“Show me the money” is the mantra of those analyzing Chinese defense budgets, searching for every defense dollar hidden behind state-owned defense enterprises and construction projects. But perhaps what they should be asking is, “where’s the beef?”
Every traveler knows that money is only as good as what it can buy. What you find on the dollar menu on one side of the border may cost $2.05 on the other. A lack of this purchasing-power-parity perspective is a major flaw in standard comparisons of annual defense spending. Analysis of the U.S. and Chinese defense budgets should not concentrate on dollar-vs-dollar, but rather the meat of what those budgets can buy.
For a quick non-scientific assessment of defense budgets weighted by purchasing-power, we look to the Big Mac Index (BMI, no pun intended). In 1986, the Economist developed the BMI as a humorous way of gauging the accuracy of currency valuations world-wide. What started out as educational humor became a serious academic endeavor. The BMI is so effective that the infamous currency manipulating government of Argentina’s Cristina Fernández de Kirchner has passed laws regulating the sale and marketing of the Big Mac. Although the Economist has produced a “gourmet” version controlling for local factors such as differences in labor costs, it is those local market defects that make the raw BMI appropriate for defense budget analysis – the analysis is not of currency on the exchange floor, but on the shop floor.
According to the Stockholm International Peace Research Institute, China‘s raw defense budget of $166 billion is a mere 24% of the American defense budget at $682 billion (including so-called OCO funds for the Iraq and Afghanistan wars). In order to gain the purchasing power perspective, we can compare the budgets using the respective countries’ Big Mac Index prices – $2.61 in China and $4.56 in the United States. Weighted with the BMI, China’s defense budget value is 42% of its American rival, the equivalent of $287 billion.
Depending on what source you use, the comparison worsens. A raw dollar-to-dollar comparison of DOD’s maximum assessment of China’s defense budget ($215 billion) and the U.S. budget without war funding ($593 billion) shows China at 35% of the U.S. level. Once you weight the budgets with the BMI index, the Chinese defense budget emerges at a robust 63% of the U.S., the equivalent of $376 billion.
The BMI is by no means a perfect method of showing the value-for-money comparison of Chinese and U.S. defense budgets. After all, burgers aren’t bombers, and fries aren’t frigates.
But using such purchasing power parity measures provides a useful perspective as the dirge of sequestration starts to play. The BMI illustrates how the value-for-money calculation tilts toward China. So, too, are the missions and challenges to which the value is applied. Because of its extensive cyber program and other means of industrial espionage, China must spend far less on R&D as it steals and copies designs and doctrines from its more advanced competitors. China’s anti-access/area denial (A2/AD) focus provides a financial asymmetry as well as a technological one. After all, a DF-21 “carrier killer” missile is far cheaper than the U.S. supercarrier it’s designed to strike.
Secretary Hagel has noted that half of U.S. defense spending is obligated to pay, benefits, and retirement – not training, supplies, capital investment, procurement, or R&D as many assume. China does not treat their personnel nearly so well. Moreover, these “people costs” are consuming an increasing share of the defense dollar. Army Chief of Staff Ray Odierno recently predicted that compensation would consume 80% of the Army’s budget by 2023.
The BMI does hold out one glimmer of hope: the McDonald’s Theory of International Relations holds that no two nations hosting a McDonald’s franchise will ever go to war. But in the Asia-Pacific of the 21st Century, the United States cannot afford to rely on Mayor McCheese to guarantee the peace.
LT Matthew Hipple is the Executive Officer of PC Crew INDIA and the Director of the NEXTWAR blog. He is also a member of the U.S. Naval Institute and a contributor to Proceedings. While his opinions may not reflect those of the United States Navy, Department of Defense, or US Government.
Twitter: @AmericaHipple
Five months after the much-dreaded sequestration went into effect, many defense analysts and military officials alike are worried about the negative repercussions of the drastic budget cuts on military readiness. In his latest commentary, the rightwing commentator Alan Caruba declared that “The U.S. military is on life support.” Defense Secretary Chuck Hagel also argued in his Statement on Strategic Choices and Management Review (SCMR) that “sequester-level cuts would ‘break’ some parts of the strategy, no matter how the cuts were made [since] our military options and flexibility will be severely constrained.”
Secretary of Defense Chuck Hagel answers reporters’ questions during a Pentagon press briefing on the recent Strategic Choices. Navy Adm. James A. Winnefeld Jr., right, vice chairman of the Joint Chiefs of Staff, joined Hagel for the briefing. (DOD photo by Glenn Fawcett)
To its credit, the SCMR seemed to hint at operational and structural adjustments underway by offering two options—trading “size for high-end capacity” versus trading modernization plans “for a larger force better able to project power.” Nevertheless, one important question which went unasked was whether or not the US Armed Forces alone should continue to play GloboCop.
The current geostrategic environment has become fluid and fraught with uncertainties. As Zhang Yunan avers, China as a “moderate revisionist” will not likely replace the United States as the undisputed global champion due to myriad factors. As for the United States, in the aftermath of a decade-long war on terror and the ongoing recession, we can no longer say with certainty that the United States will still retain its unipolar hegemony in the years or decades to come.
That said, Secretary Hagel is correct that the United States military may need to become leaner in the face of harsh fiscal realities. To this must be added another imperative: The US Armed Forces must fight smarter and must do so in ways that may further America’s strategic and commercial interests abroad.
So how can the United States military fight smarter and leaner?
Possible Combatant Command Realignments
First, given massive troop reductions whereby the Army personnel may be reduced to 380,000 and the Marine Corps “would bottom out at 150,000,” while at the same, the DoD is seriously considering restructuring existing Combatant Commands (COCOMs), it no longer makes sense to deploy or train troops for protracted counterinsurgency campaigns or foreign occupations. Instead, should another transnational terrorist group or a rogue state threaten homeland security, the United States could rely on SOF (Special Operations Forces) commandos and UAV (Unmanned Aerial Vehicles) to selectively target and neutralize potential threats. While the SOF and UAV surgical raids should not be viewed as substitutes for deft diplomacy, they can provide cheaper and selective power projection capabilities.
Second, since the United States Navy may be forced to “reduce the number of carrier strike groups from 11 to 8 or 9,” it can meet its power projection needs by encouraging cooperation among its sister navies and by bolstering their naval might. One example of such partnerships would be to form a combined fleet whereby America’s sister navies “may share their unique resources and cultures to develop flexible responses against future threats” posed by our adversaries.
Third, the United States may encounter more asymmetric threats in the form of cyber attacks, CBRN (Chemical, Biological, Radiation, Nuclear) attacks, and may also be subjected to attacks from within by homegrown terrorists and drug cartels—all of which may wreak havoc and may even cripple America’s domestic infrastructures. As retired Admiral James Stavridis argues, such asymmetric attacks may stem from convergence of the global community. Such threats require that the United States take the fight to its adversaries by cooperating with its allies to “upend threat financing” and by strengthening its cyber capabilities.
Fourth, where rogue states such as Iran, Syria and North Korea, are concerned, the United States could implement what General James Mattis refers to as the “proxy strategy.” Under this arrangement, while “America’s general visibility would decline,” its allies and proxies would police the trouble spots on its behalf.
Fifth, the United States must be prepared to defend homeland against potential missile attacks from afar. The United States may be vulnerable to hostile aggressions from afar following North Korea’s successful testing of its long-range rocket last December and Iran’s improved missile capabilities. Thus, improving its missile defense system will allow greater flexibility in America’s strategic responses both at home and abroad.
Last but not least, the United States Armed Forces needs to produce within its ranks officers who are quick to grasp and adapt to fluid geostrategic environments. One solution, as Thomas E. Ricks proposes, would be to resort to a wholesale firing of incompetent generals and admirals. However, it should be noted that rather than addressing the problem, such dismissals would ultimately breed resentment towards not only the senior brass but civilian overseers, which will no doubt exacerbate civil-military relations that has already soured to a considerable degree. Instead, a better alternative would be reform America’s officer training systems so that they may produce commanders who possess not only professional depth but breadth needed to adapt to fluid tactical, operational, and strategic tempos.
“The US Military Establishment’s Greatest Foes” By Jack Ohman/Tribune Media Services
Despite the hysteric outcries from the service chiefs and many defense analysts, in the end, the sequestration may not be as dire as it sounds. In fact, Gordon Adams argues that after several years of reductions, “the defense budget…creeps upward about half a percentage point every year from FY (Fiscal Year) 2015 to FY 2021.” Simply stated, one way or the other, the US Armed Forces may eventually get what it asks for–as it always has been the case. Nonetheless, the sequestration “ordeal”—if we should call it as such—offers the US military object lessons on frugality and flexibility. Indeed, American generals and admirals would do well to listen to General Mattis who recently admonished them to “stop sucking their thumbs and whining about sequestration, telling the world we’re weak,” and get on with the program.
Note: This article was originally published in its original form in the Naval Institute’s blog and was cross-posted by permission.
Jeong Lee is a freelance writer and is also a Contributing Analyst for Wikistrat’s Asia-Pacific Desk. Lee’s writings on US defense and foreign policy issues and inter-Korean affairs have appeared on various online publications including East Asia Forum, the Georgetown Journal of International Affairs, the World Outline and CIMSEC’s NextWar blog.
As U.S. Navy strategy enters a new phase of revival it would be wise to prepare ourselves for future debates. However, writing about strategy is a daunting task, so I took as an exercise and example something that could be treated more lightly, especially during summer months. I asked myself, “What helped Eastern Europeans effectively resist communism?” and whether there was any strategy behind it. After a short conversation with friends, what emerged was that the important factor in defeating communism in Poland was a sense of humor. And yes, there was a sort of strategy behind it, which is even more interesting considering the lack of any structure or organization that would have supported it. Everything began as a simple self-defense against the overwhelming frustration from the inability to control one’s own life under the ruling Communist Party. The Party had almost total control over our material lives. Yet a sense of humor and laughter quickly evolved into a kind of massive resistance, and the last years of so-called “real” socialism in Poland was even a time of true renaissance of cabaret. Now let’s apply military language to this phenomenon: we essentially observed groups of insurgents (such as the audiences of cabaret performances, or even just friends making jokes about the Party) creating ad hoc and unpredictable patterns using humor as a weapon. The weapon was widely available and its nature very asymmetric. An official ban on humor only, and immediately, generated extra salvos of laughter. The Party was embarrassed — instead of being feared, it became the subject of the people’s laughter. This marked a shift in people’s attitude, with consequences far beyond just making Party people angry. This strategy, used by a large part of the population, was called “inner emigration”. As I mentioned, the government was able to control the material aspects of our lives, but the intellectual and spiritual lives were beyond their reach. So changing the focus from physical wellness to intellectual activity was like defeating the enemy’s doctrine in the best spirit of Sun Tzu’s teaching.
Another technique popular in Eastern Europe is “salami tactics.” This occurs when an opponent divides an enemy slice by slice. Each slice is so thin that it doesn’t trigger a reaction until there is no more salami. The international application was demonstrated in the traditional “divide and conquer” approach of Hitler’s Germany, whereby the major powers thought they could appease the government by allowing it to absorb smaller neighbors a slice at a time. In Poland the communists took control of our material life, slice-by-slice, by introducing a series of small regulations that were individually unnoticed by the public. The final result was the same as making one big move. These tactics are potentially very effective against an opponent abiding by rules of proportional response. Breaking one of the initial, small rules would be considered escalating both violence and risk to an unacceptable level.
So how do we defend against salami tactics? One way is to convince an opponent that we do not have salami at all. This translates to strategic deception, which is very difficult in execution, especially in the long term. Another approach would be to take our salami out of an opponent’s reach, like the Poles did with inner emigration. They physically remained within Poland and subject to the rules of the Party, but their most robust undertakings retreated inwards to spiritual and intellectual pursuits, and where their loyalty was much harder to control or attain.
Both are examples of defensive strategies, meaning the object is to deny opponents their ability to achieve their positive goals. They were well adapted to the situation of the people in Eastern Europe, but inappropriate for the stronger side in a conflict. An example of a positive or offensive strategy would be to look for opportunities to apply salami tactics against an opponent. But the question is what does the other side consider salami? Answering this question is like linking something pleasant (salami) with useful (strategy) and hopefully appropriate for the summer holidays.
Przemek Krajewski alias Viribus Unitis is a blogger In Poland. His area of interest is the context, purpose, and structure of navies – and promoting discussion on these subjects in his country.
The following article is special to our International Maritime Shipping Week. While we often discuss the threats to maritime shipping, this week looks at dangers arising from such global trade, and possible mitigations.
“Where the carcase is, there will the eagles be gathered together.”
Julian S. Corbett, Some Principles of Maritime Strategy (1911)
In a global system marked above all by its complexity and interconnectedness, dependence on international shipping is universal. Yet some nations are far more vulnerable than others. As students of naval history well know, such vulnerability is often turned into a source of strategic leverage. To what extent can this leverage actually be exploited under 21st century conditions?
The needs of a nation, the opportunity of a foe
The globalized economy is, in a very real sense, a system of maritime exchange. As Thomas Friedman points out, as much as any other recent innovation, it was the shipping container that shaped our daily lives by making the economic transformation of the late 20th Century possible.[1] In the past two decades alone, the volume of sea-borne commerce has more than doubled, from 4 billion tons in 1990 to 8.7 billion tons in 2011. According to the International Maritime Organization, if the overall trend of trade growth observed over the last one and a half centuries continues, the figure will be 23 billion tons in 2060. And, while the exact share of global trade in goods that is moved by is a matter of some debate, it is sea well in excess of 75 percent by most reckonings. Further, it is clear that only cheap and plentiful shipping in a secure maritime environment can sustain this transformation. As a result, the stakes in international shipping are widespread.
But while any nation that wishes to prosper in the current global environment shares in the global dependency on shipping, the vulnerabilities that arise from it are distributed unevenly. This is mainly for two reasons: First, the degree to which specific nations sustain themselves by means of ship-borne imports, and to which they found their prosperity upon maritime exports, varies greatly. Secondly, depending inter alia on a country’s geopolitical setting, it will be more or less able to manipulate the degree to which it has to rely on shipping for its economic security. A resource-rich, continental-size state with landward access to sizeable markets – like Russia – has serious alternatives to maritime transportation. A small island nation with an export-oriented economy that runs on imported hydrocarbons – such as Taiwan – does not. It is where dependency gives rise to vulnerability that it turns into a potential source of leverage for outside powers.
Targeting Shipping for Strategic Effect
In what ways can vulnerabilities in the area of maritime transportation be exploited for strategic effect? There is, of course, a whole spectrum of options available to would-be-predators. Unilateral or multilateral sanctions have been a mechanism of choice since the end of the Cold War. But historically, it has been direct military action against the opponent´s shipping that has had the greatest impact on trade. Two main methods of waging war on commercial shipping can be distinguished, at least at an analytical level: (1) the blockade, and (2) guerre de course, or commerce raiding. The blockade relies on concentration and persistence to choke off the flow of sea-borne goods into enemy harbors, and as such will usually require some form of command of the sea. Commerce raiding, on the other hand, relies on dispersed, attritional attacks by individual vessels (or small groups of vessels), which makes it an attractive option for navies that find themselves in a position of inferiority. Both methods leverage the disruption of shipping to impose a cumulative toll on the adversary’s economy, which is expected to have a significant indirect impact on the war effort and/or erode the opponent´s will to resist.
Historical examples of shipping being turned into a strategic lever are abundant. In the age of sail, preying on adversaries’ commerce was an integral part of most naval campaigns, including those of the Dutch Wars, the Seven Years’ War, and the Wars of the French Revolution. While it was seldom decisive, it was often “exceedingly painful,”[2] as Colin Gray observes. During the late 19th and early 20th centuries, innovations in naval technology all but brought to its termination the “close blockade” of enemy harbors while also providing means – the submarine, torpedo, and naval mine – that would transform guerre de course into a method of total warfare. Much ink has been spilled on Germany’s failed – and strategically counterproductive – attempts subdue Britain by way of Handelskrieg (the German variation of commerce raiding), while a slightly more specialized literature focuses on the “distant blockades” of Germany that were a key feature of British naval operations in both World Wars. However the case of Japan is most the instructive for the purposes at hand.
An island nation with an extremely circumscribed resource base, Japan was utterly dependent on ship-borne imports of a range of raw (and precursor) materials. In a very real sense, the Empire´s huge naval modernization program during the 1930s was based on its maritime commerce with the United States. Among other things, the U.S. covered 80 percent of Japanese liquid fuel needs. Given its political and military trajectory, Japan´s demand for key commodities was highly inelastic. The only alternative to trade with the United States and other potential adversaries was the unilateral extraction of resources from Japan´s near abroad – which could decrease its dependence on this particular foreign power, but (crucially) not on maritime transportation. When war came, the U.S. was able to exploit this vulnerability to devastating effect. Despite the many operational and technical inadequacies revealed by its initial operations in 1941-42, the U.S. Navy´s all-out war on Japanese shipping eventually came as close to strategically decisive as can reasonably be expected from any indirect use of military power.[3] Aided by the dire lack of defensive measures on the part of the Imperial Japanese armed forces, U.S. submarines alone sent more than 1,100 Japanese merchantmen to the bottom, and nearly as many were sunk by aircraft and mines. By the spring of 1945, Japanese sea-borne logistics had virtually ceased to exist, and so had Japan´s ability to sustain its war effort.
It has been suggested that other attempts throughout history at disrupting shipping flows might well have been equally successful in exploiting strategic vulnerabilities, had it not been for the predators´ “technical incapacity, operational ineptitude, and policy incompetence […] in the conduct of commerce raiding.”[4] Whether this assessment is accurate or not, there is little doubt that – despite the moral opprobrium that has often accompanied attacks on civilian vessels – the vulnerable dependence on sea-borne trade can be exploited to considerable effect. What relevance this finding might possess in an era of global economic integration is, however, much less clear.
Execute against China?
Until very recently, the explosion of maritime trade supporting economic globalization has not resulted in a resurgence of military strategies based on the (selective) disruption of international shipping. An important exception has been Iran´s focus on the Strait of Hormuz, which has played a critical role in Iranian strategic thinking since the 1980s. But it is the rise of China that has reignited naval strategists´ interest in shipping as a source of strategic vulnerability.
One set of scenarios that has been debated in detail involves Chinese offensive operations against Taiwan´s economic lifeline. Given the island´s vulnerable dependency on shipping and the enduring limitations of the People´s Liberation Army with regard to a full-scale invasion, it is hardly surprising that the imposition of a coercive blockade should hold some appeal in PLA planning circles.
Considerably greater attention has been attracted, however, by the possibility that the People´s Republic might itself become the target of offensive military action against the sea-borne commerce on which the integrity of its economic model stamds. After all, 90 percent of China’s exports and 90 percent of its liquid fuel imports – which, as Sean Mirski observes are “functionally irreplaceable”[5] – are transported by sea. The oft-cited ‘Malacca dilemma’ is but one expression of a suspicion that now unites an increasing number of strategic thinkers, both Chinese and foreign: namely, that its dependence on maritime transportation may prove to be China´s Achilles’ heel on its way to greatness.
While the vulnerability of the PRC’s sea lines of communications has become an official justification for naval expansion and a rallying cry for naval nationalists, it is also a focal point for U.S. strategizing in the context of increasing access challenges in the Western Pacific. Thus, a blockade of Chinese (or rather China-bound) shipping has been debated both as an element of, and as an alternative to, the AirSea Battle Concept that is designed to enable operations in the face of an anti-access/area-denial challenge, such as U.S. military planners anticipate in case of conflict along the Chinese periphery.
While Western treatments of the subject tend to agree that a blockade would be militarily feasible – given an adequate investment of resources – and could have a very considerable impact on the Chinese economy, the assumptions under which they arrive at these conclusions are extremely restrictive. For example, Mirski assumes that (1) the U.S.-China conflict in question would not be limited in scope, yet would stop well short of nuclear use, (2) the U.S. would find itself in the position of defender of the status quo against a blatantly aggressive China, (3) the U.S. would be able to build a coalition that includes Russia, India, and Japan; and (4) under these conditions, a ‘sink-on-sight’ policy towards civilian vessels in China’s near seas would be politically viable. Even with these preconditions, he concludes that despite the American blockade “China would be able to meet its military needs indefinitely.”[6]
Recent publications also points to changes in the nature of international shipping itself as potential complicating factors: in a prospective blockade scenario, few – if any – civilian vessels would fly the Chinese flag and, given the practice of selling and reselling cargo on spot markets, a ship´s final destination might not be known until it actually enters port.[7] But while Mirski’s proposal of instituting a system of digital navigational certification is ingenious, he dodges the broader question of how the United States and the nations of the Asia-Pacific would deal with the myriad repercussions of what would amount to a major disruption of the globalized economic sphere for an extended period of time.
Conclusion: Return of the commerce raiders?
If nothing else, the current debate about a U.S. naval blockade of China reveals that – much like their predecessors in past centuries – strategists in a globalized era see shipping as a repository of strategic vulnerability, particularly in cases of high-intensity conflict between great or medium-size powers. But while the potential leverage to be gained from nations’ dependence on international shipping is perhaps greater than ever before, the actual leverage might not correspond to planners’ expectations. The sources of this disconnect lie primarily in the political and economic context in which any concerted military action against sea-borne trade would be embedded. Given the U.S. Navy’s determined stewardship of freedom of navigation, the U.S. in particular would find itself on the wrong side of the norms it has been upholding for the past 60 years. And while the economic fall-out of any great power war is likely to be significant, the willful disruption of trade flows for strategic effect would only serve to accentuate the costs to regional allies and global trading partners.
As a result, unrestricted commerce warfare of the type pursued by the U.S. Navy against Japan in 1941-45 is just not in the cards. On the other hand, anything short of a strategically counterproductive ‘sink-on-sight’ policy might not produce sufficient strategic impact to justify the cost of embarking on such a risky course of action in the first place. Finally, once we move beyond the context of open interstate warfare, multilateral economic sanctions offer the possibility of causing many of the same effects at markedly lower cost to the attacker’s international standing.
Overall, the recent surge of interest in economic warfare strategies does little to encourage faith in the potential decisiveness of military actions against globalized trade, and serves to underline the practical and political challenges presented by any attempt at leveraging the vulnerabilities of a major trading power under 21st-century conditions. While the dependence on international shipping poses many risks, the strategic leverage it provides as a direct result of its crucial contribution to the prosperity of nations is now more apparent than real.
Michael Haas is a researcher with the Global Security Team at the Center for Security Studies, ETH Zurich. The views presented above are his alone. Michael tweets @the_final_stand.
[1] Thomas L. Friedman (2006), The World Is Flat: The Globalised World in the Twenty-first Century (London: Penguin), 468.
[2] Colin S. Gray (1992), The Leverage of Sea Power: The Strategic Advantage of Navies in War (New York: Free Press), 13.
[3] Robert A. Pape (1996), Bombing to Win: Air Power and Coercion in War (Ithaca, NY: Cornell UP), 100-01.
[5] Sean Mirski (2013), “Stranglehold: The Context, Conduct and Consequences of an American Naval Blockade of China,” Journal of Strategic Studies 36:3, 389.
