Duncan’s Economic Blog

A smaller US or a larger Netherlands?

Posted in Uncategorized by duncanseconomicblog on April 29, 2009

Hopi has a great post up on the current polls. In the comments there has been an interesting debate on Trident renewal.

Much of the argument has revolved around the cost. All of this reminded me of a line in Willem Buiter’s ‘memories of Eddie George‘.

Eddie viewed the UK as a small version of the USA. I viewed it as a somewhat larger version of the Netherlands.

Now Professor Buiter was talking about the macro-economy, but I think the quote cuts to the heart of a debate on defense spending, of which Trident is only the most visible (and contentious) issue.

I think this raises two issues for all those involved in politics.

(i) Is it right that Britain still claims a global role (as does the US)? We are after all one of the world’s larger economies, possess a seat on the Security Council and historical links around the globe. Or should accept that we are actually little different from our cousins on the continent and be contend to be ‘a larger Netherlands’?

(ii) In what Charlie has dubbed the coming age of austerity, can we afford a global role and the defence spending that entails? Not just Trident, but the planned aircraft careers, etc.

We currently spend 2.4% of GDP on defence, much less than the US at 4% but more than Holland at 1.6%.

A very important side issue here, as noted by Hopi, is the role of the aerospace & defence industries in the UK economy. They are success stories and would a cut in our own expenditure badly affect them? I would mention that Sweden (only 1.4% of GDP spent on defence) has a vibrant and successful exporting defence sector.

Personally I support Britain having a global role. However I am mindful of a quote that good friend of mine is very keen on – ‘the language of priorities is the religion of socialism’. In an age of austerity, if cuts have to be made to public expenditure then defence would be on the front end of my list.

Even if we it means becoming a larger version of Holland.


8 Responses

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  1. CharlieMcMenamin said, on April 29, 2009 at 2:32 pm

    It’s not just Trident you know – it’s the whole of our damned reliance on the arms industry. I’ve posted about this on my blog in response to you.

    But you also implicitly raise a question of national self image. I think politicians are often a generation behind much of the public on all this. I feel sure, for example, that Michael Heseltine’s enthusiasm for Europe was actually partly based on his desire to have the big imperial stage to stride across he thought he would have as a young man in the 1950s when he first sketched out his plan to become prime minister on the back of that famous envelope. Ditto Blair with this ‘humanitarian interventionist’ reversal of Dennis Healey’s ‘no more East of Suez’ policy of the 1960s. My sense is that much of the general public – though it can be roused to bellicose sentiments in matters perceived as directly affecting us – is now very skeptical about the idea of Britian acting as a Great Power….or so I hope, anyway.

    • duncanseconomicblog said, on April 29, 2009 at 7:25 pm

      Interesting post.

      And interesting points on national self image.

  2. Brian Hughes said, on April 30, 2009 at 8:41 am

    I think it’ll be a while before the British public (or at least a lot of its more vocal communicators) will be ready for Britain to have a lower world profile than France! Any idea what % of their GDPs the French and the Germans spend on defence?

    • duncanseconomicblog said, on April 30, 2009 at 8:53 am

      France is 2.6%. Germany 1.5%, Italy 1.8%.

      I agree the public might not like it. And instinctively I support an international role for Britain, but then the question becomes is it worth the cost?

  3. CharlieMcMenamin said, on April 30, 2009 at 8:56 am

    Both absolute spending and %age of GDP spending are listed on wiki here http://en.wikipedia.org/wiki/List_of_countries_and_federations_by_military_expenditures

    France ($61.5tn) and Britain(c$57tn) seem to spend comparable amounts, both in absolute terms and as %GDP. Germany doesn’t spend that much less overall ($46tn), but it is considerably less as a %age of GDP (1.6%, as opposed to 2.6% /2.4%).

    There are some minor differences between these figures and those from 2007 quoted from the Stockholm International Peace Research Institute which suggests Britain spends more than France.

  4. Will M said, on April 30, 2009 at 9:00 am

    Sweden, from memory, has a large air force and a tiny ground force / navy, thus supports a decent aerospace-based defence industry at a lower cost of overall defence.

    on the wider point, it depends whether britain thinks that what happens abroad is something we care about (i think it is), something we think we can affect (again, i think it is, especially when dealing with rogue nations), and should affect (guess what i think here).

    There is an argument to be had about cost though. What we’re currently best at seems to be high training / low armour military force. I agree this may cause issues for domestic producers, but I suspect that producing for export is going to be a healthy market for a while yet…

    • duncanseconomicblog said, on April 30, 2009 at 9:06 am

      Canada is an interesting case. Defence spending 1.1%. And yet manages to provide peacekeepers.

  5. charliemarks said, on May 1, 2009 at 5:37 am

    let’s not beat about the bush – there is very little defence spending. Look at the floods in England in recent years… No, there’s plenty of war spending and if it’s guns or butter, pass me the lurpack!

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