The economic turmoil – implications for security and defence policy

Army Summit, 3 oktober 2012
Minister of Defence Anne-Grete Strøm-Erichsen

Check against delivery.

Ladies and Gentlemen,

It is a great pleasure for me to address you at this year's Army Summit.

Let me first of all say that it feels great to be back. It is my privilege to return to the post as Minister of Defence just a few months after Parliament's approval of the new Long-Term Plan. Through three successive Plans, we have taken our Armed Forces to a significantly higher level. Today we have capable and flexible Armed Forces. We have an organization that continues to progress toward the full achievement of its stated objectives.

I take up this post knowing that the most difficult part of our transformation effort is behind us. That is also a great privilege. We can look back at the most far-reaching restructuring processes that have ever been accomplished in the public sector. We are in the very front. After more than ten years of hard work, we find ourselves in a situation in which we can make choices not out of necessity but wisdom and choice.

Third and final stage – competency reform

Yet this is only half the truth. The key to a successful transformation is to remain flexible. We must be able to adapt to changing circumstances. And we must never withdraw from the ambition to create a better defence force. Hence, we modernise in order to get the best value for our money.

At this very juncture, I recognize significant challenges ahead.

First, restructuring our armed forces entails more than creating a new and effective structure and the acquisition of new platforms. To complete our work we must invest in highly qualified men and women.

In the absence of a new strategy on recruitment and education, our efforts may be futile. Frankly speaking, we will not be able to capitalise on neither a new structure nor new platforms. Hence, we need to undertake and see through the third and final stage of the transformation of the armed forces - the competency and personnel reform.

The story of the flexible and responsive defence of today is, for me, the tale of a new set of tasks, and thus, new needs for competence. It is also a story about a rapidly changing labour-market in which the Armed Forces are up against strong competition for the right skills and qualities. This requires us to think fundamentally different on how we recruit, invest and maintain a pool of highly qualified personnel.

My predecessor set this train in motion. His goals are now mine. I will seek to remain as ambitious. The Norwegian Armed Forces should aim at becoming the foremost vehicle in the public sector in strategic management and development of competency. Let there be no doubt - this is a strategic priority.

A white paper will be submitted to Parliament early next year. It is my genuine hope that this strategic issue will become a key area of discussion in Parliament and in political circles. In addition, I look forward to working closely with employers' organizations on this topic.

This is a significant challenge we encounter looking inward.

Economic austerity and a new global order

My second observation concerns a major challenge stemming mainly from the outside. This is also my main theme of today.

Let me start with the international context and what we usually refer to as the financial crisis. When I left the Ministry in 2009, we hoped the financial crisis to have reached its peak. The outlook was gloomy and uncertain. We were beginning to understand the severity of the economic situation. Still, the crisis was mainly considered as an acute problem in the domain of the finance sector.

I think no one would disagree that since then things have got worse. The financial crisis has not only sharpened. It has basically become an economic reality to which many nations are struggling to come to terms. Hence, I believe the term "financial crisis", does no longer apply to describe the current state of affairs. Rather, we are witnessing a severe debt crisis with long term effects, particularly in the European economy.

We need to prepare ourselves to be in this dire situation for the long haul. It will most likely dominate European politics for years to come. We experience an unprecedented economic crisis which over time has morphed into a crisis of social cohesion and confidence. Today it challenges our very idea of Europe and its international role.

This is taking place on the eve of a new global order. We are witnessing a world in which the traditional political and economic dominance of the West is in decline. Indeed, we have to acknowledge that the center of global economic power no longer lies in the West. The shift of power is exacerbated by the economic turmoil in Europe.

Western prosperity and political values are currently under severe strain. The United States will continue for many years to be the world's only true military superpower. However, its dominance is diminishing. The cost of employing military power world-wide has become ever more noticeable and will likely influence the future US defence and security policy.

Over the past two decades we have experienced rapid economic growth in countries and regions outside Europe and North-America. The growth of emerging economic great powers, such as China, India, Brazil and Indonesia, is changing the global balance of power fundamentally. The same applies to a revitalised Russia.

It is towards Asia in particular that much of the economic power is now shifting. History has shown that military build-up and a demand for greater international influence often follow strong economic growth.

Fundamental changes are taking place. It is a long term trend. We see new technologically advanced states rising up on the international arena. This is a very different world than the one we have experienced over the last twenty years.

After 9/11 we have concentrated on fighting asymmetric challenges stemming from international terrorist networks and collapsed states. We have developed capabilities targeted at these challenges, and we have made significant progress.

What I am suggesting is that we once again have to consider strategic and more traditional challenges. We have to reflect about the possibility of symmetric threats. Right now for example, we see increased tension between China and Japan about territorial claims in the South-China Sea. I am not arguing that this or similar disputes will result in armed conflict. On the other hand, ruling it out might be unwise. The brief war between Georgia and Russia in August 2008 is another recent example.

As a strategic challenge, we don't see a candidate to replace the Soviet Union as the main adversary for the West. Russia has embraced capitalism and so has China. China may however become the main competitor. At the same time nothing would harm China more than the collapse of the dollar. And nothing would harm the US more than the economic collapse of China. So relations are fundamental different. The main powers of the world are now increasingly interdependent. The global economy not only creates dependency. It diminishes the likelihood of direct conflict.

This development coincides with a serious economic crisis at the heart of Europe. Let us step back and address this new situation and its consequences for our defence and security interests. What does it require from Allies to keep the gloom and doom perspectives at bay?

Adapting to new economic realities

The economic crisis affects all countries, and it burdens their defence budgets. The defence budget is often seen as an easy target when cuts have to be made. Any negative effects of a reduction in defence spending are widely perceived as something that may only be felt in the longer term.

If you are a defence minister it tends to be much easier to cut investments than bases or camps, simply because it does not have the same social effect in the short run. And as politician you tend to avoid decisions which defy your voters or your constituency. Therefore, you let the short term popular decision take precedence over long term needs. This is unfortunately the default option.

My fellow defence ministers are fully aware of this pitfall. If you make cuts in your investments budget the problems will not emerge in 2012 or 2013, but rather in 2017 or in 2025. Similarly, the immediate effect of reducing the budget for training and exercises is not critical. What you obviously risk is less agile, less prepared forces further down the line.

What makes these challenges even more daunting is the constant need for military transformation. There is a danger that several European Allies may have choose to postpone the restructuring of their military organisations.

For some countries, the economic crisis brings a need for restructuring and cuts at a far more existential level than normal. In such a situation, nations may have to remove entire elements from their defence structures.

If such cuts are not considered in the context of the Alliance as a whole, the process can only lead to substantial gaps in NATO's collective defence capability. As the collective capability of the Alliance is at stake, this could equally influence Norwegian security interests.

Let us be clear. More money is not part of the future equation. The total defence expenditure in NATO is certain to drop further in the short term. Therefore, business as usual is no option for the Alliance.

Our response to this is twofold.

First, we have to find smarter ways of working together. We must attempt to alleviate the negative effects by connecting our forces and make investments together. Together we must ensure that we get the most out of our defence budgets. I would suggest that by doing cuts intelligently you can significantly reduce the negative effects by several percent. Yes, cutting will be painful, but the consequences may be diminished by doing more together.

This is also about acknowledging the international nature of defence planning. And it is about coming together with likeminded nations that have similar challenges and corresponding requirements. Regional approaches, small group co-operation and bilateral arrangements should be an intrinsic part of these efforts.

We have over the past years reached a substantial level of co-operation with our Nordic neighbours. We have seen an impressive development of joint training and joint investments. Through effective use of resources and energy we are strengthening our military capabilities for less money. In the current economic situation our experiences may prove valuable also for other countries.

Secondly, NATO should be the cornerstone of our response. The thrust of our national security and defence policy is vested in a NATO that continues to act as a relevant and potent political and military alliance. NATO's role as the primary guarantor for the security of its members, embodied in Article V and in our security consultations, should continue to be the bedrock of alliance activity.

Next week I will be attending the NATO Defence Ministerials. This time I do this in a very different setting than previously. These meetings are no longer what recently appeared to be Afghanistan-centric events. At the very center of our discussions now is the well-being of NATO itself. To put it simple, we have set out a goal to maintain NATO as a credible defense alliance at a time where there simply is less money available for defence.

At this juncture my message is clear. Maintaining a capable and decisive NATO requires more "smart defence". It requires us to see concepts through and turn words into deeds. That also applies to the Connected Forces Initiative aimed at making our capabilities working more efficiently together.

We will continue encouraging allied nations to use NATO as the preferred framework for defence planning. NATO should have a key coordinating role. The Alliance must be used in facilitating and supporting existing and new co-operation. In the end the responsibility to use this mechanism lies with each individual Ally.

The thinking we all should apply is what is best for the Alliance, is also serving our national security needs. Doing otherwise, we may produce our own security problem without being challenged by others. Re-nationalising our defence structures is clearly no viable option. Rather, we should continue building a sense of togetherness; make it clear that we are in this together.

I will also stress that neither "smart defence" nor the Connected Forces Initiative, should only be presented as savings measures. More importantly, these must be perceived as sensible investments in the long run. Stamina and patience lie at the very heart of these efforts. Decisions today to do "smart defence" will likely take effect in 10 or 15 years. Even though the benefits are remote in time, we must prevent this momentum to dissipate.

Safeguarding NATO

My main message today is that Allies and close partners must avoid that today's new economic realities become tomorrow's security crisis. In this respect NATOs role as a relevant and effective international political-military organisation must be safeguarded.

It is in our collective interest to make this transatlantic project prosperous again. Hence we must tread the difficult path into the future in concert rather than in uncoordinated isolation. In this situation, all Allies should consider what is best for the Alliance, not only for our individual nations.

Thank you for your attention.