NATO: The Greatest Bargain America Ever Got

July 12, 2018 Topic: Security Region: Europe Tags: NATOTrumpRussiaGermany2% of GDPNATO Summit

NATO: The Greatest Bargain America Ever Got

NATO keeps European powers in check and saves Washington from having to balance against them. What's better than that?

Everything Trump says about how our allies should spend more is right.

Everything he says about the North Atlantic Treaty Organization being a bad bargain is wrong.

What Trump wanted to achieve at the NATO summit—to get more defense spending out of the allies—is right. But if NATO didn't exist, Americans would all be wishing for the opposite—for the Europeans to be spending less on defense. This is because the United States would have to be hedge against their militaries again, the way Washington did before it got them into NATO.

NATO spares America that.

In the pre-NATO era, defending against Europe cost America trillions of dollars, in today's dollars. It came to $4.5 trillion in the two world wars alone. That $4.5 trillion was taken out of an American economy that was only a fraction of today's size. If we employ the measure that economists often use—the amount that would be the same percentage portion of GDP today— the spending America did defending against the European powers that are now U.S. NATO allies would come to $40 trillion today. That is the same as $600 a billion a year for each of the 70 years that NATO has existed.

 

Instead, Washingon currently pays $600 billion a year for America’s entire global defense—at home, in Europe, in the Mideast, in Asia, and everywhere else.

That means Americans are actually saving several hundred billions a year. The savings can only be explained by the existence of NATO and its European subsystem, the EU. Together they have kept the peace among the European countries and kept them in a stable alliance with Washington.

Pre-NATO, in addition to the $40 trillion-equivalent America had to spend in war expenses, the United States also had peacetime expenses for securing itself against the European powers. Washington always had to plan its defense against the British navy. As recently pointed out in TNI, in 1920 the United States was contemplating war against Britain and Japan. War plans envisioned invasion of Canada, bringing long-term pacification problems. Japan would have probably taken America’s Pacific islands. In 1922, Washington counted it as a great success that it was able to head off that war and get Britain to agree to limit its navy to the same size as America’s, as long as the French and Japanese and Italians all kept theirs at a still lower level.

Today, thanks to NATO and to its sister alliances in the Pacific, America doesn’t count European or Japanese forces as potential threats to itself at all.  Instead, Washington is able to count the forces of these countries as a pure add-on to its own.

In the 1920s, there was no NATO and as a result Western countries were stuck with defending against each other. They weren't able to combine their forces and policies against the big new threat of Soviet Communism. This was why, after creating NATO, America tried to keep European forces down, not up. Today, if it weren't for NATO, Washington would still be calling on them to reduce their military forces, no matter how much European countries needed them against other, more logical threats, that range from Islamist terrorism to China. It was only when Washington organized NATO in 1949, and added Germany and Japan and Australasia into the alliance system a few years later, that the United States really stopped needing to hedge against these countries and started cheering on their militaries as additions to America’s own.

This add-on is no small thing. It comes to about $320 billion a year. That’s the amount that all of NATO, minus the United States, spends on defense.

That's a huge gift America gets from NATO. And Washington gets it for less than a penny on the dollar.

Averaged out over the decades, the United States get at least $620 billion a year out of NATO. Part of this is over $300 billion a year saved on spending that Washington otherwise would still need to do for defense against Europeans, and a $320 billion add-on to America’s spending through allied military spending.

The United States pays NATO $594 million a year because the NATO budget is $2.7 billion and the U.S. share is 22 percent . But America gets back over 1000 times as much—$620 billion.

What a rate of return! Washington gets about $1043 for every $1 it puts into NATO. Even the greatest deal-maker has to envy a deal like that.

“But, but” (I can hear some people chafing at the bit), “doesn’t America spend a truckload on keeping its army in Germany?” No, that truckload is spent on having America’s army in the first place, not on keeping it in Germany. Keeping some U.S. troops in Germany actually saves America money. The same goes for Japan. Washington would save even more money, if it stationed more troops in Germany and Japan. And America really ought to station more forces there. It would be both cheaper and more effective for U.S. security.