Accidental rivals? EU fiscal rules, NATO, and transatlantic burden-sharing
| Author | Jordan M Becker |
| Published date | 01 September 2019 |
| Date | 01 September 2019 |
| DOI | http://doi.org/10.1177/0022343319829690 |
| Subject Matter | Regular Articles |
Accidental rivals? EU fiscal rules, NATO,
and transatlantic burden-sharing
Jordan M Becker
Institute for European Studies, Vrije Universiteit Brussel & US Army
Abstract
Both theorists and practitioners continue to show interest in transatlantic burden-sharing. Resource allocation
choices – both to and within defense budgets – are grand strategic choices, and membership in alliances and security
communities affects how states make those choices. International security and political economy scholarship offers
plausible explanations for transatlantic imbalances in military expenditures. However, NATO allies and EU
member-states have pledged to one another not just to spend more on defense, but to allocate more defense resources
to equipment modernization. Current scholarship does not fully explain the sources of such within-budget choices,
which would help anticipate the likelihood of such pledges succeeding. Building on work by security scholars,
defense and political economists, and scholars of interorganizational relations, I argue that stringent fiscal rules
dampen the kind of defense spending NATO and EU strategists seek. Governments respond to increasingly stringent
fiscal rules by reducing overall defense expenditures, while at the same time shifting existing defense resources to
personnel, and away from equipment and operational expenditures. I find evidence in support of this argument by
using education levels in the st ates in question as instruments for fiscal rules. This phenomenon represents a
significant risk for important transatlantic strategic initiatives, namely NATO’s Wales pledge on defense investment.
Keywords
defense economics, EU, international political economy, international security, interorganizational relations, NATO
Resource allocation is a strategic choice (Norrlof &
Wohlforth, forthcoming; Posen & Ross, 1997), power
over which is foundational to social ordering among
states (Galtung, 1969). Members of the transatlantic
security community (Risse, 2016) influence one
another’s defense spending through both NATO and
the EU, the main institutions of a transatlantic security
complex (Lake, 2009). Both organizations have publicly
enjoined members (NATO, 2014; European Council,
2016) to improve burden-sharing
1
by increasing overall
defense spending, and by devoting additional resources
to capabilities and operational contributions.
How likely is this initiative to succeed? I address this ques-
tion by asking a more specific one: how does the transmission
of supranational fiscal rules
2
into national policy affect
burden-sharing? I find that such rules are associated with
burden-shifting, or seeking to ‘limit contributions’ without
‘wrecking the alliance from which all benefit’ (Thies, 2015: 8).
Scholars (Schelling, 1955; Hoag, 1957; Olson & Zec-
khauser, 1966) have long focused on the collective action
problem such enjoinders seek to address. Recent concerns
that burden-sharing disputes may cause the USA to ‘mod-
erate its commitment’ (Mattis, 2017) to allies has led
scholars (Nye, 2017) to wonder about the enduring via-
bility of consensual liberal hegemony (Ikenberry, 2011).
Yet, no research to date has operationalized burden-
sharing as NATO and the EU have defined it.
3
Nor has
Corresponding author:
jordan.becker21@gmail.com
1
‘The distribution of costs among grou p members in support of
common goals’ (Cimbala & Forster, 2005).
2
‘Impos[ing] a long-lasting constraint on fiscal policy through
numerical limits on budgetary aggregates’ (IMF, 2015).
3
Succinctly the ‘3 C’s’ (Stoltenberg, 2017) of burden-sharing: Cash
(defense spending as a share of GDP), Capabilities (share of defense
spending invested in agreed equipment priorities), and operational
Contributions
Journal of Peace Research
2019, Vol. 56(5) 697–713
ªThe Author(s) 2019
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/0022343319829690
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research on interorganizational politics (Koops, 2017)
and the management of ‘multiple institutional commit-
ments’ (Alter & Meunier, 2006: 4) addressed the effects
of European integration on burden-sharing behavior,
even as national (Hollande, 2015) and EU (Juncker,
2015) leaders have noted that EU fiscal rules may incen-
tivize states to shift defense burdens.
I address these gaps by testing a novel theory: as states
transmit EU fiscal rules into domestic practice, they
increasingly engage in burden-shifting. The transparency
of transatlantic institutions mitigates overt free-riding, or
fully relying on allies to underwrite one’s own security
(Sandler, 1993). Members burden-shift instead.
I operationalize burden-shifting as limiting top-line
defense spending, while also curbing spending on the
capabilities and operational contributions that members
of the transatlantic community prioritize. This approach
captures ‘real’ (Hallams & Schreer, 2012) burden-
sharing more precisely than previous quantitative work,
while avoiding the generalizability challenges plaguing
qualitative research (Bennett, Lepgold & Unger, 1994;
Haesebrouck, 2016). I test my theory using multivariate
models with panel data including new dependent and
independent variables and making use of a two-stage
least squares (2SLS) identification strategy, using educa-
tion levels as an exogenous instrument for the European
Commission’s Fiscal Rules Index (FRI – the official EU
measurement of stringency of national fiscal rules).
This research complements previous defense econom-
ics and conflict research on burden-sharing to help
bridge the quantitative–qualitative gap. While defense
economists (Harris, 1986; Coulomb & Fontanel,
2005; Arvanitidis, Kollias & Messis, 2017; Christie,
forthcoming) have considered relationships between fis-
cal constraints and defense spending, none has addressed
fiscal rules as such. Defense economics and conflict
researchers have not yet used FRI. This absence is sig-
nificant, as FRI is the key metric EU members use to
evaluate fiscal governance.
Additionally, the dataset is the first to include disag-
gregated defense spending data
4
for the entire transatlan-
tic defense community – all NATO allies and EU
member states.
5
Disaggregation addresses concerns
about ‘form of contributions’ (Oma, 2012: 12), which
quantitative analyses (Bove & Cavatorta, 2012; Becker,
2017) have only begun to address. I combine previously
unexplored multilevel fiscal variables, standard defense
economics variables, security, and domestic variables in a
single model, uncovering a contradictory relationship
between EU fiscal rules and transatlantic burden-
sharing.
Substantively, for each standard deviation increase in
FRI, states reduce defense spending by 0.467% of GDP.
This suggests that a one-standard deviation decrease in
the mean FRI would be associated with mean defense
spending in NATO’s European members increasing
from 1.46% of GDP to 1.92% of GDP: just below the
guideline allies agreed at Wales. Even more striking, for
each one-point increase in FRI, states decreased the
equipment share of their budget by six percentage points
and the O&M share of their budget by 4.7 percentage
points. A reversal of this equipment decrease would
mean an extra $13 billion across NATO, which would
enable, for example, the purchase of any combination of
additional 60 Global Hawk unmanned aerial vehicles or
C17 aircraft across the Alliance, enough to meet require-
ments in combat airlift and intelligence, surveillance, and
reconnaissance (NATO, 2018). A reversal of the O&M
decrease would likewise amount to approximately $13
billion, enough to fund about 2.6 years of operations
against the Islamic State.
6
This analysis has five additional implications for
broader debates in conflict research. First, modeling
structural, EU, and national-level variables together
sheds light on dilemmas of collective action and deter-
rence (Weede, 1985) operating at each of those levels.
Second, such a multilevel model of detailed burden-
sharing choices contributes to the debate on the role of
non-security variables in material security choices (Kim-
ball, 2010; Zielinski, Fordham & Schilde, 2017). Third,
disaggregating defense budgets contributes to discussions
on the choice of appropriate burden-sharing indicators
(Hartley & Sandler, 1999). Fourth, including defense
industrial variables in a multilevel model sheds light on
the role of industrial policy in alliance politics (Hartley,
2006). Finally, my findings suggest that institutional
design is likely to affect states’ ability to influence one
another’s behavior (Wallace, 2008) in unexplored
domains.
Operationalizing burden-shifting by disaggregating
defense spending data enables more precise analysis and
bridges gaps between the defense economics and security
4
Into the four components identified by NATO and the EU:
personnel, equipment, ‘other’ (which critically comprises mostly
operations and maintenance – O&M – spending), and infrastructure.
5
Previous studies have done so only for NATO allies.
6
Calculated using ‘Cost of operations, operation inherent resolve’,
2014–17 (https://dod.defense.gov/OIR/Cost/).
698 journal of PEACE RESEARCH 56(5)
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