The neoliberals who controlled the US defense and foreign policy establishments have maintained for decades that “US defense spending dwarfs that of the rest of the world.” After the fall of the Soviet Union, the neoliberals who infested the Clinton Administration pushed to reap the mythical “peace dividend,” with the result being a gutting of US defense capabilities across the board, including bases, facilities, ships, aircraft, tanks, artillery, weapon systems, etc.

As recently as February 2016, The Washington Post, the media house organ of the neoliberals, once again claimed that US defense spending was “more than the rest of the world combined.” But there is that old saying, “Figures don’t lie, but liars figure.” During the Age of Trump, I have come to distrust virtually everything in The New York Times, The Washington Post, The Atlantic, and other purveyors of neoliberal and Deep State narratives. After all, they have proven they can’t be trusted to do anything other than further Democrat/Deep State/globalist interests.

Whose interests are best served by beating the drum about reducing defense expenditures? Could it be our adversaries who seek parity with the US military? In particular, like maybe the ChiComs, with whom the Democrats on Capitol Hill have been making common cause about the pandemic? Like maybe the Democrat-media complex themselves who have been purchased by Chinese renminbi over the years?

Let’s look at how “liars figure” – when it suits their political narrative, which in this case is the long-term reduction of US military capabilities. Here is a good introduction to the subject from War on the Rocks:

Defense spending is one of the most commonly used measures for gauging a country’s potential military power, setting expectations of what the military balance might look like in the future. It helps give us a sense of how much of a state’s economic power is being converted into military power. Well, in theory it should, if we knew how to measure it right, but comparing defense spending across countries is a complicated task. As a consequence, the United States doesn’t really know where its military expenditure stands in relation to that of its principal adversaries, what kind of military capability they’re getting for their money, and whether the balance of power is likely to improve or worsen over time.

[A]ny analysis of comparative military expenditure should be based on the use of purchasing power parity (PPP) exchange rates rather than market exchange rates. This alternative method takes differences in costs between countries into account. As we demonstrate, despite some shortcomings, PPP is a much more methodologically robust and defensible method of comparing defense spending across countries than the method of comparing spending using the market exchange rates that are commonly used by think tanks and academics.

PPP is explained in detail here but can be best summarized as a theoretical exchange rate that allows the purchase of the same amount of goods and services in every country despite the existing differences in currency exchange rates. The goal is to put all countries on an equal footing in terms of purchasing power in order to compare the economic output of various countries.

Now let’s look at the ChiComs’ defense budget and what is often claimed by the neoliberal crowd, i.e., that the US defense budget dwarfs the ChiComs’ budget. Here some excerpts from an article last week at Defense One:

An early lesson emerging from China’s handling of the COVID-19 emergency is that Beijing still manipulates data to fit its desired narrative. This has long been the case in China’s defense budget, where the party-government omits and withholds data to project a non-threatening image of its People’s Liberation Army. However, there are ways to cut through some of the mangled information.

If you account for differences in reporting structure, purchasing power, and labor costs, you find that China’s 2017 defense budget provided 87 percent of the purchasing power of American’s 2017 defense budget.

Further complicating accurate comparisons are the unique characteristics of China’s party-run military, such as military-civil fusionusage of state-owned enterprisetheft of intellectual property, and the embedding of party organizations in private companies. Some of these elements, even if known, are simply unquantifiable. Thus, if we seek to compare the resources Beijing dedicates to defense with what other countries are doing, our only recourse it to remove all military R&D from the calculations.

If we, as a country, are going to be able to compete effectively with the Peoples Republic of China, we need to understand it better. A great step towards better understanding is to assess accurately how it resources its military.

The article also discusses another consideration typically “forgotten” by neoliberals when comparing the purchasing power of the US and China, and that is the cost of labor. Roughly 25% of the DoD budget per annum goes directly to personnel costs. However, acquisition of military hardware and other capabilities includes a “personnel cost element,” too, as salaries of contractor personnel factor directly into acquisition costs for any system procured by DoD. US salaries across the board are much higher than Chinese salaries, including when comparing the salaries of government workers in each country’s defense establishment. That means that the Chinese get more hardware “bang for the buck” (or should I say “roar for the renminbi”) than we do.

What’s the bottom line? First of all, the traditional way of measuring ChiCom military spending on a dollar metric – which is what the execrable Washington Post did in that article – is totally useless. What matters is not how much is spent, but what the output is. As a Navy guy, the “figure” that matters most to me is the number of ships produced per year, and right now, the ChiComs are commissioning around 14 ships annually compared to America’s five. The numbers portend poorly for the foreseeable future, too, as reported here:

New ships are being put to sea at an impressive rate. Between 2014 and 2018, China launched more submarines, warships, amphibious vessels, and auxiliaries than the number of ships currently serving in the individual navies of Germany, India, Spain, and the United Kingdom. Eighteen ships were commissioned by China in 2016 alone and at least another 14 were added in 2017. By comparison, the US Navy commissioned 5 ships in 2016 and 8 ships in 2017. Should China continue to commission ships at a similar rate, it could have 430 surface ships and 100 submarines within the next 15 years.

Those are the numbers that count, and the Chinese are out-producing the US despite the difference in dollar-per-dollar investments being made by each country. So much for the narrative that “US defense spending dwarfs the rest of the world combined.” Guess where China’s trade surplus with the US has been going over the last couple of decades?

The end.

Stu Cvrk
Stu Cvrk served 30 years in the US Navy in a variety of active and reserve capacities, with considerable operational experience in the Middle East and the Western Pacific. An oceanographer and systems analyst through education and experience, Stu is a graduate of the US Naval Academy where he received a classical liberal education which serves as the key foundation for his political commentary. He threads daily on Twitter on a wide range of political, military, foreign policy, government, economics, and world affairs topics.
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