has been the worst performing dept in Oz for a long time, but although incompetence at every level is certainly a likely reason for that, no doubt it has also been hamstrung by the politics of buying serious defence capability.

    The joint strike fighter must be up there with the worst ever defence decisions, and certainly there were voices from there willing to say so, but usually former officers.

    what a grotesque waste, our defence budget would be better shown under the ‘international charity’ than defence spending.

    Then we could ask the right question, ‘are US defence goliaths the best recipients of our charity dollars.

    I suspect the answer is no!

  27. Ian

    An excellent piece Bernard. I see the US as being anything but our friend but rather our worst enemy although it may not yet have actually bombed us.

    Somehow they seem to have turned us into a kind of satellite state that bends over backwards to oblige it in every possible way (although I think we are still allowed to vote against their blockade on Cuba). I believe it is the most dangerous nation ever to have graced this planet with its unmitigated efforts to expand its empire and advance its military/industrial complex and other corporate monsters like Monsanto (GMO’s) and the fossil fuel industry (climate change denial and hence the abandonment of serious efforts to mitigate the problem).

    It is high time our apathetic/ignorant citizenry made our relationship with America a major election issue.

    How else will we ever end this madness?

  28. WhoWhuddaThunkIt Jones

    The word is spelled DEFENSE not De’Fence What ya thinking? Imagine the U.S. Department of Defence – Um Sir, did you need barbed wire fence or a wooden slat fence and an nice pretty gate to walk through the fence? lol WordGate Scandal

  29. zut alors

    ‘defense’ is the American spelling – this article was written by an Australian for an Australian publication.

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