A Rationally Optimistic Solution for the State and Defense Budgets

Richard N. Swett, FAIA (Ambassador to Denmark, 1998-2001)

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Let’s set the plate by reviewing the facts. The US has only 4% of the world’s population but produces 25% of world GDP – about $15 of $60 trillion last year. While we bemoan our economic doldrums, obviously this is an extraordinary achievement which we should nurture.

The US engine of growth has stimulated global growth of historic consequence. Compared to when Thomas Jefferson was president, the global population is 9 times larger, lives 3 times longer and is 25 times richer.

Global violence has declined dramatically on a per capita basis, making our time the most peaceful in human history. The US possesses half the strategic military weapons on the globe and has troops or an interest in over 100 of the 200 nations listed at the U.N.

These facts about economics and violence may be counter-intuitive but they are nonetheless true.  As Daniel Patrick Moynihan used to say, everybody is entitled to her own opinion but not her own facts. I have no interest in arguing the facts. They are stipulated. Those who disagree with them need to look in the facts further before making conclusions.

We live in a globally inter-dependent political economy where our 4% has been historically important in driving world progress not just the progress of the West and certainly not just our own country. And as we can see from the debt crisis, talk about protectionism or isolationism is sheer nonsense – it’s totally irrelevant to the facts.

So there’s no question the US needs a State and Defense budget. The question we need to be asking is how much we must spend if we  do so effectively. State is easier to address than Defense in that regard, so let me start there.

Foreign aid provides a few drops of the rainfall the US produces to stimulate global progress which is inter-dependent with our own progress. More of that rain comes from private foreign direct investment, multi-lateral loans and investments, and immigrant-American remittances than comes from foreign aid. Philanthropy and foundations (NGOs) also provide significant aid overseas.

In fact the multiplicity of fund sources, agendas and development models often renders foreign aid useless or counter-productive for the donor. William Easterly, who directed World Bank projects for a decade, opines that the $2.4 trillion in aid since World War II has had almost no effect on global poverty. And it might come as a surprise to Americans who oppose immigration to know that Hispanic-Americans, for example, send many times the dollars to their families “back home” than US foreign aid sends to the Latin American nations they come from.

To channel foreign aid so it produces results, State can put its funds only where an integrated sustainable development is underway. That means three Ps are integrated in what I call an Enterprise Solution:

  • P1 is a wealth-creation investment that involves the local population in ownership and project management not just labor.
  • P2 is an energy generation and distribution capability that undergirds P1 and sustainable economic development in the locale.
  • P3 involves a whole range of community developments including building solar communities, private enterprises, housing, commercial shops, health and education services, and so on.

The 3P development integration attracts additional Foreign Direct Investment, multilateral aid, philanthropy, NGOs as well as the entrepreneurs in the locale. It creates GDP that the locals own and not just the foreigners.

As for the Pentagon, if the Super-Committee fails to provide a budget solution, the Defense budget will be slashed across the board, crippling US Defense posture according to the military chiefs. Cutting budgets across the board is nonsensical in any organization and in Defense it is beyond that, it is irresponsible.

The Pentagon conducts bottom-up reviews, which is a good process, but today it needs a top-down mission statement more than anything else. The winding down or gearing up of actual and potential wars in the Middle East are a big part of this equation, it seems to me.

In addition, there are approximately 70 nations where US military are stationed for a mission and thus exposed to terrorism or violence. As I noted at the beginning, our military presence is a consequence of the facts we live with today and which can kill us tomorrow.

Once the military missions are known, budgeting can be rationalized. If possible, the Defense budget should reflect the values of the Enterprise Solution for the nation where it is operating. This was and is a huge problem in Iraq and Afghanistan, where the military operations went fine but then no 3P development program integrated with State (and all the other sources) took over. That is why those wars stagnated in my view. The mission is not over when the enemy is militarily defeated. That’s when the development mission starts.

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