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Rising Cost of the Global War on Terror

Laxman K Behera is Research Fellow at Institute for Defence Studies and Analyses, New Delhi. Click here for detail profile.
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  • January 01, 2008

    The Global War on Terror (GWOT), now into its sixth year, has become one of the most expensive wars in American history. GWOT covers three military operations: Operation Enduring Freedom (OEF), which broadly covers Afghanistan but ranges from the Philippines to Djibouti; Operation Noble Eagle (ONE), which is meant to provide better security for US military bases and enhanced homeland security; and Operation Iraqi Freedom (OIF) which began with the build-up of troops for the 2003 invasion of Iraq. The cost of these operations has phenomenally increased over the years. Various estimates put the initial cost of the war in Afghanistan at US$ 14 billion for the first financial year of the operation, i.e., FY 2001. The cost jumped to $81 billion in FY 2003 with the launch of the Iraq invasion, and by 2007 it has further increased to $170 billion. So far, the cumulative cost of GWOT stands at $804 billion, including $195 billion war requests for FY 2008. With this, the War on Terror has become more expensive than either the Korean or Vietnam Wars which cost, in 2007 prices, $460 billion and $650 billion respectively. Considering that the War will prolong for some time into the future, the cost is going to rise further. The Congressional Budget Office (CBO) estimates that depending on the size of troops deployed in operational areas, the total cost of GWOT is likely to reach between $1.2 trillion and $1.17 trillion by 2017.

    Factors contributing to the rising cost of GWOT include the increased spending in Iraq necessitated by the rising intensity of operations, extra force protection gear and equipment, huge upgrades of equipment, fresh funding to train and equip Iraqi security forces, etc. Consequently, the annual financial provision for Iraq has increased by nearly 200 per cent from $53 billion in FY 2003 to $158 billion in FY 2008. With this, the Iraq war has proved to be the costliest affair among the three operations, with total funding of $607 billion representing 75 per cent of the total cost of GWOT. OEF and ONE come at distant second and third positions with cumulative figures of $163 billion and $28 billion, respectively.

    The huge cost incurred on account of GWOT has had a major upward impact on US military expenditure. This is evident from the continuous rise in US military spending, which, in constant prices, has shot up by a whopping 53 per cent from $345 billion to $529 billion between 2001 and 2006, compared to negative growth between 1995 and 2000.

    While the GWOT has directly raised the military budget of the United States, it has also led to an upward revision in global military expenditure. This is primarily because of the overwhelming proportion of US military expenditure in global military spending, with the United States accounting for nearly half of total global military spending. According to SIPRI estimates, the war-inflated US defence budget pushed global spending (expressed in constant prices) from $892 billion in 2001 to $1158 billion in 2006. Prior to the attacks on 9/11, global military spending stood at $855 billion in 1995 and $876 billion in 2000. In other words, global military spending during the six year period before the attacks grew by only 2 per cent, compared to 30 per cent during the six years after 9/11.

    The recent upsurge in global military spending can be compared with the situation prevailing during the Cold War. At the height of the Cold War in 1987-88, global military spending in constant prices stood at $1193 billion, which is only 3 per cent higher than the present spending. Given the unfinished business of GWOT and its growing contribution to global spending, it is only a few years before spending surpasses Cold War levels.

    Apart from the United States, other major spenders like the United Kingdom saw their military budgets growing in order to keep pace with the increasing demands of the War on Terror. During the period 2001-2006, the UK’s defence budget increased by 4 per cent per year in constant prices compared to negative real growth (-1.4 per cent) during the previous six years.

    Besides the US and UK, the GWOT effect seems to have traversed to countries like China and Russia for whom a growing American defence budget further undermines their existing expenditure gap with the United States. Riding on their economic prosperity, these countries seem to be making determined efforts to close this gap to the maximum extent possible. This is evident from the comparatively higher rates of growth of their defence budgets than that of the United States. During the six year period starting from the year of the 9/11 attacks, China has raised its real defence spending by a massive 77 per cent to $49.5 billion in 2006. It has now become the fourth highest military spender, pushing Japan to fifth place. If China maintains the present growth rate of its military expenditure, then within a few years it will emerge as the second highest military spender after the United States. In the case of Russia, its defence spending has seen a real growth of 63 per cent during the period mentioned above. Russia’s defence spending in 2006 stood at $ 34.7 billion. Though the present Russian expenditure is far below its Cold War levels, it seems to be making a determined effort to boost spending and thus bridge its capability gap vis-à-vis the United States.

    The rising cost of GWOT has not only made it one of the most expensive wars in American history but it has also pushed up US military expenditure as well as world military expenditure. Given the likelihood of the war being prolonged, the world is set to witness another phase of rising global military expenditure.

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