Government debt in many of the advanced G20 economies has increased tangibly since 2008. Japan’s debt is projected to exceed a stunning 250% of GDP by 2016, according to the IMF. (This figure overestimates the effective debt burden somewhat, still…) US and UK government debts are projected to peak at more than 110% and 90% of GDP by the middle of the present decade. By contrast, the emerging G20 will see their gross debt ratios fall from more than 40% of GDP today to less than 30% of GDP by 2015-16. Debt burdens vary considerably across countries, ranging from 65-70% of GDP in both Brazil and India to less than 10% of GDP in Russia.
Due to significantly faster economic growth, the major emerging economies have been increasing in size relative to the advanced economies. The BRIC share of global GDP, for instance, stood at 15% in the early 90s and is projected to exceed 30% by mid-decade. This will almost inevitably translate into a larger share of global military expenditure.
Today the top-15 military spenders account for 85% of global defence expenditure. The US alone accounted for more than 40%, down from over 50% during the first GW Bush administration. China, whose economy is the world’s second-largest, is also the second-largest country in terms of military expenditure. Beijing’s defence spending remains 5 x smaller than Washington’s. It may also be noteworthy that eleven of the fifteen largest military spenders are US military allies. Combined with the US, they account for more than 2/3 of global expenditure.
Last but not least, US expenditure represents 4.8% of GDP, compared with (an officially reported) 2% in China, 3.9% in Russia and less than 3% (and even 2%) in Washington’s major Western European and East Asian alliance partners. (Again, reported expenditure in Japan underestimates effective spending.) By comparison, Soviet military expenditure exceeded an estimated 15% of GDP in the late 80s, while US stood at 6% of GDP at the end of the Cold War.
Defence expenditure in most of the advanced economies will grow very slowly, at best, and in quite a few countries it will likely fall due to the need for fiscal austerity. By contrast, most of the emerging economies will see continued solid growth in expenditure. In constant 2010 dollar terms, expenditure growth averaged 14% in China over the past decade, 4.8-7.4% in the other BRIC. Among the major advanced economies, only the US and the UK experienced noteworthy rises in expenditure, averaging 6.3% and 2.8%, respectively. It is more than doubtful that this decade will see similar increases given rapidly rising government debt and weak-ish economic growth. That said, even if the emerging economies continue to register solid expenditure growth, it will take a while before any of them will be coming even close to matching US expenditure.