Better Arms for Fewer Soldiers

By Dowdy, John | The McKinsey Quarterly, Winter 2001 | Go to article overview

Better Arms for Fewer Soldiers


Dowdy, John, The McKinsey Quarterly


Europe should spend less of its limited defense budget on recruiting and training troops and more on equipping them for modern warfare.

Europe's resolve to improve its defense capabilities has raised the hopes of aerospace companies and arms manufacturers around the world. They shouldn't hold their breath. Although British Defense Minister Geoff Hoon recently announced the purchase of Raytheon air-to-ground Maverick missiles, European defense budgets have been falling by an average of 5 percent in real terms every year since 1995. Most European governments will be urging their defense departments to cut costs, not to make major investments in equipment to modernize their forces.

So what is to be done? In the absence of more money, European governments should take a closer look at what they are spending their money on. More specifically, they should rebalance how much they spend on recruiting, training, and housing troops and how much on arming them.

The wide gap between defense spending in the United States and Europe is well known. In 1999, total US defense spending was $275 billion, almost double the $140 billion spent by NATO's 13 European members, excluding the newest: Hungary, Poland, and the Czech Republic. The effects of that spending gap became clear during the war in Kosovo. Fully 85 percent of NATO's effective firepower in the bombing campaign, whether via aircraft or cruise missile, was American. Europe was particularly reliant on the United States for support in high-tech areas, such as satellite reconnaissance and communications, and even struggled to get its soldiers to the baffle zone.

Less well known is the difference in the actual number of US and European troops. Despite the much smaller defense budgets of NATO's European members, they have over 2.3 million active military personnel. The United States has just 1.4 million. As a result, a greater proportion of Europe's total defense budget goes to personnel (recruiting, training, salaries, pensions, housing, uniforms, and food) than to the development and purchase of new equipment. Money spent looking after an under-equipped, immobile soldier is surely wasted money, especially as high-tech weapons revolutionize war. And, as every classic-car owner knows, old equipment costs more to operate and maintain, further depleting the limited funds available.

Simply put, the way Europeans spend their military budgets serves to widen the gap between US and European defense capabilities. The ratio between US defense expenditure and NATO Europe's is 2 to 1. The ratio spent per soldier is 3.3 to 1. The Pentagon ended up spending $35,700 per person on equipment procurement in 1999, versus an average of only $12,200 for Europe's NATO members.

That said, there are substantial differences among the Europeans' spending patterns. Of the three largest contributors to total European equipment procurement, Germany sits just below the average at $12,000 per person, France at $17,200 per person, and the United Kingdom at a surprising $40,500 per person. Significantly, the UK government recently reversed previous defense-spending cuts and announced a tight squeeze on the "resource' budget, which covers everything except spending on equipment. …

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