Image: How military spending affects the economy. Source: Investopedia - Photo: 2022

Why Not Use Money Power to Wind Back Military Spending?

Viewpoint by Jonathan Power

LUND, Sweden (IDN) — The U.S. is not the only well-built actor on the Western stage. Some argue, quite understandably after the missed opportunities and mistaken steps of recent decades, that there is a lot to be said for trying to ignore the U.S. as much as possible or, at least, go round it.

Just let the U.S. pay as little or as much as it wants to the UN and its affiliate institutions and rely on the rest of the rich countries to make up the difference. This will clear the air in the UN, take its mind off the perennial struggle with Washington over arrears, and allow its energies to be better concentrated on how best to make use of the UN without waiting for Godot.

The Europeans and much of the Third World seem to have made such a decision over the establishment of the World Criminal Court. A similar argument is widely being discussed concerning the International Monetary Fund and the World Bank, two very powerful institutions. Despite the rapid rate of growth in the importance of private investment they have a gravitas that is only matched by the U.S. government itself.

Needless to say, as with the UN itself, the IMF and the World Bank are not used to operating without the sanction of the U.S. In the UN the U.S. has a veto and within the IMF and the World Bank its negative vote can derail most, but not all, initiatives. However, both institutions have rather more room for manoeuvre than current practice suggests. There remains a difference between courting the U.S. and bowing to its leadership and simply getting on with business as best one can, preferably with the U.S. but, if necessary, without it.

One important area of dispute is the whole fraught question of the relationship between IMF and World Bank credit and the military expenditures of recipient countries. The IMF’s former director, Michel Camdessus, argued passionately that in too many cases high military expenditures were getting in the way of development.

Under his tenure quite a degree of progress was made in pushing governments to cut back their military outlays, but there was always the restraining hand of Washington that, while welcoming toughness in some cases, also had its own foreign policy agenda that in many cases would override such concerns and pull the IMF back. It is time overdue to accelerate the IMF’s interest in pushing countries to put economic growth and social advancement before the often introverted- and corrupt- interests of military establishments.

It can happen. Take Romania’s decision in 1997 whilst almost bankrupt to buy 96 Cobra helicopter gunships from the U.S. The IMF representative in Bucharest made it clear to the government that “Romania’s spending priorities in the short and medium term should be structural reforms, health and education rather than military spending”. Perhaps because it was such a provocative case in post-Cold War Europe, where Romania self-evidently had no enemies, the IMF slammed down its foot.

But less straightforward has been the IMF’s dealings over decades with Pakistan. After Pakistan exploded its nuclear weapon in May 1998 the U.S. insisted that the IMF and the World Bank suspend their loans to Islamabad. However, Washington relented after Pakistan modestly cut back its defence budget and said it was prepared to sign the Comprehensive Test Ban Treaty.

Yet if ever there was a country that each year fritters away what it needs for development, especially for such vital needs as the education of its women and an improvement in its literacy for which it lags behind all its neighbours, this is the one. The U.S. gave it a slap in a moment of anger and then relented. 

Pakistan has been allowed to return to the IMF bottle like a temporarily reformed drunk, whilst everyone is aware of what the consequences will be. Even one of its recent finance ministers, the late Mahbub ul Haq, confided to me that he was embarrassed what his country got away with and privately wished the IMF and the World Bank had firm, unbendable rules on over-the-top defence spending. “Then I would have a position of strength when I went to argue with the president about the need for greater social expenditure”, he told me.  

Unfortunately, the voices calling for a less stringent approach are not short of an argument. They say that if countries are leaned on too hard they will do anything to avoid hard choices, even if it means cheating on their books. Besides, some of these countries may truly need a beefed-up defence. Are we outsiders to tell Pakistan it has no reason to fear India?

It is indeed often possible to make a case. But at the end of the day the argument must be made that the best long-term way to avoid conflict is to establish democracy and pursue fast economic growth that is well enough distributed that it lifts the boats of the poor too.

The IMF and the World Bank do not need to be party to judging a country’s military vulnerability. But they are more than capable of having an opinion on whether a high level of defence spending is contributing to or taking away from development. If a country wants to ignore that advice, all well and good. It need no longer receive money that originated primarily in the tax payments of the developed countries and is now held in trust for the citizens of the world by the IMF and the World Bank.

A tough policy, implemented coherently over a long time period without being buffeted around by the changing needs of U.S. foreign policy, will like everything else that is immovable become to be accepted over time as a given. But if it can be budged or bent one time then every country will think it can budge it or bend it when its turn comes.

If America can’t buy this argument, then the other responsible members of the international financial institutions should do their darndest to fight to make it stick. They don’t have to go along with Washington unless they choose to. The Europeans, Canada, South Korea and Japan have a lot of independent financial clout. They should use it.

About the author: The writer was for 17 years a foreign affairs columnist and commentator for the International Herald Tribune, now the New York Times. He has also written dozens of columns for the New York Times, the Washington Post, the Boston Globe and the Los Angeles Times. He is the European who has appeared most on the opinion pages of these papers. Visit his website: [IDN-InDepthNews — 13 December 2022]

Image: How military spending affects the economy. Source: Investopedia

IDN is the flagship agency of the Non-profit International Press Syndicate.

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