Last year, for the first time since 1998, global defense spending fell (by .5 percent) to $1.75 trillion. While some countries (like Pakistan, India, China, and many other East Asian nations) are still increasing defense spending, most are continuing to cut. This began in earnest after the 2008 financial crises, which forced many nations to make cuts whether they wanted to or not.
Another reason for the drop is that a decade of heavy defense spending has replaced a lot of the elderly Cold War era equipment that urgently needed replacing. Also ending, for the United States, are the expensive war on terror operations in Iraq and Afghanistan. The U.S. military, especially the army and marines, used the demand for new weapons and equipment in Iraq and Afghanistan as an opportunity to replace a lot of aging Cold War gear. The air force and navy did not do as well and now, with American defense spending shrinking, there will be fewer American warplanes and warships in service because so many of them are becoming too old.
Most Western nations deliberately shrank their armed forces after the Cold War ended in 1991. This included China and Russia, although both of these nations are still buying a lot of modern gear. Russia does it because it was too broke in the 1990s to buy much and the Chinese because they didn’t have a modern force at the end of the Cold War and are determined to take the lead in this area. China shrank its personnel strength over the last two decades but kept increasing its defense spending.
Defense spending is still about 2.5 percent of global GDP. After the Cold War ended in 1991, defense spending declined to under a trillion dollars a year by the end of the decade. Then it began to rise again. The region with the greatest growth has been the Middle East, where spending has increased 62 percent in the last decade. The region with the lowest growth (six percent) was Western Europe. Five years of world-wide recession and the decline in spending by most Western nations has helped stall global defense spending at $1.75 trillion a year. Western defense firms are feeling this the most, as their sales have been flat for the last few years. The U.S. defense budget is still the largest, accounting for a third of global spending.