DEFENCE AND DEVELOPMENT

THE DILEMMA
Two objectives

• Restoration and maintenance of physical

security for development to take place.

• Increase in social and economic spending which

is essential for successful long-term
development.
“National defence is now the greatest
enemy of national security”

Boulding
 “Our rulers have no money
to spend on public education…. because all their resources are
already placed to the account of the next war. The nation will not
really be civilized until all standing armies are abolished. Standing
armies excites states to outrival one another in the number of their
armed men, which has not limit. Through the expense occasioned
thereby, peace becomes in the long run more oppressive than a
short war; and standing armies are thus the cause of aggressive
wars undertaken in the order to get rid of this burden”

Kant - ‘ETERNEL PEACE’ - 1795

South Asia – mil expenditure
 Comparision between Security and Social Sector
18000

16000

14000

12000 Education & IT

Health & Family Welfare
Taka

10000 Social Security & Welfare

Total- Social Sector
8000 Defence
Home
6000
Total-Security

4000

2000

0
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Year
 No need for a military…

• Bangladesh is a strong proponent of disarmament and hence considers

military expenditure as wasteful

• Fraternal relations, particularly good brotherly relations with the neighbours

• With a defence layout of only 1.5% of GDP the military can stand up to a
foreign aggression for only a few hours

• Usually corruption is acute in a poverty-stricken country and trade of

weapons merely accelerates the process of corruption

• In a disorganized society like Bangladesh a regular force, being an unequal

force, acts as the major hurdle to socio-economic development
Three views:

• Military spending has powerful effect on the shape of

modern economies

• Military expenditure exerts negative effect on economic

growth by encouraging inflationary tendencies

• Military spending slows down investment affecting

short-term growth and long-term development
DETERMINANTS OF DEFENSE
EXPENDITURE

• Level of development
• Size of the country
• Demographic factor
• Budget capacity
• Macro-economic stability
• Distributional profil
• Political, institutional arrangement
• Internal dynamics
• Geopolitical scenario
• Global socio-economic order.
 Def outlay - rules:
• Wagner’s law –
defence expenditure increase in tandem with per capita income

• Power capabilities
• excites growth in defence expenditure. – Robert McKinley

• Abundance of natural resources

• enhances the need for defence expenditure.

• Defense spending predicated on fiscal capacity.

 Dimensions of the Dilemma

o OF DESIRABILITY

o NON-QUANTIFIABILITY

o MEASURING THE PRODUCTIVITY ?

o DEVELOPMENT IMPACTS

o DEMONSTRATION EFFECT

o ASYMMETRIC INFO

o GOVERNANCE , ALLOCATIONAL EFFICIENCY

o MODE OF FINANCING

o SIZE OF THE DEFENSE SECTOR

COST, THREAT, CAPABILITY
CONCLUSION
• NO CONVENTIONAL PRICING MECHANISM

• DEFENCE IS MORE OR LESS A NON-SUBSTITUTABLE

PRODUCT

• OUR STRUCTURE AND SIZE

• EXTERNAL DISECONOMIES:

• Demonstration effects

• Relative Consumption Hypothesis- Dusenberry

“Armies existed, they would not go away,
and often were the only institution
available to make headway in economic
and social development progress.”