Thursday, 9 June 2011

US Defence Spending

The Unites States spends some $700 bn on defence. Its spending is more than the combined total of the next 17 countries - a list that includes China and Russia (See The Economist's chart on defence spending here) . It's none of this blogger's business to question whether it should be having so many bombs - that's for American citizens to decide for themselves, although we can have a mild interest as to whether it is sensible to fire a AGM Hellfire II from a drone above North Waziristan at a cost of some $70,000 to hit a donkey in its ass !

This blog, having some pretensions to economic bias, instead ruminates on the sheer scale of cost effectiveness that is possible on defence spending. Without reducing the number of bombs that is. You see, the traditional ingredients by which businesses attack costs are simply not present n the field of defence.

There is very little competition. The best way to reduce costs is competition. But there is little chance of that with US defense. Firstly, no foreign competition is possible. Secondly there are very few domestic competitors and anyway they don't really compete with each other - its all an elaborate dance of a little more or little less - the thought of the chiefs of Boeing and Lockheed Martin in a tango sent me into splits of laughter No chance here of a Walmart equivalent coming and slashing prices.

Then there is almost no innovation to reduce costs. All innovation, and there's plenty, is to build bigger and better bombs. Perhaps targeting a camel's ass or an elephant's ass. Nobody is going to get promoted for reducing the missile cost by half.

Thirdly, no offshoring is possible at all. Outsourcing is possible, but is usually only a measure to take personnel off your headcount (hence the mercenaries in Iraq, Afghanistan and so on).But can production be offshored to China or India, where you can cut costs by 50% ?? Not a chance. 

What about operating efficiencies. Like , what is the cheapest way to hit a donkey's ass in North Waziristan. An old 303 rifle perhaps ? No chance. War is all about "overwhelming military power" - and to hell with the costs.

Transparency in accounting ? Worker quality circles to reduce costs ?  Perish the thought. How about cutting Head Office costs. Like shifting the Pentagon from the middle of Arlington County to Supai, Arizona ? Ha Ha.

Somebody is footing the bill for the missed opportunities in cost reduction. It's the US tax payer , of course. Some of the more common business tools to reduce costs may not be possible to implement in the military. But while the wars in Afghanistan and Iraq are pursued, the US would do well to start another war on costs. It may actually find it more productive than the other two wars mentioned above.

Paul Ryan - Are you listening ?

19 comments:

Sankar said...

Hi ramesh

Hats off !! your last two posts have been fantastic!!
the piece on Gen x .. so very true.. couldn't agree more
Sankar

zeno said...

Paul Ryan, Supai.. all in one post? How do you have all this in the tip of the finger or the mind? They spend too much money on all this but crib about recession job cuts and burn the dreams of Indian IT folks :P :D

RS said...

BIG bow to your knowledge....:) And I shut up....

Vishal said...

Such is the power of your posts that I end up searching some or the other thing on the google - once at least for each post. I am honored to be a part of your blogging community.

One more post on USA and I would add it to Sandhya's outstanding list of your featured posts on USA.

That boggled the mind, Ramesh! $700 Billions on defence.. American Citizens - are you listening?

Hopfrog said...

It's a constant tug of war between two parties with polar opposite ideals. How we manage to be a country that is almost split 50/50 on the issues of the day probably has more to do with human psyche than conviction. It's a recurring theme of a pendulum swinging at two extremes.

One side wants to spend billions to hit a donkey in the ass from hundreds of miles away and doesn't mind cutting off Grandma's health insurance to do it. The other side wants to coddle an entire population and spend money it doesn't have.

Aside from all that. I'm sure you're aware of Eisenhower's farewell speech at the end of his presidency. He warned of this many moons ago. Warned of a military industry that had become too big and too powerful, like a giant out of control cash cow that would be hell bent on justifying its existence and would do so by having Washington in its pocket. He was right.

http://www.youtube.com/watch?v=8y06NSBBRtY&feature=related

hemarao said...

Money money money...its all so funny...
Either an ass chooses to blow it off
Or it is used to blow off an ass!!
:-)

Ramesh said...

@Sankar - Delighted to have you here and thanks for the comment. Much appreciate the kind words.

@zeno - There is some justification for US defence costs being high - the world expects the US to be its policeman. Nobody wants to lift a finger and yet wax eloquently about human rights and international community. Almost always its the US that has to do the dirty work - hence some high cost is justified. But the opportunities for cost effectiveness must be immense there.

@RS - OH No S. Please never, be mum. Love your comments and thanks for the kind words, entirely undeserved by me.

@Vishal - For the reasons I listed in response to zeno, I believe US defence spending has to be higher than virtually any other country. But the amount is indeed staggering.

Ramesh said...

@Hopfrog - Ike was a wise and honourable man and comments from a five star general and war hero on the military are very wise words indeed. Thanks for the link.

@Hema - Ha Ha Ha.ROFL.

gils said...

worlds biggest warmonger..wat else u expect frm them. their govt is run by gunmakers..they need funds for making their guns and have fun by bombing the world.

Ramesh said...

@gils - No No gils. Its not that extreme. If US followed an isolationist policy and refused to do anything anywhere, the whole world would criticise it for sitting idle and would want it to intervene. That's the price you pay for being leader of the world.

Anonymous said...

yeh, but some donkeys (the human kind) deserve a good kick in the ass from time to time ! HaHa

Trevor

RamMmm said...

Paul Ryan through his good(!) links with the Obama administration will hereby yank Ramesh of his responsibilities at his FMCG job and depute him on a defence cost-cutting mission study to a secret out-of-bounds facility at Supai with a sturdy mule as a perquisite for his 'ass' comments for a period of 1 year. :D

US uses almost half of the world's defence budget. What a waste! Fun reading this post.

Ramesh said...

@Trevor - ROFL :)

@RamMmm - LOL !! The mule was a superb ingredient in your recipe. OMG; what a life would that be :):)

Sandhya Sriram said...

At times, it is good to be like this. If you can afford it :-)

the other day, i saw a file article on WTC just crumbling to what it became finally.

it was a very detailed video and the way it was planned and some real life incidents and... it left only tears at the end of it all.

Whether it is Mumbai, or US or any place, it is very painful..

I know, all that US spends is not to combat terrorism. But if you have the money to spend, to remain important and formidable in a terrorist dominated world... why not.. and maybe some of it is waste, some of it could have been done better.. but no life is worth the million dollars it saves..

sorry, a little off but thats what i feel

Ramesh said...

Venkat commented - "Sir you missed to mention how much income US makes with thier defence power & weapon sellings, in direct & indirect ways. if we make analysis on that then 700 bn will be propotinately very less spending.

US policing part is like someone entering our house and directing us what to do & not. (respectfully disagreeing on that part)

Have no idea what happened to his comment - didn't go to spam and yet disappeared.

Thanks Venkat - Understand your point of view. And arms trade is an altogether different matter - you are right there are huge profits to be made.

Ramesh said...

@Sandhya - Why not indeed. But the sad fact is that the US cannot afford it and I am not at all sure that its all money well spent. If we go with our corporate hat on cost cutting, huge amounts can be taken off, I'm sure.

Ravi Rajagopalan said...

We should not assume that policymakers do not know what is going on. Look at the speech Robert Gates made to NATO - unless the Europeans start shouldering a greater burden they cannot expect the US to step up. In Libya the US exasperatedly stepped in to support the effort supposedly lead by the French. Against the planned 380 sorties a day the Europeans could barely manage 100. However when the US sounds this kind of warning, idiots like Michelle Bachmann accuse the President of "surrendering leadership to the French".

Those in India who accuse the US of warmongering are probably half-right. Remember that if not for US forces in the Sea of Japan and the South China Sea, China would pretty much run that part of the world and seriously threaten stability. Better that the world's sole superpower be a democracy with a free press, great institutions and an ethos that draws people in, than an opaque, Confucio-Communist dictatorship.

Choose.

Venkat.. said...

Thats so nice of u, actualy i removed since it seemed out of topic.

Ramesh said...

@Ravi - Oh yes, if there has to be a world policeman, then better it is the US. But if the world wants a policeman, it must pay for it and create a body like the UN for it. Why should the American taxpayer pay to keep the Serb from tearing apart a Bosnian Muslim ?

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