"Burden-sharing" and the 2 percent of GDP Solution: A Study in Military Absurdity

By Anthony H. Cordesman

October 23, 2019

Executive Summary

NATO remains the keystone of Western security. It provides the best possible real-world option for the West in every major aspect of collective security: dealing with Russia, countering extremism and terrorism, and finding functional approaches to out-of-area cooperation.

It also is making progress in spite of the differences between its members, their different interests and security policies, and the many challenges they face. As the Secretary General’s Annual Report for 2018 makes clear, NATO has many productive initiatives underway that do focus on its real security needs, and that will help deter Russia and deal with the key issues in its military readiness and force planning. In fact, some 90% of the Secretary General’s report focuses on such issues.

At the same time, NATO is now caught up at the ministerial level in meaningless burdensharing exercises that do not serve its security interests, and that are mathematically and functionally ridiculous. Its ministers focus far too much on abstract spending goals, rather than needed force improvement and mission capabilities. They do not properly examine the priorities that would emerge from net assessments of the balance or on improving NATO’s capability to deter and fight. They fail to focus effectively on its many individual national problems and issues in strength and readiness, and they have failed to create coherent force and modernization plans for the future.

Their goals ignore military needs and effectiveness, and merely call for spending 2% of GDP on total defense spending levels, and at least 20% of annual defense expenditure on major new equipment. Such goals may seem simple, and it may seem hard to argue that more spending does not have benefits. This only begins to make sense, however, if one ignores any concern with what the added money buys. There are no serious aspects of life, however, where spending more is a substitute for spending wisely.

Worse, this report presents considerable quantitative evidence that NATO’s current goals actually focus the Alliance on the wrong objectives, and do so in ways that encourage pointless burden-sharing debates over the wrong objectives. It shows that the 2% and 20% goals have six critical defects:

They are irrelevant, given intelligence estimates of the actual level of NATO resources relative to the key Russian threat.

They have no relation to force planning and mission capability priorities and simply assume the problem is spending more, rather than wisely.

They are not based on any assessment of key threats and net assessment of NATO and threat capabilities.

They ignore the radically different economies, force postures, investment needs, and overall spending priorities of given countries.

Meeting or exceeding the goals does not do anything to ensure that a country has the right forces and is pursuing the right path for force development, or will halt major force cuts, will halt spending on the wrong things, or make a given country’s forces “better” than the forces of the states that fail to meet them.

They are also deeply divisive, and they substitute American strategic bullying for meaningful force planning ad strategy.

The report supports these conclusions with tables and charts that show how much more NATO is spending than Russia, that highlight the problems in the reporting on the various national efforts to meet the 2% of GDP goal, and that show NATO European spending has risen far more in real terms than comparisons based on percent of GDP reveal. They also show the lack of correlation between the level of spending in GNP and maintaining adequate force levels, the pointlessness of the spending 20% on equipment goal, and the need for the U.S. to stop bullying its Allies by exaggerating its own efforts.

Spending more should not be the priority. Spending wisely should be. Accordingly, the report highlights the need for a new NATO Force planning exercise that examines how NATO country spending compares to that of Russia, and that asks why NATO spends so much more than Russia. NATO force planning should operate on the basis of a clear analysis of the priorities set by a net assessment of the balance. It should carefully consider Russia’s capabilities for hybrid, conventional, and nuclear warfare; and current nation-by-nation member country forces and capabilities.

An effective NATO force planning effort should set clear priorities for improving the mission capabilities of each individual member country – balancing force strength, readiness, and modernization – and setting force goals for a period covering at least five years in the future. NATO also needs to make such efforts transparent, and debate defense and force planning issues with the same openness that the Western democracies debate domestic issues. NATO must earn public confidence and support to get the resources and support it needs, and engage with outside criticism and debate.

Finally, NATO military and civilian staffs will need the authority to criticize and analyze on a country-by-country basis, and not simply rubber-stamp national plans. They need the authority to report even when some aspects of what they report can embarrass member countries. Above all, the U.S. – and all member countries – should approach force planning from the view of creating an effective partnership – not bullying other states or using the effort to get other nations to do more so they can do less.

Setting the Wrong Goals, Claiming Pointless Progress, and Ignoring real Increases in Defense Spending

Far too much of NATO’s public profile is now focused on fighting over burdensharing goals that are not only meaningless, but actively counterproductive. These goals ignore military needs and effectiveness, and merely call for spending 2% of GDP on total defense spending levels, and at least 20% of annual defense expenditure on major new equipment.

The Secretary General’s report for 2018 summarizes these arbitrary goals as follows:

At the 2014 Summit in Wales, NATO leaders endorsed a Defense Investment Pledge. The pledge called for all Allies that did not already meet the NATO-agreed guideline of spending 2% of Gross Domestic Product (GDP) on defense to stop cuts to defense budgets, gradually increase spending, and aim to move towards spending 2% of GDP on defense within a decade. Allies also agreed, in that same time-frame, to move towards spending at least 20% of annual defense expenditure on major new equipment, including related research and development. (p. 34)

As a result of constant pressure from the current Administration in the U.S., NATO focuses on progress in meeting these percentage objectives — regardless of whether this is the right priority for a given country or will strengthen the Alliance. The Secretary General’s annual report summarizes such efforts as follows:

At the Brussels Summit in July, NATO leaders agreed there is a new sense of urgency to invest 2% of GDP on defense and to have credible national plans on how to meet this goal. NATO Allies will continue to invest in developing, acquiring and maintaining the capabilities the Alliance needs to defend its nearly one billion citizens. The Alliance attaches great importance to ongoing efforts to ensure fair burden-sharing in all three elements of the Defense Investment Pledge: defense expenditure; investments in capabilities; and contributions to NATO’s operations, missions and activities.

In 2018, the United States accounted for half of the Allies' combined GDP and almost 70% of combined defense expenditures.

At the same time, European Allies and Canada are continuing to spend more on defense. In 2018, seven Allies reached the 2% defense spending guideline, up from three in 2014. In real terms, defense spending among European Allies and Canada increased by almost 4% from 2017 to 2018. Furthermore, in the period from 2016 to 2018, they have contributed an additional cumulative spending of over USD 41 billion.

Allies also made progress on the commitment to invest 20% or more of defense expenditure in major new capabilities. In 2018, 25 Allies spent more in real terms on major equipment than they did in 2017. The number of Allies meeting the NATO agreed 20% guideline rose to 16 in 2018.

These percentage goals may seem simple, and it may seem hard to argue that more spending has benefits even if one ignores any concern with what the added money buys. There are no serious aspects of life, however, where spending more is a substitute for spending wisely.

Worse, there is a considerable quantitative evidence that NATO’s current goals actually focus the Alliance on the wrong objectives, and do so in ways that encourage pointless burdening sharing debates over the wrong objectives. If nations actually try to meet them, they will often spend more in ways that further distort their existing lack of coherent spending on key missions and priorities. They will fund and continue the wrong programs and lack of interoperability, while the resulting debates over burdensharing will divide NATO in ways that serve no functional purpose.

Put simply, the 2% and 20% goals have six critical defects:

They are irrelevant, given intelligence estimates of the actual level of NATO resources relative to the key Russian threat

They have no relation to force planning and mission capability priorities and simply assume the problem is spending more, rather than wisely

They are not based on any assessment of key threats and net assessment of NATO and threat capabilities

They ignore the radically different economies, force postures, investment needs, and overall spending priorities of given countries.

Meeting or exceeding the goals does not do anything to ensure that a country has the right forces and is pursuing the right path for force development, or will halt major force cuts, will halt spending on the wrong things, or make a given country’s forces “better” than the forces of the states that fail to meet them.

They are deeply divisive, and they substitute American strategic bullying for meaningful force planning ad strategy.

Other Burke Chair analyses of these issues include:

NATO: Going From the 2% Non-Solution to Meaningful Planning, June 26, 2019, https://www.csis.org/analysis/nato-going-2-non-solution-meaningful-planning

Shaping U.S. Strategy to Meet America's Real-World Needs, June 4, 2019, https://www.csis.org/analysis/shaping-us-strategy-meet-americas-real-world-needs

The FY2020 Defense Budget Request and the Need for a Real "Strategy Driven" Budget, April 1, 2019, https://www.csis.org/analysis/fy2020-defense-budget-request-and-need-real-strategy-driven-budget

The U.S., NATO, and the Defense of Europe: Shaping the Right Ministerial Force Goals, June 27, 2018, https://csis-website-prod.s3.amazonaws.com/s3fs-public/publication/180627_US_NATO.Report.pdf?9jrlB.LEVnm9MvWGjS6Nyc3EKf3yD.E6.