Thursday, 12 February 2015 00:00

The Economics of Smart Defense

Written by  Keith Hartley
NATO’s “Smart Defense” proposal claims to be a new way of thinking about generating defense capabilities. It encourages allies to cooperate in developing, acquiring, and maintaining military capabilities. It means pooling and sharing capabilities, setting priorities, and coordinating efforts better. It involves member states not spending more but spending better; it is about specializing in what we do best and seeking multinational solutions to common problems. Smart Defense has economic dimensions that need to be clarified and assessed critically. We do not live in a world of “magic wand” economics, where declarations of intent miraculously lead to efficiency improvements in defense markets. Smart Defense cannot ignore the incentives and constraints that operate in defense markets at both the national and Alliance levels. The financial and economic crisis of the past five years has meant cuts in national defense budgets, which have meant that nations cannot avoid the need for more and continuing difficult defense choices. Inefficiencies within member states’ defense markets and within NATO have to be addressed. For each member state, budget pressures and rising input costs mean that, yet again, something has to go. The question is, What are the options and what goes?