Can NATO spend smarter?

At NATO’s biannual summit that opened in Wales today, leaders are expected to pledge to increase their spending on defense, a key political issue that has dogged the alliance for years.

The US has argued with European nations over inadequate defense spending for years, and the breakthrough seems to have come with a sense of urgency, as complex threats have multiplied in the Middle East and Russia.

But the pledge is non-binding, and experts say that  instead of simple quantity – all members are required to spend 2 percent of GDP on defense – the benchmark should related to better outcomes: more and cheaper collaboration, focused on specific plans to show members where their money goes and why.

“I think the 2 percent goal is a blunt instrument, and like all blunt instruments it has effect, but I think it would better to have a precision-guided theory about the spending,” says retired Adm. James Stavridis, dean of The Fletcher School at Tufts University and former Supreme Allied Commander at NATO. “The key is spending intelligently and doing it in a way that does not duplicate a lot of effort around the alliance.” 

Alternatives to '2 percent'

Europeans together account for just a third of NATO’s annual budget, with the US funding the rest – a sore point for many in Washington. Only four members met spending standards last year: the US, UK, Greece, and Estonia.

And even for those that have met targets, like Greece, the money is not always spent in the right way. Too often budgets are dominated by salaries or pensions, or large standing formations and heavy tank units that don’t match the nimble, deployable forces that NATO envisions for its future. 

“You may spend a lot of money on defense, but if you spend it wrong, your armed forces are a lot less relevant for your allies,” says Vivien Pertusot, head of the Brussels office of the French Institute of International Relations. 

Stavridis says that NATO could give countries specific spending targets on key items, like high-tech interoperable systems, cyber capability, or special forces. Indeed, according to The Wall Street Journal, the recommitment to defense spending includes a pledge to spend 20 percent of the budget on investment, at Germany’s pushing.

Christian Mölling, a research fellow at the German Institute for International and Security Affairs (SWP) in Berlin, would welcome such a shift in message. He calls the 2 percent target an American-driven illusion, one that many pacifist European nations bridle at. “You have to make a business case, and the Americans are not making a business case by saying ‘2 percent,’” says Mr. Mölling.

For example, were Germany to increase defense expenditures to 2 percent of GDP immediately, it would amount to 20 billion euros. Mölling says this is unthinkable for Germany, one of Europe's most militarily reticent countries. But “by saying we have a problem in the East and the only way to neutralize it is by doing A, B, C, I think the Germans would do it.”

Rapid response

A Readiness Action Plan proposed by NATO Secretary General Anders Fogh Rasmussen this week is one concrete step forward. While the details are still to be unveiled, it would consist of a force of 4,000 from around the member states that would be quickly deployable, to “ensure that we have the right forces and the right equipment in the right place,” Mr. Rasmussen said.

It would also entail an element of pooling resources that could become more crucial to NATO as it moves forward. The idea is to prevent overlap – that not every country needs every capability, and the alliance doesn’t need millions of men and women under arms.

NATO’s experience with pooling thus far, through its 2011 “Smart Defense” program, has been a mixed bag, says Mr. Pertusot. Sovereign states have been reluctant to cooperate on sensitive matters or give up capabilities.  But translating what he says is a good idea on paper into practice will “be more salient in the coming years, as more countries realize they need to keep some good capabilities but their resources are scarcer,” says Pertusot.

This could be a selling point for governments, too.  Mölling argues that Germany could provide “enablers,” systems such as intelligence that enable the deployment of armed forces. It’s a way to convince a country still skeptical of combat operations or procurements to contribute. At the end of the day, says Stavridis, NATO sets the goal, but national governments are the ultimate arbiters of their defense budgets.

“Governments have to go to their people with a narrative, and say ‘look what a smart job we are doing pooling and therefore saving money, even though we are spending money,’” he says.