How Smart is Smart Defense? A Review of NATO’s Smart Defense Proposal

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IntroductionSince 2008, the world has experienced a severe economic crisis, one that has led to many austerity measures, including deep in defense spending in many countries. As Secretary-General Anders Fogh Rasmussen has argued, maintaining a capable and effective Alliance in this era of financial crisis presents a real and pressing challenge for NATO.1 In response to these challenges, at the Munich Security Conference in February 2011 Rasmussen launched a proposal for Defense. This proposal aims to examine how NATO can help nations to build greater security with fewer It emphasizes the need to better by prioritizing, specializing, and seeking multinational solutions.2This article will examine and analyze the proposal for Smart Defense with a view to assessing its value in helping surmount the fiscal challenges it faces. The first section will provide a brief overview of the current fiscal environment within member states, including key member states' current and planned defense spending and how these will impact burden sharing within NATO. The next section will briefly describe the Secretary-General's Smart Defense proposal, and will explore each pillar of the concept. The third section will examine the key challenges and strengths of the proposal. Finally, conclusions will be drawn about the ability of the Smart Defense proposal to help overcome the current fiscal challenges.NATO Burden Sharing and the Fiscal EnvironmentBurden sharing within occurs through a variety of direct and indirect contributions to the costs of the Alliance.3 The main way member states contribute to the Alliance is through the participation of their national armed forces in NATO, including in operations, and in efforts to ensure that national forces are interoperable with other members.4 At the Prague Summit in 2002, member states made a commitment to spend 2 percent of their GDP on defense in order to ensure that each member state was able to maintain a capable and effective defense force that was interoperable with other forces.5Constrained fiscal environments within member states have a significant impact on NATO, as this may lead member states to reduce their defense budgets and contributions to NATO. Presently, there are two key challenges for stemming from the current fiscal environment: declining defense budgets in many states, which will likely lead to capability shortfalls; and the increasing gap between European and U.S. contributions to resources. Each trend is discussed below and is followed by a review of the likely impacts on NATO.Declining Defense BudgetsWhile declining defense budgets have been a trend for some time now in Europe, the financial crisis in 2008 accelerated this trend. In 2011, for example, eighteen member states spent less on defense than in 20 10.6 Indeed, in the last two years, Europe's defense spending has gone down by roughly USD 45 billion, which is around the size of Germany's entire annual defense budget.7 The United States also faces huge spending with a USD 487 billion reduction to the US Defense budget over the next ten years.8 In addition, in 201 1 only three of NATO's twenty-eight members met the target of dedicating 2 percent of GDP to defense spending.9 As former U.S. Secretary of Defense Robert Gates recognized, the fiscal, political, and demographic realities make [achieving the 2 percent of GDP target] unlikely to happen anytime soon. 10 Added to this are the concerns that these cuts have been carried out with little or no coordination with other member states of the Alliance.11An Increasing Gap between U.S. and European ContributionsSince the beginning of NATO, there have been concerns about the equality of the Alliance's burden-sharing arrangements, particularly between contributions made by the United States and those from its European allies. …