defense spending

The Private Production of Defense

Edwin van de Haar Current Events , , , , , , ,

Lucas’ post reminded me of a piece that I wrote for his website ThinkIR, in 2013. Most of it I re-used in my book Degrees of Freedom (2015). Of course it is also a piece on its own, that readers of NoL may find of interest. Thanks Lucas!

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It is fun to think about the almost unthinkable. Therefore this contribution is about the idea that no state is needed to provide military security against foreign attack. In modern times the idea goes back to at least the French-Belgian economist Gustave de Molinari and his 1849 pamphlet The Production of Security. The most prominent current defender of this idea is the German economist Hans-Herman Hoppe, a leading anarcho-capitalist thinker, in his essay The Private Production of Defense (also see The Myth of National Defense, which was edited by Hoppe).

Hoppe rightly notices (p.1) that the legitimacy of the modern state is strongly related to the belief in collective security. Following Rothbard in The Ethics of Liberty, he argues that states will always expand, due to the governmental monopoly to tax its inhabitants. This also applies to governments that only have the limited task of protection against aggression and administrating and justice. The only proper solution is therefore to abolish the state altogether, in order to ensure true liberty and individual justice. Consequently, this also means that the provision of security needs to be privatized, as Hoppe does not expect the world to turn into a peaceful utopia (pp. 1- 5).

So how would this work? Basically, to regard the production of security as an insurance, where the expenditures for defense are to be paid by premiums paid by individuals (pp.5-8). The insured people can choose from competing insurance firms, just like in other parts of the insurance market. This is not as improbable at it may seem at first sight. Importantly, insurance companies are already used to deal with risk and other real world dangers. There are already many private security companies in existence, also at the battlefield. The cost of defense in relation to other parts of the insurance market appears large, but do not discount the idea beforehand. For example: Dutch defense expenditure in 2013 is around 7 billion Euro, less than 1% of GDP, while annual turnover of the two largest insurers is around 20 billion. Of course Hoppe would point out that the 7 billion in current defense expenditures needs to be returned to the taxpayers, hence widening the premium base. Presumably, this would work the same in other countries with smaller economies and/or smaller financial sectors (but see the remarks below).

A world without states, but with private security insurance is less war prone, Hoppe argues (p.11-12). Insurers will have an interest in keeping costs down, and will therefore only make unprovoked attacks insurable. People who provoke, or have known to provoke violence in the past, will be excluded from the insurance. After a while, the number of uninsured people will be small. They will face big defense insurance companies if they violate somebody’s property, making this unlikely to happen often, in contrast to interstate war. Yet in my view here Hoppe relies too much on his stated view on human nature: man as rational animal.

A related main defect of the essay is its focus on the role of insurers and their (economic) incentives. This is fine, but the argument quickly loses any of the convincing power it has when Hoppe turns to an analysis of international war. Or more precise, a violent conflict between a free territory, defended by one or more insurance companies, and a state, financed by compulsory taxation. He simply asserts (p. 14) that the state would be in a disadvantage because it is less efficient and that its leaders would lose their legitimacy, because they necessarily fail to convince the population of the justification of an attack on the inherently peaceful free territory.

Yet if an attack would still happen, Hoppe continues, the state-led army of specialists would not only face the defense force of the insurance company (or several insurers and re-insurers cooperating), but also an armed population (p.15). Without much analysis he simply asserts the companies will always be more efficient and also capable to counter all attacks by any state, perform counter-operations in the state territory and be able to kill its leaders, while making sure to minimize any collateral damage. All because they have to justify their insurance fees.

That is as far as Hoppe goes in his argument. He offers no further analysis or other scenario’s, no additional arguments, does not provide any international political analysis, none whatsoever. Only the fact that the insurance companies are private suffices for Hoppe as they must be more efficient and thus able to overcome all possible attack. That is too simplistic, as just three examples illuminate.

Hoppe overlooks some important geopolitical aspects. Take size of territory and population for instance. How likely is it really that a small free territory, say the size of Luxembourg, or The Netherlands for that matter, would be able to raise enough insurance premiums to enable a good defense structure to counter attacks by much larger states? There is a difference between collecting enough money to match current defense expenditures and ensuring defense against all possible attacks, especially given the anarcho-capitalist dislike of international alliances such as NATO.

Apparently Hoppe thinks all necessary technology is either invented by the research and development people of the insurance company, or freely available at the market. This is improbable as far as the state-side of the argument concerns, given today’s relative secrecy in military procurement. Also, the cooperation between insurance companies may fail in this respect. If one company has a superior weapon system, it will be a ground for competition with the other insurer(s). The superiority of one company may quickly make it a monopolist. It may become a threat to its insured, just like states may be threats to their taxpayers. Once the armed forces of the private insurer are in full operation it only takes a powerful CEO with his or her own agenda to turn things sour. Just the fact of private financing does not make much difference.

Also, does economic efficiency always trump state inefficiency? The history of warfare is full of examples where the supposedly superior army loses unexpectedly. So if the state deals a decisive blow it effectively robs the remains of the insurance company, and it’s successors, of its premium paying clients.

To conclude, for liberty loving people the prospect of stateless private security may be tantalizing. However, the quality of the argument as presented by Hoppe thus far is poor and unconvincing. His theoretical arguments largely stem from economics and overlook other relevant facts and arguments, including those from IR. Hoppe’s private production of defense remains a fairy tale.

Links:
Molinari:
http://mises.org/document/2716/The-Production-of-Security

Hoppe:
http://mises.org/document/1221/The-Private-Production-of-Defense

http://mises.org/document/1092/Myth-of-National-Defense-The-Essays-on-the-Theory-and-History-of-Security-Production

Rothbard:
http://mises.org/document/1179/The-Ethics-of-Liberty

One Cheer for NATO

Edwin van de Haar Current Events, Politics , , , , , ,

The largest military NATO exercise since the end of the Cold War will start shortly in Norway. About 50.000 troops and 10.000 vehicles from all 29 NATO countries plus Sweden and Finland will commence ‘Trident Juncture 2018’ on October 25.

Before the actual exercise starts, there are already logistical tests. As the news release of NATO explains:

Over the next few days, 70 Foxhound, Husky and Landover vehicles will make the 2,000km journey from the Hook of Holland harbour through northern Europe to Norway. The UK convoy’s move through the Netherlands, Germany, Denmark and Sweden will test how efficiently soldiers and equipment can move between European countries. It will also test customs, border regulations and infrastructure’s ability to cope with rapid and heavy troop movements.

“Military mobility is vital, especially to reinforce in a crisis. That’s exactly why we exercise it,” said NATO spokesperson Oana Lungescu. “Over the past few years, NATO has made real progress in improving our ability to deploy troops quickly across Europe. We are overcoming legal hurdles and cutting red tape, including by working closely with the European Union. Looking ahead, we aim to further reduce border-crossing times (clearances within five days by the end of 2019), identify alternative supply routes, and exercise even more to practice military mobility.”

The exercise itself has an article 5 or collective defense scenario, training NATO’s crisis response ability. It will last about two weeks. “NATO is a defensive Alliance. We’re not looking for a fight, but we are committed to defense and deterrence. That’s what this exercise is all about: training to defend, and providing a deterrent effect, ready to respond to any threat from any direction at any time,” commanding officer Admiral Foggo underlined.

I think this exercise, with all NATO members, on this scale, in these uncertain times, deserves one cheer. It shows that the Alliance is still able and willing to get together, to show it is the most powerful military alliance on earth, and that it realizes it needs a lot of training to remain so.

There are still two cheers lacking. The second cheer is lacking because the partnership is still unbalanced. Despite increases in the defense budgets in some of the European NATO members (The Netherlands included), the main burden (also in relative numbers) still falls on the Americans. That is simply wrong. And it is also dangerous, because in current times, for example also with cyber warfare becoming ever more important, any shortage of budget is putting (future) lives at risk. The third cheer is lacking because anti-NATO rhetoric (on both sides of the Atlantic) will sow the seeds of doubt about the use and future of NATO. That is also simply wrong and dangerous. Whether it is Russia, or other powers, the West cannot afford to leave any current or future authoritarian ruler in any doubt about the military ties across the Atlantic, all the way to the Russian border. It is in the best interest of all NATO members, the US included.

Can you spot the most important information in this title?

Brandon Christensen Liberty , , , , , ,

The Diplomat has a piece up with the following title: “Russia’s Sole Aircraft Carrier to Be Fitted With Advanced New Air Defense System.”

The author of the piece goes on to wax poetic about the advanced new air defense system, but that’s not the most important information being conveyed. It’s the fact that Russia – Russia – has a single aircraft carrier.

Here is Popular Mechanics on countries and their aircraft carriers.

From the Comments: The Contribution of American Allies to Pax Americana

Brandon Christensen Comments , , , , , , , , , , ,

Dr Stocker answers my concerns about free-riding and rent seeking with this gem:

Good points Brandon. On the rent seeking, I think you are broadly correct, but I would offer two qualifications. European nations/the EU often foot a lot of the bill/take on associated civilian tasks where America has taken military action, so that the US is not subsidising the defence and security needs of Europe quite as much as it might seem. So for example, in the Yugoslav breakup led to US military operations and a comparatively passive role for Europe, but a lot of the afterwork was taken on by Europe and there is no point in military intervention without work on building civil society to create long term security and stability. Going back a bit further to the first Gulf War/expulsion of Saddam from Kuwait, Germany and Japan did pay a lot towards the cost in return for not participating. Despite [this] they got a lot of abuse in the US Congress from politicians who don’t appear to understand that their non-intervention in the Gulf owed a lot to constitutions and attitudes which the US encouraged/imposed during post-World War II occupation. Recently, though European govts have been cautious in what they say in public about the Ukraine crisis and containing Putin, there is a growth in military spending and co-operation done in fairly quiet ways largely with the aim of deterring Putin from adventurism in the Baltic states. Just one example, Germany has recently taken 100 Leopard II tanks out of retirement and work is underway for the Leopard III. Moving to the Pacific, Japan is enhancing its military and weakening constitutional restrictions on the deployment of the military (imposed by the US in the post-war Constitution) in reaction to Chinese assertiveness.

While I think it is broadly correct that the US has been paying for a military burden which should be born by Europe and Japan, the situation is not as extreme as it often assumed in the US and as far as I can see is moving in a more balanced direction. In general while it is true that the US has a very impressive military machine with some impressive technology and officers, I think some Americans are a bit over confident about this. A lot of Americans, at least amongst those who take an interest in military kit, appear very convinced that the Abrams 2 is the best tank anywhere, I would suggest that in military capacity, for cost, the Leopard II is probably better (it certainly does much better in export markets) and even in absolute terms ignoring cost, the French Leclerc (which is extremely expensive) has a good claim to be the best tank around, and the Korean K2 is another strong but very expensive candidate. The Abrams is expensive, heavy, difficult to transport and difficult to keep in sufficient fuel, though it can certainly do a very good job. A lot of Americans appear to be incapable of thinking of France as anything other than a surrender monkey joke in military terms, which is really very far from the reality, as can be seen by the very strong role that France is now taking in northwest Africa against violent Islamist fundamentalists. The US military may well be able to have the same military capacity for lower cost if it moves away from the Abrams II model of a tank that is expensive to run and transport as well as build.

So broadly a correct point Brandon, but I think the situation is a bit better than is often understood in America and is moving in the right direction as Japan and Europe are getting used to the idea of taking responsibility for dealing with new threats from China, Putinist Russia and the hydra of Islamist fundamentalists.

A very good point, and an even better angle with which to view the world.

My only quibble is that the right direction American allies are moving can easily be changed without a more fundamental shift in institutional arrangements between us. Some sort of federal or confederal arrangement would go a long way toward addressing this issue, and would further deepen the economic and cultural ties between constitutional democracies.

Or am I just looking for problems where there are none, in order for my arguments to gain ground?

From the Comments: The “Strong Defense” argument against libertarian realism

Brandon Christensen Current Events , , , , ,

Dr Delacroix claims to have spotted a weakness in libertarian foreign policy theory (known as “liberal realism” in political science circles):

Millions of registered Republicans (like me) and independents (like younger people close to me) are unable to buy the Libertarian line because they see or sense that it contains a central inconsistency: I want less or much less government, government is crushing me, it’s inimical to freedom, but what I want can only be had within a strongly defended polity. Such a polity usually requires a powerful defense establishment. Such an establishment, in turn undermines the possibility of smaller government.

This type of argument has been repeated ad nauseum in popular discourse and here on the blog, so it is – as Dr Delacroix points out – fair game as far as debunking (over and over again) goes. I have just three things to add.

1. The fact that “millions of registered Republicans” believe in something does not make it true. Millions of registered Republicans also believe that a radical Jewish rabbi came back to life three days after being crucified by the Roman state.

Even if billions of people believed that something false was actually true it would not make the falsehood any less false. Free trade is another great example of this phenomenon. Billions of people falsely believe that free trade is a bad thing, including some very smart people.

2.  Big does not mean strong. In fact, bigness often leads to weakness. This is the point that libertarians have been making for hundreds of years. The US could conceivable cut its defense budget in half while Russia and China could double their defense budgets and the US would still outspend the entire world on defense. A large military is often overstretched and therefore unable or unwilling to respond to threats elsewhere. Libertarians do not advocate for a smaller state because it makes the state weak. Libertarians advocate for a smaller state so that it can perform the few duties ascribed to it (courts and diplomacy/defense) with a ruthless efficiency.

3. A more libertarian foreign policy would be one with a much smaller budget, a much smaller role for the military, and a much more serious role for the military. If a libertarian US were to go to war it would declare that war and fight the enemy until it surrendered completely. I’ve already dealt with this in “Would a libertarian military be more lethal?” and “A cheaper, stronger army?” Dr Delacroix is either arguing from ignorance or he does not read much outside of his preferred circles.

In a society dedicated to the freedom of the individual, war is the last resort in diplomacy. As such, it should viewed with the utmost seriousness and skepticism. Even if millions of people feel otherwise.

Romney and “Defense”

Warren Gibson Current Events, Politics , , , , ,

“If you don’t want America to be the strongest nation in the world, I’m not your President.”  Thus spake candidate Romney recently.  Well, I don’t and he’s not.

Sure, you could interpret “strongest” to mean most prosperous, fairest, etc.  But we all know darn well what Mitt, who is pals with the Zionist militant Netanyahu, had in mind: military might.

Of all the urgently needed reforms in this country, I submit that dismantling the empire is #1.  It is bankrupting us, generating enemies for us, and turning our homeland into a police state.

Yes, I said empire.  Depending on how you count, there are as many as 737 US military bases scattered across the globe, about 38 of which are medium- to large sized.  The number of military and other government personnel involved plus private contractors runs into the millions.  The CIA is hated all over the world and for good reasons.  And as Brandon Christensen pointed out, the US defense umbrella weakens incentives for the Europeans, Japanese, et. al., to take care of themselves.

Obama’s record on these matters is mixed.  The good news: the Iraq war has ended (for the present; keep your fingers crossed), Afghanistan is winding down, and cuts in the “defense” budget are coming.  On the other side of the ledger, there have been ominous buildups in Australia and Central Africa.  On the home front, the police state is escalating and the spiral toward bankruptcy is accelerating.  A pretty awful report card in all, yet Romney could make it worse.

No, I haven’t lost my senses.  I will not vote for Obama, who I believe to be hell-bent for fascist dictatorship, in consequence if not by conscious design.  If you forced me to choose between him and Romney I would cross my arms and refuse to choose.  I’m voting for Gary Johnson, who has called for a 43% cut in “defense” spending.