Anyone who has ever taken a class on economics knows about the law of supply and demand. Supply and demand functions are usually expressed in terms of prices and quantities. The supply of things rises as the price increases and falls as the price declines. The demand for things will do the opposite; demand will increase as prices fall and decrease as prices go up. In the traditional economic model supply and demand interact to eventually arrive at an equilibrium point at which there is just enough supply to satisfy demand given the price. Each commodity has a unique pair of supply and demand functions that reflect a wide range of factors such as how rare or common the commodity is, how much consumers desire it or the availability of substitutes.
The current debate over how far to reduce defense spending has focused largely on only one half this law, the supply side. As resources are reduced, the supply of military capabilities, expressed in terms not only of force structure but capabilities, must decline. Proponents of deep cuts in defense spending assert that the United States will be just as secure with a reduced supply of military forces. Some in the defense spending debate go so far as to assert that if the supply of military forces declines so too will the demand, resulting in a new equilibrium.
What about the other half of the equation, the demand function for military forces? According to the law of supply and demand, if demand increases then the United States should be willing to support an increase in supply, meaning higher defense budgets.
So what is this nation’s demand for military forces and what can that tell us about the equilibrium point where demand equals supply? Contrary to what economic theory tells us, over the past twenty years the demand for military forces has been relatively insensitive to the supply. In other words, the demand has increased even when supply has declined.
In the aftermath of the collapse of the Soviet Union and the end of the Cold War the United States reduced the size of its military by some 40 percent in terms of personnel, units and equipment. The Army went from 18 active component divisions down to 10. Yet, in the period from 1990 to 2000, the demand for military forces increased fourfold. In this period the Army was involved in 284 named operations. When the Pentagon conducts a named operation this means that a substantial force is employed for a significant period of time, some for a matter of weeks but others for years. Some named operations involve forces from a single service but many are joint, involving more than one. Over this period the number of named operations in which the Army was engaged doubled, going from 29 in 1990 to 56 in 1998. Only six of these were major combat operations such as Desert Storm. The rest, a total of 278 operations, ranged from counter drugs and humanitarian assistance overseas to civil support at home.
You might not be surprised to find out that in the decade since 2001 the total number of named operations involving Army forces increased to 302. After all, we were engaged in two wars and in a global campaign against Al Qaeda. What might come as a surprise is that the number of major combat operations actually declined to a total of four. The number of irregular warfare operations naturally increased, but not by much (from 2 to 17). The big increase was in civil support at home (from 68 named operations to 160).
The only conclusion possible is that the U.S. demand for military forces is independent of the supply of forces. This demand is independent of which party is in power. It does not relate to a propensity to go to war. It went up even as the supply of military forces declined. Demand reflects the reality that this country is a superpower with global interests, alliances and friendships. We also have a desire to do good in the world as reflected by the 104 humanitarian operations in which the Army participated over the past twenty years.
Supply needs to match demand. It makes no sense for the United States to gut its defense budgets while imposing a high demand on its military forces. As Secretary of Defense Panetta and Joint Chiefs Chairman General Dempsey testified this week, at its current size and composition, the U.S. military is just barely able to keep up with demand. We are at an equilibrium point. It only makes sense to provide adequate resources so supply and demand remains in equilibrium.
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