(Editor’s Note: Every nation must strike a balance between effective and affordable defense. ”Security Resource Management” was the topic of a June 25, 2012, plenary discussion, at the 14th annual Senior Leaders Seminar hosted by the Africa Center for Strategic Studies (ACSS). Discussions were led by Dr. Assis Malaquias, Academic Chair for Defense Economics at ACSS, and by Dr. Willene Johnson, Economic Consultant on Development for the U.S. Institute of Peace. The June 18-29 Senior Leaders Seminar took place in Arlington, Virginia, and was attended by 70 security sector professionals and other government leaders from 40 Africa nations. Academic discussions at the Africa Center are conducted under a strict policy of non-attribution to allow free and open sharing of ideas. However, several presenters agreed to allow portions of their presentations to appear on the record in order to promote broader understanding of the issues.)
Dr. Assis Malaquias, Academic Chair for Defense Economics at the Africa Center for Strategic Studies (ACSS), began the June 25 plenary session of the Senior Leader Seminar by discussing the relationship between national security and national economy. One argument, he stated, is that insecurity is merely a symptom of underdevelopment. One of the main functions of the state is to provide public goods and services, and security and development are some of the most important of these. A lack of economic success in a country can therefore lead citizens to question the government’s legitimacy and perhaps rebel against its power. However, defense spending, like any economic activity, comes with an opportunity cost, which means the money spent cannot be used for something else — a problem often referred to as the “guns versus butter” debate. Spending too much on defense and not enough on other necessities can also undermine a government’s legitimacy.
Dr. Malaquias discussed some of the major economic theories regarding the impact of defense spending on nations’ economies. These theories have evolved over time and are still being refined and tested. For example, he stated that the Keynesian theory — that government spending in any sector is of equal effect, and stimulates overall economic growth — appears to be untrue in some cases of defense spending. A more current theory posits that security expenditures in developing countries can have a negative effect on growth because they compete with other investments and dampen the savings rate.
In this vein, Dr. Malaquias warned of the capability for the security sector to “crowd out” other economic sectors. Because the military is so efficient, it is possible that military engagement in industries such as farming or engineering can out-compete private industry. This can lead to multiple problems, such as a lack of competitive innovation or the collapse of production when the military is called away to fight. While it is not bad for the military to be involved in domestic industries, he clarified, it must focus primarily on security, and keep its role in other sectors at a relatively low level to prevent this crowding out effect.
Despite the challenges, he stated, enhancing security is essential, because the costs of not doing so are even higher. What can occur — such as the destruction of lives and infrastructure, damage to international image, the discouragement of foreign investment, and capital flight — will all harm security and development further.
Dr. Willene Johnson, Economic Consultant on Development for the U.S. Institute of Peace, spoke about the necessity of economic activity being both effective and ethical. She identified governmental corruption as a major obstacle to good defense spending practice, citing a figure of $20 billion per year lost worldwide through military-sector corruption. While she acknowledged that Africa is nearly impossible to generalize as a whole, she indicated that every African country was somewhere in the process of transforming its economic and governmental system. While doing so, she argued, it is necessary to create transparency and accountability at all levels of government. In particular, she stated that security forces must:
- Be accountable to elected civilian authority
- Adhere to the law
- Adhere to principles of public expenditure management
- Follow a clear hierarchy of authority
In a discussion about the availability of resources, Dr. Malaquias reiterated that Africa has an abundance of natural resources, which should bring a great deal of wealth to the continent. Dr. Johnson described a model of improved national budgeting for countries whose economies depend primarily on resource extraction, in which capital is saved up and outflow is regulated to maintain future budgets in the face of fluctuating commodity markets.
Summary prepared by Eric Severson. Mr. Severson is pursuing an M.S. in Defense and Strategic Studies at Missouri State University, and is a 2012 summer student employee of the Africa Center for Strategic Studies.