The Trials and Tribulations of Two Percent
There is only one thing that should be consistently associated with “2 percent” and that is milk, not defense spending. Ever since it was formalized as a target at the Wales summit, the goal of spending at least 2 percent of GDP on defense by 2024 has defined North Atlantic Treaty Organization (NATO) in the eyes of the public. The Defense Investment Pledge was a necessary decision taken on the heels of Russia’s invasion of Ukraine and against the backdrop of increasingly asymmetric transatlantic defense spending. Since then, the target — never a perfect indicator of national contributions to collective defense — has evolved from an indicator of credibility and unity to a divisive instrument that mars the Alliance.
The 2 percent benchmark misrepresents NATO’s strength and by extension, Europe and Canada’s commitment to burden-sharing. First, defense expenditure only includes monetary inputs, which disregards the output (i.e., impact) of that spending. In the eyes of the 2 percent target, Turkey’s controversial purchase of the Russian S-400 missile system, Denmark’s much-needed purchase of F-35 jets, and Belgian military pensions (which account for a third of the country’s military expenditures) are all the same. Furthermore, this calculation does not address the coherence of spending, as it rewards the duplication of capacities while disregarding defense integration initiatives like Europe’s shared capability projects. Second, the benchmark overlooks vital non-monetary inputs like troop contributions and conflict prevention efforts. For example, Italy and Canada are not close to meeting the 2 percent goal, yet they are in the top quintile in terms of troop contributions to NATO missions. Similarly, many European members participate in CSDP (Common Security and Defense Policy) missions and operations that enhance the security of the Euro-Atlantic area. Third, progress towards the 2 percent goal can be completely unrelated to defense spending. Since the target is a proportion of GDP, it goes up when GDP goes down (and vice versa). In other words, economic crises can help countries meet the 2 percent mark.
These imprecisions would not be an issue if the target was not massively publicized. The 2 percent goal has managed to overshadow most other measures of progress, like the second numerical goal established at the Wales summit — spending 20 percent of defense expenditures on major new equipment and related research and development (R&D) — which almost two-thirds of NATO members have achieved. Instead, almost any article about NATO takes stock of burden-sharing using the 2 percent metric; government officials frequently do the same, either to boast about their progress or to highlight spending disparities. The latter usually takes the form of the United States criticizing its partners across the Atlantic. Despite decades of denunciation, 19 out of 30 members still fall short of the target. Most of Europe invariably ends up below the bar — an outcome that is somewhat inevitable given voters’ hesitancy towards increasing defense spending and government spending constraints, like deficit limits imposed by the Stability and Growth Pact. The economic impact of the pandemic is also expected to hamper significant short-term increases in defense expenditures.
The constant emphasis on the lopsidedness of transatlantic burden-sharing as delineated by the 2 percent threshold has cast doubt on some of the Alliance’s fundamental tenets. Just a few years ago, former U.S. President Donald Trump suggested that the U.S. commitment to collective defense should be conditional on allies meeting the 2 percent mark and stated that the United States withdrew 12,000 troops from Germany because “[the Germans] are not paying their bills.” This rift did not go unnoticed by French President Emmanuel Macron, who notoriously declared the “brain death” of NATO and used the narrative of American unilateralism to press even harder for European strategic autonomy. These remarks do not exist solely in the realm of high politics; they shape public perception. Consequently, Americans have begun to see some of their closest allies as free riders, with half now supporting making collective defense conditional. Across the Atlantic, European leaders and publics alike have lost faith in the Alliance and US leadership — often to the benefit of nationalist populists. None of these outcomes bode well for the future of NATO, especially given recent flare-ups in transatlantic tensions over Afghanistan and the AUKUS accord.
We must radically reframe burden-sharing; a timely endeavor given the Biden presidency, the launch of NATO 2030, and impending pandemic-induced defense cuts. NATO should abandon the 2 percent yardstick, removing it from official documents and discussions. However, the Alliance still needs an accessible, comparable, and proportional snapshot of national contributions and collective strength. The Secretary General should convene a task force composed of experts in defense planning and public relations, and representatives from member states to design a new target. Numerous experts have already come up with different ways to replace the 2 percent metric such as a 3 percent goal that includes spending towards conflict prevention and management, an Alliance contribution rating focused on NATO’s core tasks, and a more holistic rating that would take soft power into account.
I propose developing a metric based on NATO Secretary General Jens Stoltenberg’s statement that burden-sharing is about “cash, capabilities, and commitments.” My rating builds on the dozen metrics (which primarily comprise expenditures and force numbers) that NATO experts use to assess members’ semiannual progress towards capability targets (i.e., “existing metrics”). Each indicator would be weighted based on its contribution to those targets and each category scored out of 10. The categories would then be averaged to give every country a score between zero and 10.
- Cash: existing metrics minus expenditures like pensions that do not directly impact NATO, R&D spending, and security assistance as a proportion of aid outflows.
- Capabilities: existing metrics on deployable and sustainable forces and interoperability.
- Commitments: existing metrics on mission and position contributions, participation in NATO exercises, and passive contributions like hosting bases.
Reforming the 2 percent guideline will lead to more constructive conversations about efficient defense spending and burden-sharing, while ensuring that NATO is actually better equipped to address the threats it is designed to deter. As NATO’s inaugural strategic concept explains, “A successful defense of the North Atlantic Treaty nations through maximum efficiency of their armed forces, with the minimum necessary expenditures of manpower, money and materials, is the goal of defense planning.”
