Although large parts of the world have become less violent and military conflicts seem to be ancient history in many developed countries, military “hard” power is still one of the – if not the – most important determinants of power projection and foreign policy enforcement. However, as we are shifting towards a multipolar military world order, the traditional military status quo of the past decades is about to change.

Our observations

• Since World War II, there have been no major wars between great powers of the Cold War, the U.S. and the Soviet Union (except for some proxy wars such as the Vietnam and Soviet-Afghan War). Since the collapse of the Soviet Union in 1991, there has even been no military conflict between major states (except for the U.S. invasion in Iraq in 2003).
• The U.S. is by far the most powerful military power, deriving its military strength largely from its nuclear, naval and aircraft capabilities. Although trailing the U.S. by a wide margin, Russia, China and the U.S. are considered the three dominant military forces. However, Russia’s military spending has declined significantly, falling by almost 20% last year, while China’s, India’s and Turkey’s military spending has increased most rapidly of major countries in the past decade. Saudi Arabia, the third largest military spender in 2017, allocates 10.3% of its GDP on military, making the country the largest spender by far in relative terms, but its military is not as well-equipped as these other countries’ militaries.
• Military spending by NATO members declined consistently since the fall of the Soviet Union in 1991. Currently, the only seven of the 29 NATO members that are spending more than the required 2% of their GDP are the U.S. (3.1%), Greece (2.5%), France (2.3%), Turkey (2.2%), Estonia (2.1%), Poland (2.0%) and Romania (2.0%), compared to just two countries in 1991 (Canada and Luxembourg).
• U.S. military spending will increase by 14.8% this year to $700 billion, while China will increase military spending by 8.1% this year.
• Nick Bostrom argues in his book Superintelligence that the first-mover advantages of general AI are so large that there will be a winner-takes-all-dynamic. Russian president Putin also said that whoever becomes the leader in AI “becomes the ruler of the world”. AI can be used to develop cyber weapons (e.g. Stuxnet) or autonomous warfare machines (e.g. unmanned tanks or drone swarms).

Connecting the dots

Most developed and emerging markets now live in the “Long Peace era”, with few or no military conflicts. Since World War II, the Western hemisphere has even enjoyed a period without military conflict, (partly) because of the preponderance of American military dominance, a kind of Pax Americana. However, international power dynamics might change in the coming years.Using the Stockholm International Peace Research Institute Military Expenditure Database, we see that after 13 consecutive years of decreases from 1999 to 2011 and relatively unchanged spending from 2012 to 2016, global military spending increased by 2.68% to $1.739 trillion in current US$ in 2017, or 2.2% of global GDP. However, when looking at real US$ terms, military spending has barely increased since the 1990s, and military spending as a percentage of real GDP is almost unchanged, reflecting a military status quo. But the makeup of global military spending has changed drastically, as military expenditures dropped by almost 40% in Europe since the fall of the Berlin Wall, and by 10% in the U.S. in the past decade (although rising 2.1% in 2017 and still accounting for over a third of global military spending). In the past decade, other regional powers are edging U.S. military hegemony, notable examples being China and India who increased their military spending by 110% and 45% respectively. However, China is still spending just over than a third and India only a tenth of U.S. military spending. As such, we see that the balance of military power is clearly shifting from the West towards the East, although very gradually.However, this fundamental shift will reshuffle international power relations. As the percentage of GDP spent on military has remained relatively stable for India and China (a standard deviation of 0.2 and 0.1 percentage points at 2.6% and 2.0% of GDP in the past two decades respectively), the shifting center of economic gravity to the Asia Pacific region will in turn undermine the U.S. military hegemony that created the global military status quo. This fact in itself might be a driver of further military spending, as there might nog be a causal relationship between GDP growth and military spending, but there is significant Granger causality (i.e. time-variant correlations) from GDP growth to military spending. And indeed, during the period of the “Long Peace” between 1991 and 2007 we find that military spending as a share of GDP has significantly declined in most places of the world, and significantly increased when U.S. hegemony was pressured before (during the Cold War) and recently (by China’s rise). Hence, shifting towards an economic multipolar world might imply that we will see an increase in military confrontations between countries, hence more military conflicts and spending. We are already seeing an increasingly hostile environment where Chinese and U.S. interests conflict (e.g. South China Sea or Taiwan) and that military spending in these countries is again accelerating. Likewise, conflicts in the Middle East makes this region to have seven of the top 10 countries with the highest military burden in 2017, and Saudi Arabia’s war in Yemen has made its military expenditures explode.Another driver of this non-linear relationship is that increased military spending occurs when countries not only use their military capacity to project power and control, but also to protect foreign investments. With India and China rising as regional or even global powers, they increasingly deploy active foreign investment policies, hence more military spending is required to protect these assets and establishing areas that live under a Pax Sinica or Pax Indiana. Furthermore, a new generation of accelerating military weapons might be developed that render such large first-mover advantages that countries will be “forced” to invest in these technologies, such as artificial intelligence, robotics or even 5G and quantum computers (to enable future “smart warfare”).

Implications

• Exponential military technologies might become the new military deterrent weapons after nuclear weapons. Following Thomas Schelling’s Arms and Influence (1966), the next technological revolution might makes foreign policy strategies less driven by military actions but increasingly by non-violent coercion and persuasion (i.e. sharp power).
• With the ongoing digitization of our living worlds, government and public services, digital warfare might become more relevant. Furthermore, it allows smaller and less powerful countries to “leapfrog” in their military strength, as relatively little infrastructure and investments are needed for establishing a powerful digital force (e.g. North Korea). However, shadow power strategies, as we have written before, might not be sufficient for protecting and maintaining long-term foreign investment and expansion strategies. In this way, traditional hard power arguably will remain the most important form of power projection and enforcement of rising (regional) hegemons.
• Countries with unique capabilities that allow them to better project power and enforce their foreign policy ambitions given military power should outperform in a multipolar world order, as it gives them more space to leverage these “power gaps”. Examples might be small states (e.g. the Netherlands), or countries that are dominant in certain historico-cultural regions (e.g. India or Russia).