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Think tank: How much security can a dollar buy?

It is easy to measure how much food or fuel a dollar can buy, but how much security can a dollar buy? This deceptively simple question is a difficult one for even the most advanced economies in the world. SIPRI’s new Macroeconomics of Security Programme seeks to understand how policymakers, particularly in developing countries, balance their spending on security and defence against other public goods, including development, governance, health and education.

To even begin to calculate how much security a dollar can buy, one would need to know how much insecurity there is, including the prevailing and known threats and their associated costs and the likelihood of unknown threats and their probable costs. One would need an assessment of the mitigation measures available, and the costs and effectiveness of each response. In addition to issues of effectiveness, one would need to estimate probabilities of threats materializing, and the probabilities of security measures succeeding in mitigating those threats.

Sounds complicated? It is. Yet it is expected that policymakers around the world make informed decisions every day when spending scarce public resources to provide for the common good. Do these policymakers apply probability theory to every threat and respond with optimal mitigation measures, maximizing efficiency in their response? Probably not, even though economists assume they do. There is a great deal of inertia in policy—policymakers and their institutions tack slowly, adjusting last year’s practice to this year’s prevailing winds, be they financial, political or social.

What’s more, many of these threats are unknown or intangible, and the costs of losses are immeasurable. Due to risk aversion, these losses may also be untenable at any level. Finally, even if all of this information were available, policymakers would need to decide how to spend their limited resources on different forms of security, choosing responses across all possible threats.

National military expenditures vary widely

The last dollar spent on each security activity delivers a marginal ‘unit’ of security. That last dollar is a starting point for estimating how much security a dollar can buy. More broadly, information about military and security expenditures can point us to the revealed priorities of policymakers. Global military expenditure alone accounts for $1.7 trillion annually and this number does not include expenditure on much of the police and justice system, local security and expenditure by non-state armed actors and private security.

While there is a vibrant literature on security, security expenditure and security sector reform, the application of this knowledge in developing countries often remains uninformed or naive and, in some cases, can be corrupt, abusive or criminal.

A quick snapshot using SIPRI data for lower- and middle-income countries shows a wide variation in military expenditure. Military expenditure in lower-income countries typically ranges from 1 to 3 per cent of gross domestic product (GDP) but there are countries (South Sudan, Eritrea, Algeria, Syria) with military expenditure at or above 4 per cent of GDP. The average low-income country spends around $22 per capita on the military each year, while average annual gross national income (GNI) per capita for this group of countries is $888.

Military expenditure in some fragile states sees double-digit growth

Spending in fragile and conflict-affected countries is of particular interest, as these countries have a limited capacity to deliver governance and experience frequent instability. As the graph below indicates, fragile countries (as defined by the Organisation for Economic Co-operation and Development) have relatively lower per capita incomes and higher military expenditure as a percentage of GDP, suggesting that policymakers are often directing more public resources toward security and military expenditure in these environments.

This may be necessary and efficient—security concerns may be higher in these environments. However, these precious and scarce resources are often directed toward defence when they could go toward development. Conditions are stacked against these countries—indeed, estimates suggest that more than half of all global poverty will be concentrated in this group of countries by 2030. We need to understand how these scarce resources are being applied in fragile environments.


Image: Military expenditure in developing countries (2012) Sources: SIPRI Military Expenditure Database and World Development Indicators

In addition, military expenditure has been increasing in a number of fragile countries. In Afghanistan, military expenditure has nearly quadrupled since 2003. Over the same period, military expenditure in Zimbabwe and Sudan has increased by more than 30 per cent annually, while in Timor-Leste and Liberia it has increased by more than 15 per cent annually. Again, there may be a variety of reasons for these increases, and our interest is in better understanding why they occur, particularly in fragile states where everything can be a priority.

New SIPRI programme to examine the macroeconomics of security

If the international community is serious about not leaving any countries behind in the next 15 years of development, then new systems for reporting and monitoring basic functions of the state, like security, will need to be built and strengthened in fragile and conflict-affected countries. Research on how security policy and reform work in successfully developing countries can inform practice for other states that have yet to make these transitions.

These trends and the underlying policy processes that drive them will be unpacked in SIPRI’s new Macroeconomics of Security Programme, which will look at why developing countries, particularly fragile states, expand and contract their defence programmes and budgets. In addition, it will examine how security policy is made and when policymakers embark on security reform processes, identifying where those have been successful and what can be learned from them. The programme will keep the international community honest by identifying only specific, measurable, attainable, relevant and time-bound (SMART) indicators that can measure security and peace in a post-2015 framework. Furthermore, it will endeavour to bring these findings to policymakers, practitioners and advisors in developing countries, particularly fragile states that can use them the most.

The programme is being launched in lean times with an increasingly informed and literate citizenry who have growing expectations that governments will be efficient and effective in delivering public goods. Better informed policy can lead to more efficient spending and better delivery of services, including security, and maybe policymakers can get a little more security for their citizen's dollar.

Dr Gary Milante is the head of SIPRI’s new Macroeconomics of Security Programme.

This text was written by Stockholm International Peace Research Institute (SIPRI), an independent international institute dedicated to research into conflict, armaments, arms control and disarmament. Established in 1966, SIPRI provides data, analysis and recommendations, based on open sources, to policymakers, researchers, media and the interested public.


Last Updated (Wednesday, 27 November 2013 15:25)


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