By 2016, Russia plans to increase its military budget by 44%. It is not the only one. All the emerging powers of the century are taking the same steps. Paris and Berlin have to make similar strides.
The following is a case for MBA students: The multinational Goliath, on a heckled, but glorious road throughout the twentieth century, collapses in 1990, for mainly three reasons: inadequate governance, ill-conceived external growth operations, causing a fiasco; and financial mismanagement. For two long decades, Goliath was humiliated by the world leader of its market. The latter, an American, took advantage of the difficulties of its main competitor to increase its lead in all areas: technology; capturing new global markets; and finances. Goliath put up with the humiliation and rebuilds its forces. Its parent company profits from buoyant economic conditions in order to refinance its subsidiary.
Today, during winter of 2014, Goliath is in good shape. Third largest player on the market, it has a 68 billion dollar operational budget, which by 2016, should increase to 98 billion dollars, a steep increase of 44% in three years. In the wake of this double-digit growth, we find the number two on the market, a Chinese, but also all the major power players of the twenty-first century: the Middle East, India, Brazil, Japan, large African nations.
In this emerging market, we highlight two anomalies. First, the American world leader curiously decides to invest less internationally, notably in Europe and the Middle East, and focus on its domestic market and its growing and dangerous rivalry with the Chinese. Second, during their squabbling, the former European champions have become disinterested in this market which made them their fortune between the sixteenth and the twentieth century. In your opinion, what will Goliath and the other emerging leaders do in this growing market? Nature abhors a vacuum, and so does the economy: when such a profitable and strategic market is abandoned by those who dominated it, new players, motivated by good or bad (eg, to avenge past humiliations) will naturally fill the gap.
The bad news is that the market that we are talking about is different from others. It is vital in the proper sense of the term. Human societies that found it useful or comfortable to abandon, all paid the heavy price for their decision a few years later. France found itself in this position multiple times during the twentieth century. The market that we are talking about is defence and the Goliath in this equation is the Russian Federation’s Ministry of Defence.
At the beginning of February, the American firm, IHS published the results of its annual global defence budget report (IHS Jane’s Aerospace Defence & Security). The results were received relatively quietly in France. Yet, the report contains numerous alarming details in light of the tragic events in Ukraine, which we predict will continue for some time. The first detail: for the first time since the 2009 financial crisis, the global arms market will grow to 1.547 billion dollars in 2014. This is in spite of the US’ disinvestment. The US continues unsurprisingly to dominate this global market with a budget of 582 billion dollars.
Behind China (139 billion), Mr. Putin has three strong ambitions for Russia, that is third in the ranking, having already passed the United Kingdom (59 billion), Japan (57 billion), and France (53 billion) in what must be called objectively a new global arms race.
This ranking and the events in Ukraine should accelerate, first in Paris and Berlin, an awareness and decisions to be made in the field of European defence. The European countries are in a world growing increasingly dangerous and armed each day. If each country goes about its own little or major diplomatic initiatives, one to Africa (France) another to the east (Germany), and the last according to the American diplomatic agenda (Great Britain), they will find humiliation of various forms from powers that are quickly remilitarizing at the end of the road. And who was able to measure the speed at which our material and human resources were limited in recent European interventions (Afghanistan, Libya, Mali, Central African Republic)? And the reality of American withdrawal?
Today, French-German action must be taken in the field of European defence. The combination of the French and German defence budgets (about 100 billion dollars) and a program of joint procurement have become an urgent necessity. The events in Ukraine, but also the new German government’s clear signal that it will finally play a political and diplomatic role worthy of its economic power are two rare occasions that the French administration must take advantage of.
Not doing so, leaving Russia head-to-head with Germany, would be a pathetic political agenda and a rare display of irresponsibility.