Will the world pay for a slimmed down US military?



Barack Obama claimed on Thursday to have seen the future of combat. He announced a new strategic vision for the US military. America will shed its "outdated Cold War-era systems", he said, and create a "leaner" fighting force that is "agile, flexible and ready for the full range of contingencies and threats".

There is just one problem: Mr Obama didn't have a choice.

He made these remarks shortly after signing the Congressional Budget Control Act, which requires large government spending cuts. Like the US defence budget, the US military is about to become smaller out of necessity, more than because of Mr Obama's vision of the future.

The US Congress has mandated military spending be cut by anywhere between $500 billion (Dh1.8tr) and $1 trillion over the next decade. In concrete terms that means roughly 100,000 fewer soldiers and around 200 fewer aircraft.

Reeling from a decade of spending on two wars and a painful recession, Americans no doubt are eager to see a peace dividend.

There is probably ample room for spending cuts. The two wars, in Afghanistan and Iraq, by most counts, cost US taxpayers around $1 trillion. The Pentagon, by its own admission, was paying around $400 a gallon to put fuel into armoured vehicles in Afghanistan.

Mr Obama's speech, however, rang of political doublespeak. It was especially striking to hear him quote the former US President Dwight Eisenhower's farewell speech to the nation.

Against the backdrop of the Cold War and fears of the spread of communism and consequent calls for greater military spending to counter the threat, he said: "Each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs."

This is the same President Eisenhower who unveiled the so-called "New Look" national security policy, which drastically cut the manpower of the US military and concentrated on building a massive air force designed to drop atomic weapons. He too was convinced that this was the future of warfare.

The New Look policy was also widely blamed for creating the so-called "hollow military" of the 1970s, a termed coined soon after the then President Jimmy Carter was considering bombing Iran during the hostage crisis. He reportedly asked how many B-52 bombers the Air Force could muster, and was told: four.

The reason was that while the US had grown a massive air force, it lacked mechanics, support aircraft, supplies and fuel to get them airborne. Today, the "hollow military" or "hollow force" has sprung up in almost every piece of punditry condemning Mr Obama's planned revamp of the US military, with some justification.

The US has a habit of drawing down after a conflict only to be left unprepared for the next one. It is a cycle that has happened with unerring regularity since the First World War, and started even after the country's War for Independence when it reduced its army size to 80 people.

Every reduction in military might has been followed by a conflict that left the US struggling to muster the number of troops it needed to effectively engage.

The most recent examples in Iraq and Afghanistan are no different. The US resorted to calling up thousands of inactive military personnel, some of whom had not trained for years, and National Guardsmen.

Despite what his critics may argue, Mr Obama is unlikely to create another hollow military.

A reduced number of soldiers overall can be expected to create a better equipped, more capable and - most importantly - cheaper fighting force.

But his conclusion that this will make America better equipped to wage war does not necessarily follow. The world has yet to see a conflict where the size of your army does not matter.

It should be noted, however, that the overall size of militaries across the globe has steadily reduced since the end of the Cold War. But this period of relative calm is in large part due to the military might of the United States.

Mr Obama would have America, as well as its allies and enemies across the globe, believe that the US can spend half a trillion dollars less and yet field a stronger military.

If wars could be won with drones and superior technology alone, he would be right. Unfortunately, neither history nor common sense has convinced anyone of this.

Rather than perpetuate the crimes of his predecessors Mr Obama should have encouraged a serious debate on the future of international security, from Asia Pacific to the Middle East. He tacitly admits that the US cannot continue to field a military the likes of which we saw in the mid-20th century, but then claims that this is no worry.

America is no longer capable or willing to be the sole guarantor of world peace. Increasing international security cooperation has rightly been the watchword of the current US administration since Mr Obama's inauguration.

America will not be able to prevent the next major war forever. At the same time, the world will not cease to produce Adolf Hitlers, Kaiser Wilhelms, Kim Il-sungs, or even those who will be seen as comparatively minor villains in future history books, such as Osama bin Laden.

Mr Obama said last week: the US "can't afford to repeat the mistakes that have been made in the past".

He would be wise to remember the words of the 20th century philosopher, George Santayana. "Only the dead have seen the end of war."

Sean McLain is a freelance journalist based in New Delhi and a former feature writer for The National

The story in numbers

18

This is how many recognised sects Lebanon is home to, along with about four million citizens

450,000

More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps

1.5 million

There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m

73

The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association

18,000

The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme

77,400

The number of people believed to be affected by the current nationality law, according to the 2009 UN study

4,926

This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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