Security and Defence Economics. Review of an Essay volume.
Harald Pöcher/Herbert Strunz (Eds.)
Security and Defence Economics
Carolus Magnus University Press, Wilmington, Brussels 2014
Just as the laws of nature, war and conflict are part of human existence. Ever since there is conflict, there are also the military, soldiers and armed forces with all demand structures inherent to their systems. The armed forces have always had to struggle to make do with the scarce resources provided to them for deployment – in times of war as well as in times of peace – or for reorganization during ongoing processes of reform. At the beginning of the 21st century we have to realize that in this respect, nothing has changed. When it comes to the allocation of the public good “defence”, experience has taught us that the specific demand structures caused by allocation are not met according to the fundamental laws of rational economic activity. Furthermore, the establishment of ideal structures of organizations and processes are suspended in favour of special military requirements and demands. The fact that the dictate of rational economic activity seems to be void in the military, and that economy and the military appear to be two irreconcilable opponents has been a particular challenge for scientists about to engage in the topic.
Alexander Breunig, MBA, Captain (res.), University of Applied Sciences Zwickau, Germany
Karl-Heinz Gimmler, Lawyer, Lieutenant Colonel (res.), Koblenz, Germany
Bo Hu, Prof. Dr., University of the Federal Armed Forces Munich, Germany
Friedrich W. Korkisch, Ph. D., Colonel (ret.), Center for Foreign and Defence Policy, Vienna, Austria
Emília Krajňáková, Assoc. Prof., Mgr., CSc., University Trenčín, Slovakia
Armin Leopold, Mag., M. Sc., University of the Federal Armed Forces Munich, Germany
Gyula Mezey, Assoc. Prof. Dr. habil., Corvinus University Budapest, Hungary
György Nógrádi, Prof. Dr. habil., CSc., Corvinus University Budapest, Hungary
József Padányi, Prof. Dr., DSc., Brigadier General, National University of Public Service Budapest, Hungary
Stefan Pickl, Prof. Dr., University of the Federal Armed Forces Munich, Germany
Harald Pöcher, Dr., Dr. habil., Brigadier General, Federal Ministry of Defence and Sports, Vienna, Austria
Andrea Riemer, Hon. Assoc. Prof. Dr., Dr. habil., Ph. D., Scientist, Germany (http://www.andrea-riemer.de)
Tamara Scheer, Dr., University Vienna, Austria
Jürgen Schnell, Prof. Dr., Lieutenant General (ret.), University of the Federal Armed Forces Munich, Germany
Matthias Sebera, Dr., Lieutenant Colonel, Federal Ministry of Defence and Sports, Vienna, Austria
Herbert Strunz, Prof. Dr., Ph. D., University of Applied Sciences Zwickau, Germany; University Trenčín, Slovakia
Sergej Vojtovič, Assoc. Prof., DrSc., University Trenčín, Slovakia
The Big Picture
Security and Defence Economics – An Unknown Discipline
The International Order – The Strategic Playground in the 21st Century
Friedrich W. Korkisch
21st Century – Foreign Policy as Usual?
To Equip Armed Forces
Military Budgeting in Europe and the “Euro Army”
Security Policy, Constitutional Law and Scientific Insights
Harald Pöcher / György Nógrádi
The European Defence Technology and Industrial Base
To Manage Armed Forces
Bo Hu / Armin Leopold / Stefan Pickl
IT-Based Complex Decision Support with System Dynamics – Strategic Quantitative and Qualitative Analysis
Herbert Strunz / Sergej Vojtovič / Emília Krajňáková
Management in the Armed Forces
Quality and Management Control in the Armed Forces
Practical Recommendations for the Management of Resources during Organizational Downsizing of Armed Forces
To Operate Armed Forces
Herbert Strunz / Alexander Breunig
Civil Military Cooperation – The Ideal Interrelation between Armed Forces and Civilian Stakeholders
Risk Analysis – A Proposal for a Common European Methodology
Forms of Violence – The Example of Habsburg Occupied Serbia during World War I
Just as the laws of nature, war and conflict are part of human existence. Ever since there is conflict, there are also the military, soldiers and armed forces with all demand structures inherent to their systems. The armed forces have always had to struggle to make do with the scarce resources provided to them for deployment – in times of war as well as in times of peace – or for reorganisation during ongoing processes of reform. At the beginning of the 21st century we have to realize that in this respect, nothing has changed. When it comes to the allocation of the public good “defence”, experience has taught us that the specific demand structures caused by allocation are not met according to the fundamental laws of rational economic activity. Furthermore, the establishment of ideal structures of organisations and processes are suspended in favour of special military requirements and demands. The fact that the dictate of rational economic activity seems to be void in the military, and that economy and the military appear to be two irreconcilable opponents has been a particular challenge for scientists about to engage in the topic.
An analysis of the correlation between the military and economy gains a higher degree of complexity and comprehensiveness if it is extended by politics. In Western, democratic states politics is a priority, which means that politics sets the security political framework within which the military is to perform with the respective resources allocated to it. This, of course, leads to tensions since high ranking military staff often judge security political necessities rather differently from policy makers. Tensions between politics and the military have become more and more intense over the past decades, especially in Europe, and already take their toll on the effective compliance of military duties by the armed forces due to political negligence - e.g. the lack of allocation of financial resources or the vague formulation of strategic objectives for the armed forces. The result is bewilderness and a tendency to resignation among the military staff. Even though the resolution of such tensions between politics and the military does not belong to the duties of economists, military economists may have an impact on the respective discussions, based on their expertise, and issue a warning about the possible adverse effects neglecting strategic objectives may have on the armed forces.
In the Anglophone world the established term for scientific research concerning the military and the armed forces as scientific objects is “Economics of Defense” or “Economics of Defence”; the German speaking areas refer to it as “Militärökonomie”. Those who have been facing questions of defence economics will know how fragile the basis of the sector is, and to how few economists the topic has appealed, especially in the German speaking world.
The German Bundeswehr has been engaged in economic thinking right from the beginning, even though the discussion processes have been kept alive by scientists outside the system. In 1973 Germany made a big step towards the implementation of economics in the military and set a milestone for professionalization of its armed forces with the establishment of two universities of the Bundeswehr in the cities of Hamburg and Munich. Since then, prospective officers gain comprehensive knowledge in economics during their master’s programmes. Scientific research in defence economics has also been fostered. However, since a number of notable defence economists have taken off to their well deserved retirement, it has become rather quiet around the German research landscape of defence economics. Unfortunately, the ideas of defence economics of the German Democratic Republic, which were – apart from some platitudes on class struggle – characterized by a well organized classification, got lost in the times after the fall of the Berlin wall. In Austria there are hardly any publications on the topic. The apparent lack of interest in questions of defence economics is also reflected in the lack of respective research facilities. As a consequence, defence economics is still quite unknown to the Austrian and German public, and the defence economics of the German speaking world is accordingly insignificant in a global context. However, the lack of awareness regarding publications of German speaking defence economists is mainly due to the fact that publications in German are not widespread and only read and understood by a handful of experts. German speaking economists writing about defence economics therefore publish for a very small minority.
The complete opposite happened in the Anglophone world in regards to the development of “Economics of Defence”, especially in the USA and the UK. Due to two victories in two World Wars, the military has gained a good reputation and high regard among the people, which also positively reflects in research. In both countries, the military is an acknowledged scientific object of fundamental and applied research. The numerous publications on the topic are proof to that. Without going into detail, special attention is to be paid to the early research of Hitch and McKean as well as the comprehensive research work of Hartley. Even winners of the Nobel Prize in Economic Sciences e.g. Samuelson and Stiglitz, have engaged in scientific questions in close connection with the military, and have published their findings in their technical and educational publications.
Nowadays, a little more than 20 years after the end of the Cold War, the demand of economic knowledge in the military has not diminished, to the contrary; it has increased, also in complexity due to the new security political challenges which all armed forces have to face these days. Decision makers all over the world, also politicians of the German speaking areas, do good in including research on defence economics into their decision making processes.
This publication is to be seen as a first vigorous sign of life from German speaking security researchers and defence economists, in order to revive an almost forgotten discipline and to advertise it far beyond the borders of the German speaking world. The contributions deliberately mark a wide range of the topic in order to underline the diversity of research areas within defence economics. In the spirit of a united Europe, researchers from Hungary and the Slovak Republic were invited to contribute to this publication with their expertise.
Defence Economics is obviously a comprehensive field of research with many different aspects. It is especially complex in a global context, which does not make it easier to find appropriate solutions. The management of armed forces is very difficult and is not limited to the activities of military forces. It has very high requirements, demanding careful strategic, tactical and operative planning as well as political and legal and – last but not least – financial parameters.
This publication is divided into different sections, although the individual topics are closely connected and influencing one another. However, it does have a central theme. At first, social, political and especially global security political realities and parameters are explained. Secondly, the significance of security and armament political questions within the respective research context is closely examined. And finally the manifold management problems and administrative challenges linked to questions of defence economics is in the focus.
Recent unimagined threats and consequent scenarios have made certain demands of knowledge and needs of security obvious, which have, if nothing else, given the connection between security policy and economy a special importance. This particular topic includes a multitude of aspects, which are not necessarily directly linked to one another. From the scientific point of view, it is a topic which has been strongly neglected. Harald Pöcher tries to contribute to closing this gap. Just as the public sector as a whole, the military sector is currently also subject to considerable economic restrictions. “Getting out the most of the budget” is therefore, quite understandably, the omnipresent slogan. Considerations of Defence Economics could be of value and quite helpful in this respect. However, the discipline is practically orphaned, and there are hardly any recent and comprehensive publications on the topic. Hence, the following topics are of significance: External security and national defence in connection with economics; governance as a new paradigm; public management in the military; reform related work; possibilities of civil military cooperation; economic implications of security political decisions.
„9/11” marks a watershed event in the current international order as well as a psychological and perceptive turning point. It is the obvious landmark of events, which were characterized by numerous signals already in the mid-1990s. None of those events happened overnight or unexpectedly. It is common knowledge that neither social science theories nor societal practice provided theories or methods, which enabled them to offer early warning and early response capabilities with regard to fundamental systemic changes. The underlying approach to the current international order of Andrea Riemer is based on the analysis of “big patterns in current events”, the meta-order, its actors, their rules of behavior and engagement, different power-layers and the role of change. Finally, it supports arguments about the usefulness of early warning and early response. This approach is based on intertwining knowledge from the realms of international relations, current history, historical sociology, and political sciences.
The topicality of tensions between the dominant hemispheres of global politics, especially the USA and Europe, is obvious. Fred Korkisch tries to analyse these tensions from different perspectives. His main focus and concern is the synthesis between a structure of theoretical considerations and practical approaches to the topic.
In economic wars, national economies are the targets which are attacked by non-military measures in order to reduce the country’s capacity to act in a global context. The different weapons of economic warfare are examined by Harald Pöcher, from a historical as well as modern perspective. In this context, the armed forces may play a not insignificant role. Target oriented planning and training of experts is therefore an important issue in national armies.
The current situation and perspectives of the EU member states’ budgets are directly linked to the respective military budgets as part of the national budgets. Recently, the EUs expenses on defence have diminished without any security political reasons. Therefore, the provocative wording “defence by cash position” is not quite unfitting. Latest numbers do not give any indication of a quick increase of defence expenditure. Thus, military budgets will for the time being, continue to be dominated by the rule of economy. Jürgen Schnell discusses the respective possible and necessary impulses, which are also to be seen as opportunities in order to implement economy and increase efficiency sustainably and according to the needs of the EU as a whole.
The connection between – of course ostensibly national – constitutional law and security policy is obvious. At least, this is what the long history of war has showed us. Today, however, these legal implications are to be put into perspective, as Karl-Heinz Gimmler shows. This is especially true against the background of an aspired Common European Defence Policy, which is already being implemented. It also highly affects international deployment, organised by the European Union in its quality of a federation of states. However, against the background of different national laws and regulations, the individual decisions regarding armament and, above all, deployment have to be made in an atmosphere of considerable permanent and manifold tension.
Armament policy is a very important part of global politics. However, there are no comprehensive analyses about this significant topic. The examination of the international context and the topical European dimension of the manifold possibilities of armament political activities is the main concern of Harald Pöcher and György Nógrádi in their contribution. In this context, the challenges for Austria are analysed as well. The need and possibilities of action – from the political as well as the military point of view – are discussed, in order to identify and recognize the significance of armament policy, and to include it into the policy making process. Due to its history and a well directed investment strategy in the past, Europe disposes of a capable and diversified defence technology and an industrial basis for the production of military goods. However, in the past decade investments have diminished the same way defence budgets have. Now, Europe has reached a turning point, if it does not want to fall far behind the USA and the upcoming powers in Asia. A new strategy for the European defence technology and industrial base is an urgent necessity. The main consideration behind this strategy is the thought that the armament industry, like any other industry, needs competition and investment. It will be shown which future perspectives a reform the European armament market may disclose.
“Complex Decision Support” is in the heart of military thinking. The contribution of Bo Hu, Armin Leopold and Stefan Pickl focuses on a special methodology which intends to combine quantitative and qualitative decision analysis within a modern IT-based analytic approach. The combination of so called soft- and hard-OR techniques is characteristic for an innovative strategic planning process. “System Dynamics” is presented as a main tool, applicable to the areas of logistics, load forecasting, supply chain management, defense acquisition etc., which demonstrate the advantage of the distinguished approach. Strategic, tactical and operational activities could be modeled, simulated and analyzed by means of an advanced system dynamics approach.
Strategy, planning and the best possible use of scare resources are classical priorities on the military sector. Additionally, the principles of modern business management are gaining more and more importance and can certainly be applied to defence administration as well as to operational and troop management – taking into account their unique specifications. In this context, as Herbert Strunz and Sergej Vojtovič show, future oriented thinking, adaptability, flexibility, improvability, and the best possible coordination and performance are standing in the foreground. The instruments of performance and effect oriented governance can – if applied correctly and professionally – contribute substantially and in the best way to find solutions for the manifold problems of military management.
Against the background of increasingly restrictive budget policies quality management and controlling gain importance within the armed forces as tools for the increase of economic efficiency and the optimization of liquidity within the framework of budgetary specifications and cost optimization. József Padányi discusses the purpose of quality management, which should provide and constantly guarantee a particular service in the determined or desired quality by continuous optimization of work and implementation processes.
Human resources management has an influence on nearly all fields of military activity; starting with procedures concerning education, planning and development, to aspects of production and procurement, allocation and attendance up to the disposal of military goods and services, and in particular under deployment conditions. It is aimed at the optimal support of the active troops and allies during general military operation as well as during deployment, and the accomplishment of crises. The high importance of HRM is not only drawn from its vital significance for the armed forces operational readiness, but also from its cost intensity. Especially the latter is a considerable challenge for many armed forces. This is the reason why many of the optimization approaches, outlined and discussed by Matthias Sebera assess there.
Civil-military co-operation is becoming more and more significant and relevant, as Alexander Breunig and Herbert Strunz show in their contribution. Above all, should activities in this context be seen as the development and preservation of strategic alliances between civil and military organisations, which go beyond selective co-operations in case of crisis or deployment. Such cooperation efforts may include a multitude of different areas and establish co-operations between diverse civil entities and military organisations.
The article of Gyula Mezey is about the idea of a common Europe-wide risk mapping methodology and its four phases and activities of a data gathering system. In identifying and mapping different specific risks and then integrating them into a common framework with either a defence or civil protection aim is a focal point in defence planning. But a Geographic Information System in itself is insufficient without an add-on multiple criteria software in order to have a Decision Support System in the end. However, in this article only a methodology developed for threat, vulnerability, and risk mapping is being outlined.
During World war I. the Austro-Hungarian Empire occupied Serbia, Montenegro and Albania as well as parts of Romania, Italy and the Ukraine. This lead to the challenging task of establishing peace in the occupied areas and keep them quiet and in order as well as securing the stationed troops’ livelihood and obtaining resources for other fronts or the rear. All occupations were subject to the course of war and the partly peaceful, partly rebellious behaviour of the civil population. Tamara Scheer’s contribution systematically deals with this historic topic, which has remained practically unchanged in many contexts, and has not lost its topicality from the economic point of view.