Examine critically the proposition that ‘small’ nation states have exploited ‘large’ nation states in the North Atlantic Treaty Organisation. What considerations are relevant when predicting the extent to which a nation state might be willing to act collectively?
The North Atlantic Treaty Organisation (NATO) was formed in 1949 in lieu of the Soviet Union threat. It was founded on the basis of collective security and defence, and as outlined in Article 5 “The Parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all” (NATO, 2018). With defence being the cornerstone of NATO, and also considered a public good; the debate arises that the ‘small’ nations exploit the ‘large’ in NATO. A public good can be described as a good that is non-excludable, and non-rivalrous, and as such NATO’s collective defence is perceived to hold both these characteristics as discussed later. Consequently, leading to a ‘free rider’ problem. This essay will explore to what extent such ‘small’ nation states do exploit ‘large’ ones, with state size primarily defined by national income. Whilst it will also discuss the factors that states consider when acting collectively, and why some are understood to contribute more than others.
It can first be seen that the ‘small’ nations do exploit the ‘large’ nations within NATO in relation to collective defence. The burden of defence seemingly falls heavily on the ‘large’ states, in particular the USA, with ‘small’ nations contributing very little. Zeckhauser and Olson carried out a number of tests in 1966 with the aim of proving such a disproportionate burden, and to find a correlation between the size of a state’s national income and the percentage of this income spent of defence. For the year 1964, it was found that a “significant positive correlation” existed (1966, p.275), thus proving the exploitation the ‘small’ states carry out. Looking at more recent years, we see the same trend. Even after the NATO summit in 2014, where a guideline of GDP-Military expenditure was set at 2%, many small nations are still far behind. In 2018, the USA’s estimated military expenditure is at 3.5% of GDP, whilst 15 predominantly small countries are below the 1.5% mark, with Luxembourg for example spending only 0.55%. This is further evidence of the disproportionate burden witnessed within NATO. Defence can be considered a normal good as found by Murdoch and Sandler in almost all reports (1984, p.94), and therefore the wealthier states are expected to contribute significantly more than the less wealthy, and an unequal burden is predictable.
Small nations are able to exploit the large, due to the nature of collective defence. Collective defence is a pure public good, and so they can reap the benefits with little cost – and this is why ‘small states’ will not fulfil their pareto-optimal allocation in defence (1984, p.84). Defence can be considered non-excludable due to deterrent weapons, such as a nuclear bomb, and all members of an alliance are protected by such weapons, even if they do not possess them. Thus, small states have no need to increase their budgets, when they can simply rely on the budgets of others. In addition, it also non-rivalrous, as the protection of one state through deterrent weapons, does not limit the protection of another. This is an example of the free rider problem, as for the ‘small’ states, once they become a part of the alliance, they have access to all the security benefits with minimal costs. Furthermore, “the smaller an ally is…, the more it free rides” (Plumper and Neumayer, 2014, p.249), as its military contributions would be small enough, that any budget cuts would have no noticeable effect on the alliances defensive measures. From this we can see that ‘small’ nations do exploit the ‘large’, and why they are able to do so.
However, ‘small’ nations do not necessarily exploit the ‘large’ in NATO. In a study carried out by Sandler and Forbes, they discovered that after 1967 (1980, p.438), the correlation between national income and military expenditure began to weaken quickly and lose significance. Implying that the ‘small’ states do not exploit the ‘large’. When looking at the infrastructure element of NATO, there is in fact a negative correlation between national income, and percentage of that income dedicated to infrastructure. This was researched by Zeckhauser and Olson in another study, in which they discovered a significant correlation present (1966, p.277). This is reinforced by a NATO press release, showing in 2016 only 1.22% of the US budget was towards Infrastructure, in comparison to Latvia’s 12.83% (NATO, 2018). In terms of infrastructure, there is instead a disproportionate burden on the ‘small’ nations. Adding to this, the military expenditure of nations is often related to the benefits associated with the expenditure. If ‘small’ states are exploiting the large, it would be expected that there is a large difference between benefits and expenditure. Although, this is not the case as Sandler and Murdoch discovered. In the years 1990-1999, there is evidence of a match between defence benefits, and defence costs. For example, in 1999 Luxembourg made up 0.03 of the defence burden, and only 0.05 of the average benefit share (2000, p.315). Consequently, ‘small’ nations do not exploit the ‘large’ as they get back what they give.
Furthermore, there is an argument that defence is not necessarily a public good, and if it is not a public good, then ‘small’ states cannot exploit the ‘large’ states, as their benefits are not guaranteed. The extent to which the ‘small’ states can exploit is dependent upon the weaponry of the ‘large’ state. As Plumper states, “only ‘deterrent’ weapons provide pure public goods, while the other types are excludable.” (2014, p.251). The USA has begun to develop more ‘protective’ weaponry, as opposed to ‘deterrent’ and with this (Sandler and Forbes, 1980), defence becomes excludable. In addition, “after NATO abandoned the strategy of mutually assured destruction and implemented the strategy of flexible response in 1967” (2014, p.51), this excludability increased dramatically. Small nations are at the mercy of the large for protection, and given Article 5 has never truly been tested – it is unclear whether some ‘large’ states would defend a ‘small’ state if it were attacked. The non-excludable element of collective defence is thus questionable, and can’t be proven until Article 5 really is breached. The defensive benefits that the ‘small’ states are perceived to have from NATO are dependent upon the interests of the ‘large’, and thus the extent of exploitation is limited.
There are a number of considerations that predict the extent to which a state will act more collectively. The primary factor is national interest. States ultimately only care about themselves and achieving their goals, and thus if acting more collectively facilitates their success, then that is what will be done. Differences in interests are an important reason for why some act less collectively and this is a strong argument for why the USA contributes so heavily, and continues to accept their disproportionate burden. As Plumper and Neumayer state, in comparing the USA with Denmark, Denmark “has no geostrategic interest beyond the Northern Atlantic”. Whilst, “the USA is a superpower with troops stationed in 150 countries ,…and that after the Second World War was involved in militarized conflicts on all continents with the exception of Australia and Antarctica” (2014, p.248). Alas, it is no surprise that the USA is seen to act more collectively and spends a much a larger percentage of national income on its military. However, a larger military budget does not necessarily mean a state is acting more collectively. Military actions of states have predominantly private benefits. For example, the UKs increased defence budget in 1982 for the Falkland War, reaped benefits for only the UK, and none of the NATO members. States will provide defence to achieve their private benefits, as ultimately these benefits cannot be derived from anyone else.
Considerations behind a state’s willingness to act collectively, can also be seen to be dependent on the states geographical location. NATO countries with long exposed borders or that share a land border with a Warsaw Pact country and are closer to Moscow, are seen to contribute more. This is proven by Plumper and Neumayer, who discovered a negative correlation between the degree of free riding and sharing a land border with a Warsaw Pact country (2014, p.249). We can also see by looking at NATO data, that 7 of the top 10 military contributors, are states within close proximity to Russia, such as Estonia and Latvia (NATO, 2018). These states have a constant threat with Russia, and so the collective security NATO offers is essential to them. As such, they are very willing and have to act collectively, with the hope of guaranteeing support if needed. On the other hand, countries such as Spain experience no such threat – being bordered by NATO members, and being a considerable distance away from Moscow. Therefore, there is no need to act more collectively, and this explains the small 0.93% of national income that Spain puts towards military expenditure (NATO,2018).
A final factor a state will consider when acting collectively, is if their contribution will have much of an impact. Given the military expenditure of the smaller states makes up a tiny fraction of the overall NATO defence expenditure, any increase or decrease in the expenses of ‘small’ states will have little to no effect on the overall scheme of things. As such, it is easy for these states to not act collectively. If, for example, Montenegro halved their military expenses, the USA could increase their spending by a mere 0.0062% to compensate for this. Consequently, in using game theory, it would be better for ‘small’ nations to not act collectively. In contributing more, they change nothing, yet there is an opportunity cost of military expenditure, so in contributing less – a sum of money that would have no effect on NATO could be used for investing in other important areas, such as education or healthcare. However, in absolute terms, any increase in expenditure will make the alliance more powerful than before, and so they should act collectively. This is not an option for the ‘large’ states, as any expenditure cuts would be noticeable, and thus these states need to continue to act collectively, as they are the backbone of NATO.
In conclusion, I believe that the ‘small’ states do not exploit the ‘large’ within NATO. Although, Zeckhauser and Olson discovered a positive correlation between national income and percentage of that income spent on defence, this was carried out in 1964, and Sandler and Forbes later discovered that this correlation became insignificant after 1967. It can be said that states exploited this in the past, however in the modern day this is no longer the case. I believe that the benefits received are the primary reason for a state to act collectively, and so if these benefits are judged to be equal to the burden – as was shown previously, it can be said that there is no exploitation. Obviously, there are some countries that still free ride, but these are not only ‘small’ states, with Italy and Spain showing strong evidence of exploitation – spending less than 1.05% of GDP in 2014 (NATO, 2018). With the introduction of defence expenditure guidelines of 2% in 2014, we should see a convergence of these budgets, as the majority of NATO members strive towards achieving this target. Tackling any remaining doubts about a ‘free rider’ problem and ultimately creating a stronger alliance.
Word count – 1963
Reference List:
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