NATO: An Economic Case for American Withdrawal

May 13, 2003 • Commentary

From a military perspective, the case for American withdrawal from NATO seems to have already been made. A number of commentators, including George Will and the British historian Paul Johnson, have pointed out that NATO is an anachronism rendered helpless by distrust and infighting. But there are also compelling economic grounds for American withdrawal. Simply, the American security guarantee perpetuates the continuation of the European welfare states and thus encourages economic sclerosis across the European continent. Thus NATO is not only useless, it’s harmful.

The collapse of the Soviet Union saw western military budgets shrink. According to the Center for Strategic and International Studies, between 1990 and 1999 the defense expenditure of all European NATO members decreased from 3 percent to 2.3 percent of GNP. American military spending fell from 5.3 percent to 3.1 percent of GNP over the same period.

But spending as a proportion of GNP does not give an accurate picture of the underlying spending disparities. During the 1990s, the U.S. economy grew at a much quicker rate than the major economies of the European Union. Between 1992 and 2001, for example, the German economy grew by 1.45 percent per annum, on average, and the French economy by 1.88 percent. At the same time, the United States experienced an average growth of 3.46 percent per annum. As a result, despite the “decline” in military spending, U.S. military spending actually went up from $277 billion in 1995 to $283 billion in 1999. By contrast, the defense spending of all European members of NATO put together declined from $183 to $174 billion during that same period.

The terrorist threat provided the impetus for an increase in American military spending to $380 billion in 2003. President Bush used the 2002 NATO summit to urge the Europeans to increase their military spending from the current 150 billion euros per annum. Only a month later, the German government actually slashed its spending by ordering fewer military transport aircraft and air‐​to‐​air missiles than originally planned. The technological gap between the United States and Europe in reconnaissance, communication, high‐​tech‐​weapons and mobility is thus bound to widen. According to Richard Perle, former chairman of the Defense Policy Board, the European militaries “atrophied to the point of virtual irrelevance.”

Yet there is no use complaining about European complacency. The Europeans behave in a rational manner. As long as the United States guarantees their security through NATO, the Europeans lack the incentive to invest more in their defense. Instead, they can use the money they save to preserve their inefficient welfare states. Even so, the budgets of some European states are stretched to the breaking point.

According to the European Union Commission, the European economy is expected to grow only 1 percent in 2003. Because of a possible contraction of the European economy in the first quarter of 2003, that estimate may have to be adjusted downward. As a result of economic slowdown, a number of European countries, including Germany and France, have now breached the European “growth and stability pact” that limits their annual budget deficits to 3 percent of GDP.

French President Jacques Chirac’s insinuation that France’s economic problems may have been caused by the American war against Saddam Hussein is a preposterous attempt to shift blame. In fact, France and Germany are beset by deep structural problems, including rigid labor markets, restrictive regulations, hurtful environment and safety standards, high taxes and large unfunded pension liabilities.

But neither Germany’s Schroeder nor France’s Chirac exhibit the leadership qualities necessary to pull their countries out of economic malaise. The two built their careers on populism. They do not possess the reformist zeal exhibited by Margaret Thatcher in Great Britain in the 1980s. They are thus relegated to tinkering with the margins of their welfare states. The longer those trivial changes continue, the further will the European states fall behind the United States.

An American withdrawal from the European security guarantee would galvanize serious economic reform. Instead of remaining defenseless, the European states would find it necessary to raise more revenue by cutting the size of the welfare state and increasing their economic growth. A vibrant Europe with a strong economy and a credible military force could then contribute to making the world more prosperous — and safe. Whether that will happen is up to Washington.

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