Smart Defence: the economic angle

Smart Defence:

The economic angle

In July 2009, as the economic crisis

was unfolding around the world,

we interviewed NATO's Senior

Defence Economist, Adrian Kendry,

to see how he thought the crisis

would affect defence and security.

Three years later we revisit

some of the issues and places

of that original report

and ask Mr. Kendry:

What was the impact

of this economic crisis

on the advent of Smart Defence?

Adrian, we're back here

after three years.

This is where we discussed

the financial crisis in 2009.

A lot's happened

and changed since then,

but the Smart Defence policy

that the Secretary General

is trying to put forward,

is one of those new aspects.

It's claimed that it's not

directly linked to the economy.

How does that work?

I think those people who believe

that there is a difference

between the economic challenges

and the security challenges,

are missing a fundamental point.

They are missing

the fact that economic security

in the years that have followed

since we were last discussing this,

has become a major threat.

The resources available for defence

spending is becoming scarce.

So, the fact that we’ve wasted

millions of euros in recent years

and the way that we have

conducted our defence spending,

that’s got to all come to a stop.

- This isn't just about saving money?

No, I think that fundamentally,

the time has come for us

to recognise that the austerity,

the financial austerity,

makes it absolutely essential

that we have got to spend more...

spend wisely, spend more prudently,

make sure we eliminate waste.

But, we have also got to take

the opportunity to draw together

as a NATO Alliance and, indeed,

within the whole context

of European defence,

if we are to meet the challenges

which are emerging.

I mean, for example, we see recently

that Asian defence spending

is projected in this year

to go above that

of NATO European countries.

This is an attempt also

to work more closely with industry.

We have a still far too unconsolidated

and a far too fragmented

defence industrial base,

which means that we’re

operating very inefficiently.

But it's really critical for

our capabilities and our technologies

that we come together within Europe

and forge much stronger

cooperation between NATO,

the European Union,

the European Defence Agency

and NATO's

Allied Command Transformation.

So Adrian, three years ago

we were filming here outside

what was a thriving Belgian bank,

but that's gone

and it's been replaced by somewhere

that sells healthy snacks.

Is that an allegory for what's been

going on in the last three years?

Well, in the last three years,

we have seen tremendous changes

taking place within the European

financial system and economy.

Some financial institutions

have indeed suffered greatly.

Retail sales are a symbol of what's

happening to the European economy

and at this stage, things are

very fragile. They remain very weak

and it's probable

that for the next couple of years,

that they will stay in the doldrums.

In fact, the European economy

has not really recovered,

in terms of its total output,

from what it had before 2008.

Although this Smart Defence

looks largely at Europe,

the US has also had its own review.

The link in the transatlantic economy,

this is the most vital economic

relationship still in the world

and it's fundamental that it should

remain healthy and strong.

At this time,

the United States is also vulnerable

to further financial

instabilities in Europe.

If a number of the countries

should experience further difficulties

and we see

more banking losses, more bailouts,

then this could be difficult for the US.

If Europe gets a bad cold now,

then this will certainly cause

the United States to start sneezing.

So Adrian,

this is more a reflection of 2012.

We're in front

of a low budget supermarket

and more and more people

are shopping at this kind of place,

because of the economic

constraints of the time.

How does this impact

on the environment

in which Smart Defence

is being set up?

Everybody is affected

by the economic downturn.

People have to be more cautious,

and spend themselves more smartly.

And Smart Defence is

all about making certain

that we use the budgets

which are available.

And, in my view,

these budgets are likely to fall

in the coming five to eight years.

It is going to become more difficult

because governments

will have to meet

other priorities

in their budgetary spending:

health, education, social security,

pensions, this kind of thing.

So, if we're going to spend

more wisely on defence,

then we have to be sure that we have

a proper basis for cooperating.

I think, this time it's going to work

because I don't think we have

been in this situation before.

Not since the beginning of NATO

and during the Cold War period.

What is the biggest obstacle

to make it work?

The biggest danger

if we get it wrong, in my view,

is that it will lead to fragmentation,

to division across the Atlantic.

We may see our most important

member state, the United States,

pursuing increasingly

its own approach, its own agenda,

and maybe developing

bilateral security agreements

with other member states

across the world.

It could then seriously undermine

the effectiveness

and the cohesion of NATO.