Military Spending in Guatemala: The Fiscal and Microeconomic Impact: 1969-1995 Thomas Scheetz
I. Military Spending as a Public Service: A Theoretical Vision Economists conceive of military spending as an insurance policy that protects a nation against external risks in a politically unstable and unpredictable world. In acquiring this insurance policy, one must weigh the value of protection of national territorial integrity against potential dangers versus the other needs of a country's citizens. Ideally, this "security umbrella" allows citizens to invest, work and live in a country with a certain amount of predictability.
No country can finance a policy against all risks because the cost would be simply prohibitive. From the perspective of the armed forces (as in the case of any other bureaucratic organization), the decision to adopt insurance against all risks is particularly enticing, as it would grant its members maximum employment, income and power. However, regular citizens undoubtedly have a very different vision. Citizens conceive of external defense only as one more good in a large basket of goods. External defense is one public good along side many others, such as health, education, housing, public safety, etc. In the face of budgetary constraints, political representatives in a genuinely democratic and open system attempt to maximize the benefits of each good at the lowest cost without neglecting any of the other public needs.
In addition, in a democratic system, the citizen's perception of the benefits of investing resources in protecting external security is conditioned by the configuration and utility of the mechanisms utilized for assuring that good. It makes sense to finance mechanisms designed to defend external security and that are actually used for that purpose. On the other hand, it would be irrational for citizens/taxpayers to pay for arms that may be used against their own children. It would be equally irrational to finance armed forces to defend external security if later those institutions use their arms to provide a very different public good: internal order. In democratic states, this task is carried out by the police, who use very different procedures than the armed forces: a minimum use of force under the strict supervision of elected authorities or judicial power.
Following the end of the Cold War, defining military functions has become a crucial topic of discussion. After the disappearance of the missions assumed by many armies (heavily directed towards combating subversion in the Cold War context), and today confronted by the need to justify the high costs of maintaining those armed forces, many political leaders have opted for assigning military roles for which it is not ideally suited, as for example the fight against drugs, education in rural areas, civil defense, or environmental protection. These constitute inefficient uses of both military power and scarce public resources. A basic economic principle states that efficient production of a good or service can best be carried out by a specialist, resulting almost inevitably in lower costs. In order to provide the services mentioned previously, it would be more efficient to contract a police officer, a teacher or a Red Cross worker than military personnel, as, given its training and equipment, the military has a comparative advantage in the maximum use of force. Some might argue that if military personnel are not efficient in providing such services (education, health, civil defense, etc.), they should receive new training to become more efficient. The economic logic of this proposed solution is dubious: if military personnel have extra time to be retrained in new tasks, then in reality what is in excess are soldiers. Thus, funds earmarked for such public services provided by the military should be redirected to other state institutions.
In a democratic system, civilians must be in control of the armed forces, in particular through a civilian head of state and a civilian defense minister. Civilian authorities must be capable of defining defense policies that are in accordance with the country's economic capacity. In addition, this policy must be conceived of not only in service of the multiple needs of the country, but also considering the numerous variables that influence external security. In the end, the armed forces are only one aspect of the mechanisms that protect a nation's external security. This security results from a country's diplomatic capacity (the first tool to be used in an external conflict), the dynamism of the economy, the legitimacy of the nation's political representatives, and finally, the power of its armed forces.
To define what type of armed forces a country requires is not an easy task, given that maintaining a military apparatus is often very costly and it is seldom used. Frequently politicians as well as the military themselves have attempted to replicate models borrowed from fully developed and successful armed forces such as the French Army, later the German Army, and today the U.S. Army. The problem is that these paradigms correspond to imperial armies whose force levels and arms system are eminently offensive. The cost of maintaining a military with offensive potential is exceedingly high and tends to grow exponentially (approximately 9-11 percent annually during the Second World War) while fiscal revenue increases much more slowly (3-4 percent annually in most cases).
In such cases, defense costs increase greatly and strangle available state resources. Several policy alternatives can be pursued in these circumstances. The first is to maintain a constant operating power of the military, in which case defense spending will continue to rise inexorably, displacing little by little other government spending. The second option is to freeze defense spending whereby, due to the increasing costs of military equipment, no more acquisitions are made to update equipment. That is, a decision is made not to continue a race that every poor country will inevitably lose to richer countries. In this scenario, the defense infrastructure gradually loses its operational capacity and frequently assumes non-military missions such as environmental protection or the war against drugs. This process is normally accompanied by an exodus of most talented officials and by a gradual decomposition of the morale of those who continue in the military, who may begin to use their position for criminal acts. A third possibility is the adoption of a defensive military doctrine (called "non-provocative defense") that is in accordance with the country's fiscal capacities. This defense policy is understood as:
"A military posture in which the strategic and operational concepts, the deployment, organization, armaments, communications and command, logistics and training of the armed forces are such that they are in their totality unambiguously capable of an adequate conventional defense, but are unambiguously incapable of a bordercrossing attack, be it an invasion or a destructive strike at the opponents territory."
The maintenance of this kind of defensive capacity can be achieved at a significantly lower cost than that of an offensive army.
It should be added that since external defense is conceived of as just one more public good, subject to a cost/benefit analysis, a fourth option cannot be discarded: to renounce military protection of national external security and to reinforce the use of diplomacy. This solution is conceivable for countries in which no long-term threats or plausible military missions to protect the country's territorial integrity exist and/or the opportunity cost of maintaining any kind of military infrastructure is simply too high in terms of the provision of other public goods to society.
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