Overall assessment

Overall assessment of military capabilities in the East-West framework during the US unipolarity

When taking great powers and NATO-allies into consideration and using just current US dollars, the impact of USSR collapse is striking and Western preponderance is superior during the first twenty years of the US-led unipolarity as seen in the table below.

The overall picture is quite different compared with the PPP-adjusted figures.

Revealing picture of “power development” can be seen in the figures of military expenditure here below, calculated in current billion US dollars but PPP-adjusted (World Bank Data, SIPRI Database):

• The annual military budgets of each great power (in current US dollars, SIPRI Database) has been re-calculated / converted into PPP- figures according to World Bank Data conversion.

• PPP-comparison gives usually more neutral, flawless and unbiased outlook than other “direct” comparison methods, which may distort seriously the picture.

• In this case this method is even more justifiable, because both defense forces (China, Russia) utilize nearly 100% of their own domestic industry in the military procurement (China purchases also from Russia), recruit just their own citizens paying domestic salaries etc.

The result is quite different from the “usual/normal” outlook in Western military or strategic analyses.

The statistics above tells, among others, that in the 1990s the superior position of the US was very clear and undisputed, range of variation regarding the ratio of the US / China&Russia expenditure was approx. between 3 – 4,5 in other words, the military budget of the US was so much bigger than the combined Sino-Russian budget.

In the first decennium of the 21^st century the picture began slowly to change but slowly, range of variation being 2 – 2,5. The dramatic change took place in 2011-2012, when military loadings both in Russia and China were set in surging. However, in Russia these costs have been restrained slightly during last two years, partly due to heavy sanctions of the US but China instead had stepped further on the gas.

The most striking point in the above statistic is that the combined military expenditure of China & Russia has gone up in parity with the US since 2014. This matches well with the threat perceptions of the US, examined in the National Security Strategies of the US.

US Army Chief of Staff, General Mark Milley paid attention to the budgeting size ranges in the hearing of Senate subcommittee on defense in May 2018. He first referred to the cost of labor stating how much the US military spends on pay and benefits for uniformed and civilian personnel — almost half the budget, which means that China’s budget for weapons, operations and training is probably bigger than American’s. The unit cost of Russian soldiers or Chinese soldiers is a tiny fraction from the comparable American cost. Milley states also “estimating what China and Russia actually spend on defense is complex enough, let alone separating out their pay and benefits costs. Russian military pensions, for example, were paid from the defense budget until the mid-1990s, but then taken out.”

The standard comparisons of international defense spending convert everything to US dollars at market rates. But countries like Russia and China buy most of their equipment from domestic suppliers, which they can pay in local currency. So instead of using market rates, a better measure would be Purchasing Power Parity (PPP), which tries to account for prices being different in different countries.

When you compare actual market price-based spending and purchasing power-based spending, America’s superior spending power erodes dramatically.

In his recent article in “DefenseNews”, on May 3, 2019, Michael Kofman (Senior Research Scientist) noticed the same thing: how to compare military spending of different countries. He stated:

“In reality Russia’s effective military expenditure, based on purchasing power parity, is more in the range of $150-180 billion per year, with a much higher percentage dedicated to procurement, research and development than Western defense budgets.” 

Kofman also refers to SIPRI’s recent announcement that Russian military spending has fallen to the sixth highest in the world in 2018, at $61.4 billion, asking how is it possible to maintain a million men forces and the world’s largest nuclear weapon stores and by the same keep on with one of the biggest military procurement program.

Michael Kofman reminds also that: “The Russian defense budget fluctuates at around 3 trillion rubles yearly but total military expenditure includes housing, pensions, infrastructure, the National Guard, the Border Guard Service and some line items that are secret. Depending on what you count, total military expenditure can add to roughly 4 trillion rubles in 2018 or about 4 percent of GDP. This also means that a decline in overall military expenditure, as recently reported by SIPRI, does not necessarily mean a reduction in Russian spending on military operations, procurement, R&D, or maintaining the force. There is well over 1 trillion rubles of military expenditure in Russia outside of the regular defense budget.”

There is no value in conceptualizing Russian (or Chinese) defense spending in US dollars based on the prevailing exchange rate, since Russia does not buy its weapons or major components from the West. PPP is not without limitations but it is heavily advantaged when comparing defense spending. As a consequence, it is not only the most accurate way to compare defense spending in countries using different currencies but should arguably be the only method of doing so.

Speaking about the defense budget in June 2019, President Putin reminded at his annual televised Q&A session that Russia retains leading positions in developing modern weaponry, despite consistent cuts in military spending.

“But, perhaps, the most interesting thing is that we are the sole great military power, which is cutting its military spending, as it is. This spending equaled 3.4% of GDP in 2017, which is quite a substantial figure for us. In 2018, it already dropped to slightly over 3% and in 2019 this figure will make up less than 3%, namely, 2.9%, and it will decrease to 2.87% next year and to 2.8% in 2021.

We have a trend towards military spending cuts. No other big country is doing this but what is interesting and what we should undoubtedly draw attention to and be proud of is that despite these quite modest military expenditures, we are ensuring both military and nuclear parity and turn out to be two steps ahead of our rivals,” Putin said adding that “I mean our missile technology, hypersonic missile armament.”