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December 13, 2012 |  1 comment |  Print  Your Opinion  

Editorial Team

NATO's Senior Defense Economist on Security Despite Austerity - Part 1

Editorial Team: Adrian Kendry has answered questions from atlantic-community.org members about the security implications of the financial and economic crises. In the first part, he talks about potential threats to the stability of the Alliance, terrorist recruitment and defense spending levels.

NATO's Senior Defense Economist Adrian Kendry has recorded an exclusive video on the interaction of economic and security challenges. Then atlantic-community.org members submitted questions about maintaining security despite austerity. We will now present Mr. Kendry's answers in two parts.

In the first part Adrian Kendry describes the combination of declining defense spending and growing economic and social insecurity as "a potentially grave threat to the well-being and stability of the Alliance." Moreover, "the prospect that certain segments of the population will become more alienated and disaffected from the economic crisis, and therefore more vulnerable to targeting and recruitment by terrorist organisations is to be taken seriously."

He points out that NATO's Founding Treaty encourages economic collaboration between member states and describes the target of defense spending at 2% of Gross Domestic Product as "a demonstration of solidarity among the member states" and in a sense a "Club Fee".

Adrian Kendry, who works in the Emerging Security Challenges Division, concludes that "the vitality and resilience of a transatlantic alliance that has guaranteed stability, security, and the conditions for economic prosperity, for some sixty-three years must be sustained by ensuring that the investment in defense and security is not neglected and recognised as being fundamental to maintaining the Alliance and its member states."

Read his answers and the questions from our members in full context:

Hanna-Kerli Metsala, MA Student Security and Diplomacy, Tel Aviv University, Israel-Estonia: Mr. Kendry, you mention in your video statement the need for NATO to maintain a strong defense capability in order to prevent the economic crisis becoming a military crisis in the case of unpredictable shocks to the society. When can we say that a critical point has been reached in an economic crisis for it to be considered a security threat? In light of a practical example, what characteristics (events, trends) need to appear in Spain that would invite a reaction from NATO? And what in practical terms would this "action" entail? 

Adrian Kendry: The NATO Strategic Concept "Active Engagement, Modern Defence" adopted by the NATO Heads of State and Government at the Lisbon Summit in November 2010 addressed part of this extremely important question. The Strategic Concept is built on three fundamental pillars of mutual security. Firstly, Collective Defence designed to deter and to defend NATO's interests, individually or collectively, when and where they are threatened by aggression or emerging security challenges. Secondly, Crisis management mechanisms developed to ensure that NATO will use its political and military tools to mitigate, manage, end and stabilise crises and developing crises that might undermine Alliance security. And thirdly, the building of Cooperative Security that involves active engagement in partnership with relevant countries and other international organisations in order to enhance international security.

However, the scale and scope of the economic and financial crisis of the past two years has prompted Defence Ministers and Senior Military Officers to warn that the economic crisis threatens to become a security crisis. When would a critical point be reached? The combination of declining defence spending and growing economic and social insecurity pose a potentially grave threat to the well-being and stability of the Alliance. Although NATO is not a law enforcement organisation, it has a vital role to play in a rapidly changing and complex world to ensure that the Alliance, as a multinational organisation, stays strong in supporting freedom, peace, security and the shared democratic values of its member states. It should be remembered that Article 2 of NATO's Founding Treaty from 1949 emphasised the importance of its (then 12) members eliminating conflict in their international economic policies and encouraging economic collaboration between them. Sixty-three years later, this link between economic stability and international security is just as important. The restoration of economic stability and prosperity is fundamental for the security of all members of the Alliance. A prosperous and stable NATO will be better able to respond to challenges coming from unpredictable shocks and also help maintain the cohesion and stability of Alliance member states as they respond to the most serious global economic crisis since the 1930s.


John A. Hughes, Graduate Student, Dr. Colette Mazzucelli's class "IR Theory in the Post-Cold War," New York University - USA: Since the global financial crisis, many NATO countries have witnessed domestic protests movements in response to austerity measures implemented by their respective governments. Do you view these protest groups as being ‘potential' recruiting targets for terrorist organisations?

Adrian Kendry: The fiscal policies that have been, and are being, implemented to bring under control the large budget deficits and increasing national debts in the European economies are very controversial. Even though the stance of monetary policy is very permissive, with low interest rates and central bank interventions to provide "quantitative easing" (injecting liquidity into the economy), fiscal austerity inevitably adds to the slow (and in some cases declining) economic output in NATO European states with persistent and high unemployment (notably among young people) and wage freezes (or reductions) creating considerable economic and social misery. In these circumstances, the fear that social and economic instability is being translated into not only domestic protests but also rising criminality is one to be taken seriously. The linkages between corruption, organised crime and terrorism are complex. In some cases, terrorist organisations can collaborate with criminal networks to achieve separate goals but mutual benefits. The prospect that certain segments of the population will become more alienated and disaffected from the economic crisis, and therefore more vulnerable to targeting and recruitment by terrorist organisations is to be taken seriously. However, terrorist strategy, behaviour and actions are motivated much more by the reinforcing of a set of ideological beliefs through targeted messaging and indoctrination.


Dr Ian Davis, Director NATO Watch, Gairloch - United Kingdom: Secretary General Rasmussen repeatedly warns against defense cuts that are too large and disproportionate, but what is the impact of defense cuts that are too small and inconsequential, as could be argued has been the case in NATO's largest economy, the United States?

Adrian Kendry: Having reached 9.4% of Gross Domestic Product (GDP) during the Vietnam War, the defense spending of the United States had fallen to some 3.7% of GDP in Fiscal Year 2000. Even after the attacks of 9/11 the average defense spending as a proportion of GDP during Fiscal Years 2002-2007 was just below 4.0%. During the Fiscal Years 2008-2011 the share of defence spending (taking account of the increasing scale of operations in Afghanistan and the presence of US combat forces in Iraq until August 2012) increased the share of defense spending to 4.7% in 2011.  President Obama has proposed that defense spending should fall to the 2000 figure of 3.7% of GDP by 2018 (this proposal does not allow for the impact on defense spending of the so-called "Fiscal Cliff" impact arising from a failure of Congress to agree on a deficit-reduction package by the end of 2012). Should this ambition be realised then the United States would experience, on current trends, a fall in its share of world military expenditures from 42% to fewer than 30%. Of course, as suggested in the question, is this a case of defense spending reductions that are too little and too late? As Dr. Davis well understands, the reality of United States defense spending and its conduct of the "Wars against Terrorism" since 9/11 is that the United States accounts for more than 70% of all NATO defense spending. In an unpredictable and complex world, many would argue that this is not the time to be making even larger reductions in defense spending in the United States.


Mari-Liis Mäevere, Student of International Relations, Estonian School of Diplomacy, Talinn-Estonia: Estonia has remained one of the few countries whose defense spending is 2 percent of its gross domestic product. How can it be assured that other NATO member countries contribute in the same amount? 

Adrian Kendry: The commitment to achieve a target of defense spending at 2% of Gross Domestic Product is an important political signal and demonstration of solidarity among the member states of the NATO Alliance. In a sense it can be thought of as a "Club Fee" (drawing upon the ideas of the Nobel prize-winner in Economics, James Buchanan) that enables the member state to meet the requirements for being a capable and effective member of "the club". However, it can be argued that this is only a necessary and not sufficient condition for investing in security. Ensuring that equipment spending and research and development are developed and sustained are critical to the production and maintenance of defence outputs and the capabilities that result. At a time of severe economic pressure and great pressure on public finances and budgets, defence spending has to compete with education, health, welfare and other social expenditures that have claims on tax revenues (that are themselves under pressure because of low growth and in some cases economic recession). Therefore there can be no absolute reassurance concerning the commitment to 2%. However, the vitality and resilience of a transatlantic alliance that has guaranteed stability, security, and the conditions for economic prosperity, for some sixty-three years must be sustained by ensuring that the investment in defense and security is not neglected and recognised as being fundamental to maintaining the Alliance and its member states.

The editorial team would like to thank all participants in this Q&A and especially Mr. Kendry for taking the time to answer them in such detail.

UPDATE: Part 2 of Mr. Kendry's responses have been published as well.

 

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John A. Hughes

December 13, 2012

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I thank Mr. Kendry for his responses and insight. As we engage in the discussion of economics and security, I would be curious to know how NATO plans on addressing the economic security concerns of our global stock markets. The trading platforms in NATO states are electronic; how do we secure that our markets don't crash, as a result of cyber terrorism?
 

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