A decade of heavy defense spending is ending, as all that money has replaced a lot of the elderly Cold War era equipment. 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.
Most Western nations deliberately shrank their armed forces after the Cold War ended. 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.
This decline in military spending has taken place over the last two years. Since September 11, 2001, global defense spending increased nearly 50 percent, to over $1.4 trillion. That's about 2.5 percent of global GDP. After the Cold War ended in 1991, defense spending declined for a few years to under a trillion dollars a year. But by the end of the 1990s it was on the 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 $1.4 trillion a year. Western defense firms are feeling this the most, as their sales have been flat for the last two years.