October 25, 2014: Military budgets aren’t all they appear to be. While the United States alone accounts for over a third of the annual defense spending worldwide, this is not as overwhelming as it appears to be. There are several very practical reasons for this misperception. First there is the purchasing power parity (or PPP, the relative cost of common goods in different countries) angle. If you take into account PPP, those nations with lower costs (like China and India), loom larger.
Without PPP the top five in military spending is; United States, China, Russia, Britain and Japan. Adjust for PPP and India rises into the top five and Japan falls. That’s because things like local supplies and labor are much cheaper in India than Japan. Applying PPP also makes American defense spending much less effective compared to what China spends. Thus without PPP American defense spending is closer to 20 percent of global spending.
Adjusting for PPP Chinese defense spending goes from a quarter of what America spends to over 70 percent. Yet American forces deploy many more high teach weapons than China. That’s because U.S. defense spending has been the highest in the world since the 1940s. Since major items of military equipment (ships, aircraft and armored vehicles) have useful lives of over 30 years the Americans have had plenty of time to accumulate a much larger arsenal of expensive equipment than China. But that will change in the future because Chinese annual defense spending has nearly tripled in the last decade. Thus if China keeps its defense spending high and relative costs low, it will match the U.S. in many areas within two or three decades.
Read the full story at StrategyPage