The elusive, exclusive, and rarified 2% threshold
NATO's 2% threshold is now going to be a running joke here at NOL
I’m talking about the 2% threshold that NATO members are supposed to meet when it comes to military spending and their domestic budgets. Most members rarely meet it. The ones on Russia’s border meet it, but the ones in between the comfy confines of former Warsaw Pact client-states and the Atlantic Ocean rarely, if ever, deign to meet it.
Mancur Olson and Richard Zeckhauser explained why this happens way back in1966, with their article “An Economic Theory of Alliances.” The gist of the article states that incentives are to blame for the chronic lack of agreed-upon contributions from member states.
To counter this lack of incentives, Olson & Zeckhauser put forth two options: a marginal costs sharing scheme whereby each member state contributes an agreed-upon percentage, or substituting a union for an alliance. The first option is the one that policymakers on both sides of the Atlantic purport to follow.
It’s the option that has been a thorn in the side of trans-Atlanticism since the 1950s.
It’s the option that leads to people like Bush I, Clinton, Bush II, Obama, Trump, and Biden to complain about the lack of support on the European side of the Atlantic.
It’s the option that leads to articles like the one I linked to in last night’s “nightcap”: “By 2022, nine out of 30 NATO allies had met the 2 percent target, up from three in 2014.” Wow, nine members met their 2% threshold in 2022.
I’m going to start blogging about all of the articles and tweets I read that talk about the 2% threshold. I’m going to start pointing out that this threshold has never worked, and it likely never will, not even in the face of a Russian invasion. And I’m going to point out that EVEN AFTER EVERYBODY WHO WRITES THESE ARTICLES ACKNOWLEDGES THAT THE 2% THRESHOLD IS NEVER CONSISTENTLY MET, no alternatives will put forth by said authors. They’ll just try to will the 2% threshold into existence with their wishful thinking.
I would also like to blog about the second path of “institutional changes that alter the pattern of incentives” Olson & Zeckhauser identified: a union of previously independent states which band together to form an optimum order that would iron out the inconsistencies associated with incentives. Unfortunately, nobody is talking about this second alternative. Mises and Hayek wrote about it in the interwar years. Madison and Hamilton wrote about in the years after seceding from the UK (and Adam Smith wrote about it in the years preceding the American secession). Oh wait, there is one journal article that talks about union instead of thresholds. But the answer is a tough pill to swallow:
So influential has this article been that several generations of North American and European elites have called for and pursued a percentage-based system even though it has never worked. The alternative to percentage-based models, greater unification, has to my knowledge been completely ignored, not because it’s incorrect or incoherent but because it still seems to be so completely unimaginable. This trend of confronting the question of how to share costs without violating national-state sovereignty places the eighteenth-century American federalists at odds with twentieth- and now twenty-first-century conventional wisdom in that the American federalists sought to abrogate the state sovereignty that our contemporaries, including those in libertarian and classical liberal circles, take as sacrosanct.
When more durable unions are discussed in works on military alliances and interstate economic confederations, the usual answer to the collective-action problems faced by states in the international arena is constitutional, but because constitutional bargains among sovereign states are so difficult to achieve, especially if starting from scratch, scholars and statesmen are left to pursue other options, such as cost-sharing arrangements based on percentages. Yet the American interstate order’s answer to the age-old problem of the sovereignty gap is hidden in plain sight.
NATO member states should trade in their sovereignty for seats in the American Senate. The peoples of Europe should become American citizens and their lands should become American territory. Voluntarily. Here’s more:
The ultimate aim of the Senate—to compensate states for their loss of sovereignty—has been and continues to be a rousing success. The institution of the American Senate untangled federalism’s Gordian Knot. Yes, national sovereignty will be abrogated, but this is exactly what Hayek argued was necessary for security and freedom in a world characterized by unfree and unequal states, and an equality among the states within the federation will be guaranteed via seats in the Senate.
The American Senate and the American Constitution are the missing pieces of Hayek’s interstate federalism puzzle, and to achieve interstate federalism we must push this argument forward and into the face of nationalistic sentiment and the idea of national sovereignty. The U.S. Constitution says nothing on nationalism, unlike the constitutions of Westphalian nation-states and confederations, and the American experience shows how polities “as different as Russia and Turkey” (Hendrickson 2003, 27) were able to form an interstate federation that focused solely on preventing despotism and Balkanization at home and on achieving republican security abroad. The American federal project as a whole was not a nationalist project; rather, it was a novel and successful attempt to fill the sovereignty gap, and the fear that the American Proposal would lead inevitably to nationalism is unwarranted.
Read the whole thing, as they say, and be on the lookout for more wishful thinking about the elusive 2%…