On Luxon In The NATO Pressure Cooker

New Zealand is one of six countries invited as onlookers to this week’s NATO summit in Washington. As such, PM Christopher Luxon will be made aware of the pressure on the 32 NATO member states (a) to increase their Defence spending (b) to become less militarily dependent on the US and (c) to treat NATO as having a global purpose, beyond its customary regional focus on Europe. According to NATO’s globalising rhetoric, a similar list of enemies - Russia, Iran, North Korea, and China – pose threats in the Indo-Pacific, as well as to Ukraine and its NATO neighbours.

There will be receptive ears for those messages. After 14 years of Tory mis-rule, Britain has a crumbling public health system and a threadbare welfare safety net. Yet already, the new Labour government of Keir Starmer is under pressure to lift Britain’s spending on Defence to 2.5% of GDP. No doubt, Luxon will have noticed that many other NATO members are on track to spend (at least) 2% of their GDP on their military:

A record 23 NATO countries are expected to hit the alliance minimum target of 2% this year, up from 11 in 2023, meaning that European NATO allies, as a whole, will collectively spend 2% of their combined GDP – worth £300bn – on defence for the first time.

New Zealand First and the ACT party are both keen on raising our Defence spending to that magical “2% of GDP” number. Despite the usual flag-waving rhetoric from Winston Peters, the political reality is (temporarily at least) heading in the opposite direction.

For example: this year’s Budget allocated just over $4.949 billion for Vote Defence. As Reuters recently reported, the coalition government’s May Budget delivered a 6.6% reduction on the amount that those alleged peaceniks in the Labour government had allocated to Defence in Budget 2023:

According to previously unreported data, provided to Reuters by the defence minister [Judith Collins] the proposed defence budget will fall to NZ$4.95 billion ($3.03 billion) for the year that ends in June 2025. This year's defence budget was NZ$5.3 billion.

So far, you would have to say that Peters has been achieving far less in Defence spending under National, than he did back when he was governing in coalition with Labour. This year, austerity has been imposed in order to deliver tax cuts. Next year, will austerity be intensified in order to fund Defence?

Counting the Cost

How much would spending 2% of GDP on Defence actually cost us? Since New Zealand’s GDP is currently worth $NZ410 billion, that May Budget figure of $4.949 million amounts to only 1.21% of that target figure. Kicking Defence spending up to a 2% ratio of a GDP worth $410 billion would amount to $8.2 billion. Meaning: given the climate of austerity for everything else, if David Seymour and Peters can get National to commit to devoting 2% of our GDP to Defence, this will entail a massive shift in taxpayer priorities.

Even under more conservative estimates of the size of the gap between current spending and the 2% targeted amount, this would still involve shifting at least $2-3 billion more into Defence spending in each and every year. For perspective: the amount involved would probably exceed the $2.4 billion contingency fund set aside in this year’s Budget to meet all of our national or regional emergencies.

Yet in all likelihood, it wouldn’t end there. Here’s a relatively recent guesstimate of the cost of re-equipping Defence with its current shopping list of self-conceived “needs:”

The increase in capital expenditure across the three services will be not less than $5 billion. However, this expense will be spread over a decade, so the increase in capital is $500 million per year. The 2022 budget continued defence expenditure at 1.5 percent of GDP, made up of approximately $3 billion in operating costs and $1.5 billion in capital costs.

These are ridiculously large numbers, even before you include the borrowing costs. We could well be talking about an extra $5-6 billion in capital expenditure alone in a context where – judging by recent past performance – the subsequent operational costs have been running at double the capital costs.

Try not to freak out, but taxpayers could be looking down the barrel of a circa $9 billion commitment in extra Defence spending over the next decade. That’s before we add in (a) any extra costs generated by joining the second pillar of AUKUS and (b) the cost of replacing those breakdown-prone prime ministerial 757s and (c) the extra cost of fixing the inadequate runways and sub-standard accommodation at Ohakea for the crews operating those new P-8 Poseidon anti-submarine aircraft.

For a useful comparison: the alleged “ blowout” in cost for the ferries project that was deemed unacceptable, and that drove Finance Minister Nicole Willis to cancel the project, came to only $1.47 billion. ( i.e. little more than half what we’ve spent so far on the Poseidons.) When Luxon returns from Washington babbling about the dire state of the world, and the alleged need to make “tough decisions” about Defence, this is the scale of spending he’s talking about. The opportunity cost to New Zealanders in the coming years, if extra billions of dollars are ploughed into Defence budgets, is heart-breaking.

“Defending” the Pacific

Over the past four years of the Biden administration, the US has knitted together an extensive array of overlapping aid, trade and security alliances in the Pacific. All of these pacts have shared the common aim of isolating China diplomatically, and blocking Chinese “expansionism” into a region where the US has grown accustomed to being the only military superpower.

What steps are being taken, one wonders, to future-proof New Zealand’s current role in the Pacific as a US /Australian proxy, against the prospect of a Trump victory in November ?

For his part, Biden seems to regard himself as being solely responsible and personally essential to the West’s current policy settings in the Indo-Pacific, and in his view, these policy settings would not survive without him. As Biden bragged rather pathetically in his recent interview with George Stephanopoulos:

...Who's going to be able to hold NATO together like me? Who's going to be able to be in a position where I'm able to keep the Pacific Basin in a position where we're at least check-mating China now? Who's going to -- who's going to do that? Who has that reach? Who has -- who knows all these people? .....

And moreover:

I'm the guy that shut Putin down. No one thought it could happen. I'm the guy that put together a South Pacific initiative with AUKUS. I'm the guy that got 50 nations out -- not only in Europe, outside of Europe as well, to help Ukraine. I'm the guy that got the Japanese to expand their budget...

Unfortunately, if a re-elected Trump does take the US back into an isolationist stance and away from engagement with the Asia-Pacific, this will – paradoxically – put more pressure on other Western powers to view their policies in the Pacific through a military lens. AUKUS is likely to become the sole remaining interest that Trump has in the Pacific. That being so, it is worth keeping in mind that AUKUS is a pact for projecting military power right up to China’s borders. It is not a vehicle for defending us against any theoretical threat of invasion here, or anywhere else in the Pacific.

Australians are learning that lesson the hard way. Hundreds of billions of dollars are to be spent on AUKUS, and yet none of it will go into helping to defend the homeland. Apparently, the northern part of Australia’s mainland will have to fend for itself:

Military bases in Australia’s north would be vulnerable to long-range missiles without new air defence systems...Former chief of air force Geoff Brown told the [Australian] newspaper the bases need “integrated air and missile defences, there’s no two ways about it … the trouble is that with no new money, the [nuclear-powered] submarines take up 38% of the budget”. It comes after Senate estimates recently heard none of the money in the Australian Defence Force’s $330 billion investment plan had been earmarked for defence missiles or launch systems....

Similarly, New Zealanders need to be conscious of how little of any extra AUKUS spend – or from boosting our Defence spend to 2% of GDP – would actually help to shore up this country‘s ability to repel an enemy offensive. Instead, AUKUS and similar manoeuvres with our traditional allies are all about developing new attack capabilities that are meant to deter China, by threatening it with overwhelming force. The vast bulk of those expensive force projection weapon systems are designed for delivery on China’s own doorstep.

Here's the drawback with that stance: using the threat of overwhelming force to deter Chinese expansionism carries an inbuilt risk of back-firing. If A threatens B and then invests heavily in the weapons to carry out its threats, then B is likely to feel very, very paranoid - and liable to treat every gesture as an existential threat. That’s the problem. When you prepare so comprehensively for war, you raise the risk of starting one by accident.

Footnote One: If we want to use all of this planned array of new warships, planes and military personnel for humanitarian relief work in the context of climate change... then it would be far cheaper and more efficient to purchase ships and planes purpose-built for those tasks, and train the people in uniform explicitly for that role. On recent evidence though, the NZDF is reluctant to carry out humanitarian work – it's not what many of them signed up for - and is not very good at it.

Footnote Two: As mentioned, Christopher Luxon will come back from NATO waffling on about what a dangerous world it is out there - and supposedly that will be why we will need to spend more on the weaponry that’s guaranteed to make the world an even more dangerous place.

Footnote Three: We like to think we largely keep to ourselves, except when we’re extending a helping hand in the Pacific during their times of need. In reality, New Zealand is extensively engaged in a network of pacts and alliances across the Pacific region. The Guardian recently published a useful list of the entwined alliances we have with our Pacific neighbours. New Zealand figures prominently in these networks that are underpinning the growing militarisation of the Pacific:

As competition for influence in the Pacific region intensifies, analysis by the Guardian has mapped a vast network of security, policing and defence agreements between the island countries and foreign partners – leading to concerns about militarisation of the region.

The Guardian examined agreements and partnerships covering security, defence and policing with the 10 largest Pacific countries by population. Australia remains the dominant partner in the region – accounting for more than half the deals identified – followed by New Zealand, the US and China.

Biden diagnosis

Clearly, Joe Biden’s condition has declined sharply from what it was four years ago. What it might look like after another four years is material for a horror movie. Throughout his political career, Biden has been never short on self-esteem. He is treating the calls for him to resign as a personal slight to his abilities, and to his presidential legacy.

IMO, this assessment of Biden’s evident medical/cognitive symptoms seems pretty convincing.

Footnote: The Stephanopoulos interview was supposed to reassure everyone that Biden was fit and able. Biden was asked whether he realised during the debate how poorly things were going. To my mind, his reply epitomises the problems he now has in holding to a consistent train of thought:

INTERVIEWER: Did you know how badly it was going?

BIDEN: Yes, look, the whole way, I prepared -- nobody's fault, mine, nobody's fault but mine. I prepared, what I usually would do, sitting down, as I did come back with foreign leaders or the National Security Council, for explicit detail. And I realized about partway through that all -- I think I quoted -- The New York Times had me down 10 points before the debate, nine now or whatever the hell it is. The fact of the matter is that what I looked at is that he also lied 28 times. I couldn't -- I mean, the way the debate ran, not -- my fault, no one else's fault, no one else's fault.

Unfortunately, there seems no way of convincing this proud and cranky old man to come in off the porch.

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