Defence facts

Sir Michael Carver

The Economics of Defence Gavin Kennedy (Faber and Faber £6.75) It is hard to say who understands least about the economics of defence, professional military men, professional economists, politicians, civil servants, students of defence, students of economics, defence industrialists, or journalists even if they specialise in defence or economics. It is probably true to say that each thinks he knows something about the subject, only a few would pretend to know all about it, and all, if they were honest, would admit that they have not studied it in depth even if they have been involved in it in one way or another.

All should welcome Dr Kennedy's admirably short, clear and comprehensive survey of the subject. In the course of nine brief chapters he goes to the root of the problem, analyses it, evolves a few simple theories illustrated by a diagram or two and a few clear statistical tables, and then either demolishes or qualifies the theory with a cold douche of realistic commonsense. In the course of this a host of clichés, parrot cries and arguments beloved of politicians, Treasury men and other civil servants, military men and those who profess to write about or study defence are scattered to the four winds or put firmly in their place. Those who are actually involved in the management of defence will both themselves gain from attempting to apply to their daily task the analysis that Dr Kennedy expounds, and also pray that those who make their never ending struggle more difficult than it already is by their incomprehension of the true balance of the factors involved will read this invaluable book and either act on it or forever hold their peace.

There is no doubt that The Economics of Defence fills a long-felt need, particularly in viewing the problem as a whole and recognising the illogicality but yet the strength of many of the factors which control it. Dr Kennedy begins by reminding us that we are not dealing with a new problem. He starts with Adam Smith and quotes what he wrote two hundred years ago justifying the expense of defence as a first duty of government. This forms the base from which Dr Kennedy develops his discussion of 'Defence and the Theory of Public Good', noting on the way the different attitudes taken by Ricardo, Malthus, Marx and other economists up to Keynes. One of his comments on Ricardo's suggestion that governments should be prevented from engaging in war by forcing the tax-payer to pay the full costs at the time is worth quoting: "If a community," he comments, "puts a low price on liberty or national integrity, it may end up with neither."

His chapter on the application to defence of the theory of public good concludes that it does apply, although with qualifications. The most interesting aspect of it lies in its application to an alliance, showing clearly how smaller nations in an alliance benefit most from it and explaining why they tend not to contribute, at least in financial terms, what the major contributors would regard as their fair share.

This leads the author on to a consideration of the vexed question of what is a fair share and of whether percentage of GNP or expenditure per capita or percentage of government expenditure or a combination of them can be taken as a valid yardstick. Thestatistical tables he employs to illustrate the chapter are unfortunately not all compiled on the same basis, although they can be compared. Some readers will be surprised to see the figure of 4.6 per cent of D /GNP quoted for Britain for 1972, the latest date for which a figure is given. It is taken from the Institute of Strategic Studies' The Military Balance 1973-4' and is lower than that generally quoted. This is because the figure is usually given at factor cost whilst that shown is at market prices. All in all, Dr Kennedy prefers D/GNP as a basis of comparison, provided that it is cautiously qualified. All those who engage in discussion of this subject, beset as it is with pitfalls, on whichever side of the argument they are, think themselves to be or would wish to be, would do well to read this chapter carefully. It dispels many myths.

Having got the 'fair share' argument out of the way, Dr Kennedy devotes a whole chapter to consideration of British defence budgets. It is somewhat unfortunate for him that the defence review was in progress as he wrote; but there is no justification for scribbling OBE (Overtaken By Events) on the chapter. His analysis and reasoning raise familiar echoes to those who themselves have been directly engaged in the process. He has some particularly interesting things to say about the financing of fully regular forces, the difficulties in making "savings" by short-term reductions, about the true cost to a community of conscript forces higher than most people assume and not revealed by traditional methods of accounting and about the mix between regulars and conscripts and between men in uniform and civilians employed in defence.

Dr Kennedy then turns to that complex field which absorbs the principal element of defence expenditure other than manpower, that is equipment procurement. Two chapters are devoted to this, the first examining the so-called Military-Industrial-Complex both in the United States and in Britain. In the process many hoary myths are dispelled: that governments are helpless prey in the hands of the complex, that economies are dominated by them, or that capitalist societies support them as a means of propping up the economy which would collapse without them. All these are shown up as false and the conclusion reached is that it is the government that dominates the industry and not the reverse. This is followed by a perceptive chapter on the problems and the process of weapon development, a clear child's guide to this thorny subject. It is full of wise comment: that in real life things are more complex than can be represented in a diagram, that a programme of R & D cannot be conducted on a random basis in the hope that something will turn up usable in defence, and that there has to be some order in the process, if only to ensure accountability: that those who are engaged in assessing operational requirements are operating even beyond the frontiers of technology, trying to estimate and forecast what will be used ten to fifteen years ahead, assuming that the unexpected is randomly mixed with the best guess of what to anticipate.

One of the virtues of this chapter is that the author shows quite clearly that he recognises and appreciates all the external factors, the battles for influence and power, that enter into the process, and what is more that they are both inevitable and legitimate.

Having got so far, he turns to the heart of the matter defence planning, or as he aptly

describes it, -decision making under uncertainty". To emphasise his point he quotes a leading American defence analysist's description of the process:

A long range military problem is comparable, for exmaple, to the problems of the owner of a racing stable who wants to win a horse race to be run many years hence on a track to be built between horses not yet born. To make matters worse, the possibility exists that when the race is finally run the rules will have been changed, the track length altered and the horses replaced by grehounds.

An aspect that is not perhaps given enough weight is that, while engaged in this essentially long-term planning, the defence manager is subject to pressures stemming from extremely short-term political and economic factors. The rest of the chapter is largely devoted to a discussion of systems analysis, the chief virtue of which the author judges to lie not in that it leads to decisions which are necessarily correct so much depends on the validity of the criteria but to informed and therefore one hopes better ones.

A brief survey of the impact of military spending on economies and its reverse, disarmament, completes a handy, if expensive for its size, vade mecum for all engaged in the practice of study of defence management.

One must hope that, with equal clarity and realistic commonsense, Dr Kennedy will now apply himself to the study of the popular field of international hopes for a more economic and effective use of defence resources through various forms of international co-operation. The number of magic formulae by which this may be achieved proliferates. Standardisation, rationalisation, specialisation, consolidation, shared R & D, two-way streets these are quoted by many experts in the business as geese which will lay golden eggs. All are admirable in concept: many, if not all, are difficult of achievement. Dr Gavin Kennedy has shown us that he has the knowledge, the clarity of mind and the commonsense to qualify as a guide through the jungle of international defence co-operation. Let us hope that he will don his jungle green and venture forth.

Field Marshal Sir Michael Carver has been Chief of the Defence Staff since 1973.