Military spending

WHY RUSSIAN MILITARY EXPENDITURE IS MUCH HIGHER THAN COMMONLY UNDERSTOOD (AS IS CHINA’S)

Gresham’s Law states that bad money drives out good money, but anyone who has spent time around Washington, D.C., knows that this law can safely be applied to information too — bad information tends to drive out good information. Such is the case with America’s assessments of other countries’ military and economic power. 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.

Policymakers are barraged by a daily stream of think tank reports, academic writing, and media stories competing for their perceptions. For example, by cherry-picking a few gross measures, including military expenditure, a recent RAND report caricatured Russia as a weakling rogue state. Major newspapers generate erroneous headlines: many ran stories asserting that in 2017 Russian defense spending declined by a fifth . In our experience, both in Washington and London, decision-makers have little time to investigate or read and tend to believe many of the headlines they come across.