The Pros and Cons of Defense Spending

There are some nations in the world who manufacture their own defense equipment. However, a majority of the countries outsource their production activity to private companies abroad. Companies like Lockheed Martin are known to extensively take contracts from foreign governments. Regardless of whether the money is spent locally or given to foreign contractors, the amount of money spent on defense spending is huge.

When countries outsource their defense work, there is generally a lot of hue and cry. This is because several critics believe that outsourcing critical tasks make the nation weaker. Foreign companies may or may not supply weapons at the time of war. Hence, the belief is that every country should have its own infrastructure to manufacture weapons. However, local manufacturing adds to the already out of shape national budget.

Also, local manufacturing is not possible for obvious reasons. Firstly, the technology required to manufacture weapons is very difficult to obtain. Hence, countries should buy from companies that already have these technologies instead of wasting their time trying to reverse engineer the weapons.

However, apart from this obvious reason, there are several economic reasons which need to be taken into account before a decision regarding the strategic sourcing of weapons for national defense is made. In this article, we will have a closer look at the pros and cons of defense spending.

Pros of Defense Spending

  • Value Added By Defense Industries

    People who advocate setting up of defense industries locally state that it will also be economically beneficial. The idea is that weapons manufacturing is also like any other business. This means that this business also generated employment and sales like any other business would. Hence, if the cost of manufacturing the weapons is removed from the sale price, the balance is economic value added by the defense industry. Also, proponents of these policies advocate defense spending because they believe that even the expenditure undertaken on contractors is spent on procuring goods and services from the local economy. Hence, that should also be considered while calculating value added to the economy.

  • Peace Aids Trade and Commerce

    Peace is important to maintain fruitful trade relations in a given region. However, this peace can only be achieved if military spending is done. Military spending builds military might. This power acts as a deterrent for aggressors. In the absence of military spending, opponents may view the nation as a soft target. Hence, even though local defense spending may be more expensive, it creates more value in the form of more robust national security and fewer disruptions to trade and commerce. If the defense system of a country is fully integrated, there are economic benefits to it.

Cons of Defense Spending

  • Constitutes Huge Percentage Of National Budgets: Defense equipment can be really expensive. The price tag often reaches billions of dollars. This is usually the single largest line item in the budget of any country. This is not a good situation considering the fact that defense spending should not be more than spending on health and education. However, in most countries, this is exactly what is happening. To make matters worse, it is not just the purchase price that causes an economic impact. The maintenance of this equipment can also prove to be extremely expensive. This is because specialized personnel are required for such maintenance. Critics of military spending never fail to mention that the huge amount of land, personnel, and other resources could be put to better use elsewhere. According to them, defense spending does lead to economic development.
  • Irresponsible Usage: Theoretically, taxpayer dollars would only be spent on good projects. The goods and services procured should, ideally, enhance the capabilities of a nation’s military. However, in real life, a lot of military projects are unnecessary and of low quality. A lot of these projects are undertaken because corrupt officials want to receive kickbacks. Since questioning military spending is sacrilegious in many nations, these personnel are able to get away with this embezzlement. This does not mean that all military projects are of low quality. It just means that corruption is rampant in few projects. Hence, if this corruption is removed, there is scope for reduction of military budget without adversely impacting the national security.
  • Diverted For Corporate Gains: In many nations, corporations use the military to enforce their own agenda. These allegations have been leveled against nations such as the United States. The US has a strong military presence in almost every nation that has oil reserves. Critics often believe that this military presence is for the benefit of certain private corporations. However, the wars are funded by the taxpayers. Hence, the losses are borne by the general population whereas the profits are reaped by a select few. Also, national defense, which should ideally be the only goal of the military, takes a backseat. In some cases, militaries have been accused of being mercenaries for private corporations. Raising the taxes on population for defense spending is, therefore, a form of “reverse transfer of wealth”.

To sum it up, there are many pros and cons to defense spending. In order to ensure that this spending does not economically harm the nation, this spending needs to be reviewed periodically.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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