Defence: is it really all about the money?
3 Dec 2012|

Defence: Is it really all about the money? Image courtesy of Flickr user Krug6.

There is a tendency by many commentators to see defence as just being all about money. A cut is intrinsically bad, growth naturally good. For some, the size of the defence budget is held as a real measure of the defence credentials of a government or nation. Hugh White’s latest missive is a good example of this, although I’m sure unintentionally.

At its core the focus on money is derived from considering defence as an insurance policy against the risk that bad things might happen. This was the case with the 2009 White Paper which saw that the key problem in defence planning was strategic risks. This kind of approach addresses risks through building and sustaining the necessary defence (and other national) capabilities such that these risks might be controlled to tolerable levels. This costs money. So the more money you spend, the more risks that can be handled and/or the less damage that these risks if they occur might inflict.

There are some issues with this seemingly reasonable approach when it is translated into the arcane art of budgeting. Firstly, only some risks can be addressed while most are ignored. As US Defense Secretary Bob Gates warned: ‘Nobody lives in that world…you are never going to get to zero threat. You could spend $2 trillion and you’d never get to zero threat.’

Secondly, the risks that are managed are enduring. Risk management is not about actively seeking a better future and eliminating risks. There will always be risks. So not taking positive actions to eradicate identified risks—that is, continually treating the symptom not the cause—is inherently costly. And in risk management there is, by design, never enough. Defence budgets are always too small.

There is a potential solution to this though. Budget allocations can be prioritised and constrained at a level where risks are managed and the damage they might cause is limited should they occur. Politically, however, agreeing to how much damage is acceptable so that budgets can be rationally constructed is rather problematic. It smacks of a re-run of the Brisbane Line; how much of the country and its national interests will be sacrificed? What is the acceptable cost in blood and treasure?

So risk management both encourages a focus on the quantum of money as the central issue and is an approach where there is never enough. Cutting the defence budget is always bad as it inherently means increased risks; conversely increasing the budget is always good.

This simple focus on money can distract from other matters that might be equally or even more important. That is, it’s really how you use the money that establishes if Defence succeeds or fails. The US spent a lot of money in Vietnam but it didn’t lead to triumph. Determining how money should be spent requires a strategy to guide the way the budget is to be used to achieve the desired outcome.

The importance of how the money is spent can be seen in our US relationship. There’s been much talk that, at the last AUSMIN, the Americans complained about the Defence budget cuts. Hugh White, for instance, considers that the Obama administration wants the next White Paper to commit to ‘very big spending increases.’ However, the Obama administration probably isn’t so interested in the quantum of money spent but instead that it’s spent in a way that best supports America’s grand strategy. They would like Australia to be a useful contributor to the American project. A higher level of spending in those specific defence areas of most interest to the Obama administration is likely to please them much more than a simple increase in the next Defence budget or additional spending in areas irrelevant to their strategies.

Hugh continues with a further illustration in being concerned that the government will decide to build a fourth Air Warfare Destroyer as part of an election year strategy. In a risk management approach, spending money is naturally good; all would agree that buying another destroyer would be effective in reducing the impacts if some risks eventuated. Interestingly, here Hugh is concerned that this will be a poor use of the cash and indeed create problems; how the money is spent is then more important than whether it is spent or not.

This brings us back to Australian Defence budget cuts. At the moment, without knowing the outcomes Government wants or the defence strategy that the Department recommends it’s difficult to know if the reduced money the parliament has allocated to Defence is sufficient. A good strategy might be able to use the allocated money in a way that leads to the desired outcome but we won’t know unless the strategy is articulated. This makes the promised White Paper really important in explaining both the outcomes sought and the strategy Defence has devised to use the part we do know: the budget.

Bring on the White Paper!

Peter Layton is undertaking a research PhD in grand strategy at UNSW. Image courtesy of Flickr user Krug6.