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Eastern Europe, Ex-USSR Led in Defense Cuts

  • Robert Lyle

Prague, June 4 (RFE/RL) -- The countries of Eastern and Central Europe and the former Soviet Union have been leading the world in a decline of military spending, say three economists at the International Monetary Fund (IMF). And these countries, say the economists, have saved more than 125,000-million dollars over the last five years, and trimmed their defense outlays by nearly five percentage points of GDP (Gross Domestic Product).

In an article in advance of a study to be released by the IMF late this month, the economists say a global decline in military spending, which began in 1985, accelerated in the 1990s. By the end of 1995, defense outlays had dropped to a low of 2.4 percent of the world's GDP. They say their study of the latest data shows that the decline in military spending has been widespread, both geographically and by level of development. But they say the transition economies - the countries of Central and Eastern Europe and the former Soviet Union - "registered the most dramatic decline in military expenditures."

From 1990 to 1995, the economists say, the 15 nations of the former USSR cut their spending on defense to 3.1 percent of GDP, a drop of 5.3 percentage points of GDP. That created a savings of 120,600-million dollars.

In the countries of East and Central Europe, the economists say, the cut has been far less dramatic - a savings of 4,500-million dollars over the five years, with a drop of 1.7 percentage points of their economies being spent on defense. However, they point out, the largest drop occured between 1990 and 1993, when military outlays among these nations fell to 2.8 percent of GDP and that since then, the figure has gradually worked back up to 3 percent of GDP. That is still 1.7 percent less of their economies being spend on defense compared to 1990. The three economists - Sanjeev Gupta, Jerald Schiff and Benedict Clements - are experts in the IMF's Fiscal Affairs Department and have been studying global military spending for several years. They say that for the world as a whole, the savings from these military cuts is staggering. "If military expenditures as a share of GDP had been maintained at 1990 levels, spending in 1995 would have been some 345,000-million dollars higher." Even worse, if the ratio of military spending to the overall global economy had continued at its 1985 level, defense spending in 1995 would have been 720,000- million dollars higher than it was.

The economists say this implies a "growing global resource savings - or peace dividend." While the linkage between military spending and other government outlays remains complex and difficult to observe directly, they say, the evidence is that countries which made the sharpest cuts in military spending used the money, in part, to finance social expenditures and, in part, returned it to the private sector.

If that in fact is what most did, they say, it is a potential boost to private investment. If the savings was used for deficit reduction - cutting government spending and reducing debt - then the money is being used for public investment.

The few countries in the world which did not cut military spending over the period, or even raised it - about 25, mostly in Africa and Asia - tended to increase non-military spending as well, raising fiscal deficits while cutting capital spending. That suggests, the economists say, "that military spending may crowd out both private and public investment."

The global savings from the cut in military outlays is not likely to continue to grow, however, the economists suggest. A minimum level of spending for national defense is likely to remain necessary for the foreseeable future. That is especially true for the nations of the ex-Soviet Union, East and Central Europe. They say "this makes it all the more imperative that the savings from cuts already made be used efficiently and equitably."