Chapter 12 – Money for the Military

Money for the Military

DURING THE DECADE of the debt buildup, dictatorships outnumbered democracies in the Third World five to one, arms expenditures amounted to 40 per cent of the debt increase, and Third World arms sales more than doubled. In the mid-1980s, the Stockholm International Peace Research Institute (SIPRI) attributed 15 per cent of the non-oil-exporting Third World’s accumulated debt directly to arms purchases. The German Institute for Peace Research attributed 20 per cent of the Third World’s accumulated debt to weapons imports. And in 1989, World Bank President Barber Conable put the figure at one-third for some Third World countries.

In the 1970s the superpowers, wincing under their own budget deficits and trade imbalances, stopped giving away arms and started selling them. To pay for their arms, Third World countries borrowed heavily. Without the OPEC oil crisis — which squeezed military budgets to purchase oil — the arms build-up would have been even more dramatic, according to SIPRI.

Dictatorships, be they military or not, tend to purchase military hardware to wage wars against their neighbors: of the 180-odd wars waged since the Second World War, virtually all have been fought in the Third World, generally between Third World combatants with the blessings, and the arms, of the Cold War powers. But dictatorships also need arms to wage war against their own people. In Argentina’s so-called “dirty war,” 9,000 innocent citizens disappeared for disagreeing with their government. The Chilean junta’s list of the disappeared is over 2,000 long. The Ethiopian rulers killed at least 60,000 by forcibly resettling between 700,000 and 800,000 of their citizens from areas of rebel activity. “In the ultimate mockery of `defense’,” says World Military and Social Expenditures, “military power wedded to political control turns inward to terrorize the people it is intended to protect.”

Unrestricted access to their countries’ treasuries made these internal and external wars possible. Operating above the law and beyond public scrutiny, dictatorships are notoriously undisciplined spenders, acquiring exotic missiles, tanks, and fighter aircraft in much the same way other despots acquire hydro dams and other vanity projects. In Argentina under the generals, no one body oversaw the accounts. For several years of military rule, no records of foreign borrowing were kept — for military expenditures or otherwise — breeding unchecked borrowing. A subsequent central bank investigation discovered that about $10 billion in debt derived from arms purchases, much of it through Argentina’s state oil company. The oil company — which was run by one of the generals — ran up a debt of some $4.5 billion but kept only $300 million of it, turning over the balance to the military government for still unknown purposes.

In many Third World countries, military personnel dominate the official bureaucracy and the military budget dominates the central government’s budget. The poorest countries typically spend the most: Africa as a whole spends proportionately more on its military than does any other developing region except the Middle East — about 4.3 per cent of GNP in 1987. Africa’s poorest country, Ethiopia, spent nearly nine per cent of its GNP on arms — more than twice that spent on education and eight times that spent on health care. Other war-torn African countries such as Angola and Mozambique spent up to half the public budget on the war effort.

Compared to the Middle Eastern countries, whose militaries spent a feverish 10 per cent to 20 per cent of their GNPs, to the former Warsaw Pact countries, which spent 10 per cent, and to NATO countries, which spent 5 per cent, most Third World nations don’t seem profligate militarily. Latin America, in particular, spends only 2 per cent of its GNP for military expenses. Yet compared to their people’s state of health and education, and to the state of their economies, Third World military expenditures are exorbitant.

In the early 1980s, the Third World’s military expenditures grew faster than other government expenditures, with two of three governments spending more on their military than on health care, or on social security and welfare.

The combination of military expenses and debt payments soon starved governments of the revenues required to run their countries. By the mid-1980s, Third World governments found themselves spending up to 85 per cent of their total revenues for these two items combined: 50 per cent in the case of Chile, 64 per cent for the Philippines, 46 per cent for Zimbabwe, over 60 per cent for Pakistan, and 85 per cent for Jordan. It could not continue for long.

As the debt crisis became worse, military budgets tended to be the casualties. Apart from five countries especially involved in conflicts or arms races, the Third World’s arms imports declined by over 25 per cent. In Latin America, said SIPRI, this spending decline reflected a decline in militarization, a return to civilian rule, and a shortage of foreign exchange. In Africa, less money — even with more conflicts — squeezed arms imports.

The World Bank and the IMF have also been turning the screws on the military, increasingly pressing Third World governments to reduce their military expenditures. Both institutions insisted in the mid-1980s that Peru reduce its military expenditures by one-third from 6 per cent to 4 per cent of the country’s GDP. A 1989 World Bank plan to restore growth in Africa criticized military spending for having “diverted enormous resources from southern Africa’s development, and [consuming] nearly 50 per cent of government expenditures in the countries experiencing the worst destabilization.” World Bank President Barber Conable — echoing the IMF — announced that defence costs would in future be a factor in loan discussions with African countries.

With the Cold War thawing, the USSR (the leading Third World arms supplier, with $236 billion in sales from 1969 to 1988) and Western governments such as the U.S. ($149 billion), France ($43 billion), and the U.K. ($23 billion) are less determined to arm their client states, and more concerned with how their monies are spent. Zaire, the African bulwark against communism in Africa, now receives tough messages from its long-time donors — the Americans and the Belgians — to combat official corruption and start respecting its citizens’ civil rights. The World Bank excoriated the Third World for allowing military expenditures to increase “more than twice as fast as … income in the developing world since 1960,” and called on other donors to ensure their assistance is not squandered on military spending.

SIPRI sees reason for hope: “The combination of high military spending and debt repayment creates an untenable and explosive situation for Third World governments, as they fail to meet the most basic welfare needs of their citizens,” leading to a new preference in many countries for social programs over arms expenditures.

Although in most countries the military has lost ground because of the debt crisis, it has gained strength in Guyana, India, Malaysia, Sri Lanka, Gabon, Sudan, Uganda, and Zaire, where health clinics and school budgets were cut to spare the military.

Third World countries still have eight soldiers for every physician, two and a half times the proportion in industrialized countries, and the rich countries still have attractive arms promotion packages in place.

Sources and Further Commentary

For statistics on the portion of the Third World’s debt that can be attributed to military expenditure see: “Arms and the Third World” in The Globe and Mail, Toronto, June 26, 1990; “Our Alms For The Poor Fall Into The Wrong Pockets” by John Gellner in Executive Magazine, Canada, May 1984; “Research Communication: The Military Related External Debt of Third World Countries” by Michael Brzoska, in Journal of Peace Research, vol. 20, no. 3, 1983; “Military-Related Debt In Non-Oil Developing Countries, 1972-82” by Rita Tullberg in World Armaments and Disarmament, Stockholm International Peace Research Institute Yearbook 1985, Taylor & Francis, London and Philadelphia, 1985; “Debt, Financial Flows and International Security” by Somnath Sen in SIPRI Yearbook 1990: World Armaments and Disarmament; Address by Barber Conable to the Board of Governors of the World Bank Group, Washington, D.C. September 26, 1989.

Another excellent source of information on military expenditures is World Military and Social Expenditures by Ruth Leger Sivard, published by World Priorities, Washington, D.C. I have relied on Sivard’s annual reports starting in the late 1970s for virtually all of my statistics. See the latest, the 14th edition, issued in 1991 for current data, and the 1989 report for the quotation about domestic use of military might.

For information on Argentina’s military expenditures see “Argentine debt: a case study” by Edward Schumacher in The New York Times, May 12, 1984; “Argentina sends more weapons to Central America” by Jackson Diehl in The Washington Post, June 10, 1984; “Plans to boost arms exports” in Latin America Weekly Report, WR-84-26, July 6, 1984; “Argentina selling defence industries” by Paul Knox in The Globe and Mail, Toronto, September 17, 1990.

Africa spends more on its military as a percentage of GNP than do other regions of the Third World, with the exception of the middle east. See Sivard, 1991. Also see “Aid Donors to Africa: Fewer Guns, More Security” by Samantha Sparks in Development Forum, New York, September-October 1990.

For rates of growth in military expenditures see Tullberg (as above) from SIPRI Yearbook 1985.

For statistics on the combined expense of the military and debt servicing, and the decline in military expenditures in the 1980s, see Somnath Sen in SIPRI Yearbook 1990 (as above). Also see “Tightening the Belt” by Husain Haqqani in The Far Eastern Economic Review, July 14, 1988 for details on Pakistan’s military and debt servicing expenses. Also see “The Trade In Major Conventional Weapons” by Thomas Ohlson and Elisabeth Sköns from SIPRI Yearbook 1987: World Armaments and Disarmament, 1987.

Regarding the World Bank and the IMF’s position on military expenditures in Peru see “Peru tightens belt to reduce debt” by William Chislett in The Globe and Mail, Toronto, January 16, 1984; for other countries, see “IMF urging cuts in military spending,” The Globe and Mail, Toronto, May 4, 1991; Barber Conable’s September 26, 1989 speech (as above). For the World Bank quotation criticizing Third World military expenditures see “The world’s poorest get poorer” in The Toronto Star, September 17, 990.

Statistics on arms exports from industrialized countries come from Sivard, 1991.

For further details on pressure being applied by Western donors on Zaire’s government see “Redistributing the Blame in Africa” by Stephanie Cooke in Institutional Investor, New York, September 1990.

For SIPRI’s expression of hope that financial constraints would finally reduce Third World military expenditures, see Somnath Sen in SIPRI Yearbook 1990 (as above). Despite promises to adopt arms control measures, the U.S. administration announced soon after the end of the 1991 Gulf War that it was going to ask Congress to authorize the Export-Import Bank to underwrite sales of military goods for the first time since the 1970s. According to “White House sides with arms industry” in The Globe and Mail, Toronto, March 19, 1991, “A Pentagon-administered military credit guarantee program was suspended in the late 1970s after too many customers went into arrears, with their loans either forgiven or rescheduled.”