Maharashtra Board Class 11 Defense Studies Chapter 4 Defence Economics PDF Download

Defence Economics

In the Chapter on Key Concepts of Defence Studies, you have learnt that 'Economics' is an important dimension of 'National Security and National Power'. The need for a nation to be prepared for defence and its economic cost was well recognised from ancient times. In the Anushashan Parva of the Mahabharata, Bhishma instructs Yudhishtir about the duties of a King. He explains to him that a king should always protect his people. During the Mauryan rule, Kautilya considers war as a last option. But he also advises that when war is inevitable, preparation and maintenance of army is essential for the defence of the nation.

Adam Smith, the founder of economics as a discipline in the social sciences, was the first economist to theorise about the economics of war, in his major work, An Inquiry into the Nature and Causes of the Wealth of Nations (1776). He also accepted that the first duty of the sovereign is to protect the society and for that a military force is necessary. But how does the country meet the expenses of defence? He argued that since defence was common good for all the citizens the expenses must be met by everyone. He thus considered defence to be 'public good'. It meant that it is for the benefit of all the people of the country. But everyone cannot pay the same amount to the government. The poor would not be able to afford to pay the same as the rich. Therefore, he suggested the policy of 'payment according to ability'.

Today defence economics is an inescapable part of a nation's economic management, it is a useful way of looking at military problems, many of which can essentially be seen as economic problems in the efficient allocation and use of resources. We can consider the economic problems of defence at three levels: (i) the quantity of national resources available now and in the future; (ii) the proportion of these resources allocated to national security purposes; and (iii) the efficiency with which the resources so allocated are used.

What Is Defence Economics?

Defence Economics is a sub set in the field of national economic management, concerned with the economic effects of military expenditure and the management of military budgets during peace and war. To further amplify the scope, defence economics extends over the overall economy involving defence-related issues, which includes the level of defence spending; the impact of defence expenditure on domestic economy; the defence industry sector; the relation of defence spending to technological changes and the implications of defence spending for international peace and stability.

Teacher's Note

Defence spending helps keep our country safe and strong. Like how your parents spend money to keep you safe and healthy, India spends money on defence to protect all its citizens.

Exam Trick

Remember: Defence Economics = How a country spends money to stay safe. Just like you budget your pocket money, countries budget their defence money.

Points to Remember

Defence Economics helps a nation manage its money for security and protection.
Adam Smith said defence is a public good for everyone.
Every person should pay for defence based on how much money they have.
Defence spending helps with three important things: resources, allocation, and efficiency.

Determinants Of Defence Expenditure

National security is highly valued by most citizens, judging by the sacrifices that many nations make when territorial integrity, or fundamental interests, are threatened. Nations tend to swing between the extremes in terms of expenditure. They spend more on defence when military pressure is actually exerted on the country, and less when peace prevails. Perceptions are important in determining the demands for expenditure. Some of the determinants for expenditure are:

1. Security Scenario: Security issues include confrontations with neighbours, due to territorial and sovereignty disputes, competition over natural resources, managing bordering ethnic peoples and instability of a neighbour. India has faced and continues to face such confrontations with China and Pakistan. After the 1962 war with China, there was a manifold jump in India's defence expenditure.

2. International Obligations: India is committed to treaty obligations, including cooperative efforts with the United Nations (UN) and other coalitions and countries, including peacekeeping operations, humanitarian assistance, and disaster relief. India has such obligations with the UN, Bhutan, Nepal, Myanmar and Maldives which requires considerable expenditure from time to time.

3. New Threats: Impact of transnational issues such as terrorism, drug-trafficking, and environmental issues have an impact on defence spending. India faces such threats from across the border from most of her neighbours. This has led to increased deployment of border security resources, leading to rise in expenditure.

4. Maritime Issues: This includes protection of Exclusive Economic Zones (EEZs), marine resources, and fisheries. India raised the Coast Guard specifically for this task at considerable cost.

5. Trade: Protection of market access to trade, investment, energy, food, and other vital resources requires finance. India imports eighty percent of her energy needs from oil producing nations by sea, these routes need to be protected. This means that India needs a strong Navy to protect its sea routes.

6. Domestic Concerns: Internal security issues include maintaining domestic law and order, counter-insurgency, etc. India is faced with the Naxal problem as also Pakistan sponsored terrorism. The Central Reserve Police has been strengthened and expanded for this task.

Teacher's Note

India spends money on defence because of many reasons like wars, helping other countries, and protecting trade routes. For example, India protects its sea routes from Africa to get oil.

Exam Trick

Remember the 6 reasons for defence spending: Security, International Obligations, New Threats, Maritime, Trade, and Domestic. Use the word SINTMD to remember them.

Points to Remember

Countries spend more on defence when they face danger from neighbours.
India must keep peace with China and Pakistan to reduce spending.
India has to help other countries through the United Nations.
Terrorism and drug-trafficking cause more defence spending.
India needs a strong Navy because it imports 80% of oil by sea.

Defence And Development

One of the issues in the discussion of defence economics, is in context to third world and developing nations. These nations face the challenges of economic development and poverty alleviation. The question is if such a nation spends on defence, will it be at the cost of development? Or is there a case, for both defence and development going hand in hand keeping in mind the overall interests of the nation.

In the 1940s and 1950s, defence expenditure was not looked at positively. It was thought that it took money away from development. In the past development was understood simply as economic and industrial growth. Today things have changed. Today development is looked at in a holistic manner. It involves several aspects. We talk of social, political, economic development, modernisation, and environmentally friendly approaches. The word used is sustainable growth and development.

The Complementary Nature Of Defence And Development

Today we see defence and development to be complementary. Some examples are given below:

1. Adequate expenditure on national security helps create a peaceful and secure atmosphere, this is conducive for industrial and economic growth. This creates more jobs and income which leads to increase of the Gross Domestic Product (GDP). A good rate of increase in GDP, attracts more investment in the nation's economy. Thailand consistently leads its neighbours Cambodia, Laos and Myanmar in development because of the peace and tranquillity it enjoys as compared to the neighbours, this in turn makes it the number one tourist destination of the region.

2. Defence spending includes creation of infrastructure such as roads, bridges, railway lines and airports. This helps development of backward areas. Ladakh and Sikkim are areas which saw rapid development due to construction of defence oriented strategic roads.

3. Development of defence industrial sector gives a boost to civilian industries, by bringing in new technology and setting up of ancillary industries. For example, requirement of Titanium alloys to manufacture fighter jet engines and artillery guns has resulted in a plant to convert indigenous ore to Titanium metal and alloys which are also used in civilian industry. This has resulted in import substitution and creation of more jobs.

4. As defence forces recruit large number of youths from rural areas and train them in various skills, it widens the mental and attitudinal horizons of the recruits, they pass on these skills and disciplined behavioural norms to their village.

Teacher's Note

Defence spending is good for development too. When India builds roads for the army in Ladakh, those roads also help people live better lives and start businesses.

Exam Trick

Remember: Defence and Development go together. Defence = Safety. Development = Growth. Both make a country strong and happy like a healthy, educated child.

Points to Remember

Peace helps business and industry to grow faster and better.
Defence spending builds roads, airports, and bridges in remote areas.
Defence technology helps create new civilian industries and jobs.
Soldiers trained by defence forces teach skills to their villages.
Thailand is rich because it has peace, unlike its neighbours.

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