Mark Norman: Canada’s defence-spending quagmire

Countries don’t typically get report cards, but there are hard facts that can be collated, assessed and compared. Enter Benchmark Canada, a new project from the Macdonald-Laurier Institute that brings together more than 40 different metrics that measure this nation’s performance. This fall, the National Post is examining many of those findings.

I was pleased to have been asked to contribute to the analysis of Canada’s defence spending and related metrics by the team at Benchmark Canada. I commend the process and believe it will be helpful in informing public discourse and debate about defence spending and the rebuilding of Canada’s military and security capabilities. With that said, however, building and maintaining an effective military is a complex undertaking and we should be careful what conclusions or inferences we draw from the analysis. I will refrain from focusing too much on the data itself, and instead I will try to provide context and a broader understanding of the implications of what the analysis tells us.

The bottom-line up front — at least at the macro level — is that Canada has met its minimal NATO spending target of two per cent of GDP, and we appear to be on a viable trajectory toward achieving the revised targets of 3.5 per cent and ultimately five per cent over the coming decade or so. Although this might be considered a significant accomplishment, it simply puts Canada in compliance with the previously agreed target and removes the awkward and embarrassing distinction of “laggard” among our allies. Notwithstanding the considerable effort to achieve this result, little has actually changed in terms of our defence capabilities and outputs, and it will take considerable time for the impacts of the increased spending to actually materialize.

This arguably stark reality is important — not because it underpins any intended criticism, but because it is an inconvenient truth that we cannot just assume away. We are starting from a structural deficit both in terms of the direct impacts of decades of under-investment, but also in terms of the systems and processes that allow us to translate spending into actual capability. In this context, therefore, the numbers themselves, and even a basic analysis thereof, don’t tell the entire tale of the Canadian Armed Forces (CAF).

To fully understand the deeper implications of what is going on behind the scenes of Canada’s defence business, a more comprehensive understanding of how all the constituent elements fit together is required. In essence, building and sustaining a military can be represented by a complex equation with multiple variables. Typically, analysis — whether it be internal or external — tends to focus on individual variables in isolation rather than a holistic perspective. Understandably, therefore, this creates unintended consequences downstream as the subsequent impacts of adjusting one variable on the rest of the equation can often be ignored and take years or decades to manifest.

This is in part why efforts to try and rebuild or transform the CAF are often short-lived or unsuccessful as they tend to focus on short-term objectives and, as such, fail to “fix” many of the underlying structural problems. Additionally, the recurring fascination with things such as the politics of defence, spending analysis, procurement problems and recruiting numbers address only a few of the many variables in this otherwise complex equation. We must also make an important distinction between inputs and outputs. Equipment, people, organizational structures, doctrine, infrastructure, training, maintenance, logistics and spare parts are all outputs of investment decisions as much as they are inputs to overall military capability and readiness.

To make this more complicated, we are not starting with a clean-sheet design for the CAF. The “force in being” — which is a product of decades of previous decisions — has an enormous impact on both current decisions and future options and it often constrains how we transition to any future force. This is in part why the impacts of new spending are not necessarily immediately measurable or impactful. It takes time and effort to divest of old stuff (and all of its attendant procedures, logistics support, etc.) and “onboard” new capability. Without sufficient people, training, doctrine, spare parts or a plan, new equipment is not necessarily any more “ready for operations” than what it replaced despite its relative “newness.” This also assumes that the new capability is actually delivered before it becomes operationally irrelevant, unsustainable or no longer fit for purpose. That assumption is sadly not always true given the protracted timelines of our traditional procurement processes.

Further, not everything can be quantified and qualitative analysis is often more difficult and contentious. With that said, the results of the benchmarking analysis highlight some interesting and important “take aways.” I would like to focus on three in particular.

One of the key challenges — across the alliance — is that industrial capacity is semi-fixed in terms of supply. This has been illustrated repeatedly in the context of the war in Ukraine, whereby increased demand, even here at home in Canada, cannot necessarily be satisfied quickly or easily. There are many reasons for this, many of which are structural or procedural, but the net effect is that there is seldom a linear or commensurate increase in capability simply because more of it is needed or funding is available.

Secondly, while cost increases are real in all economic sectors, defence-specific inflation is significant and typically well beyond the scope of traditional economic modelling. This means that time literally is money when it comes to military capability. Canada is not immune to this phenomenon and regrettably our exceptionally long procurement cycles exacerbate this reality.

Lastly, the intent to leverage increased defence spending to enhance domestic industrial capacity and resilience is sound policy. Given a number of factors, including market scale and inconsistent future demand, it won’t happen naturally and must therefore be incentivized by government. This mean potentially unpopular choices such as directed contracts, increased costs or alternative technologies, systems or capabilities. None of these are necessarily bad in and of themselves, but they represent important trade-offs that are frequently misunderstood or misrepresented in the public domain.

Ultimately, Canada is showing considerable progress towards its symbiotic objectives of meeting our NATO obligations and rebuilding the CAF. We are a long way from achieving either objective and we must never lose sight of the fact that spending the money is actually easier than rebuilding a national institution. Spending wisely, however, is where challenge and opportunity meet. We need to shift our focus from measuring inputs and instead keep a closer eye on outputs like overall military strength, capabilities and readiness. Ultimately, that’s what will matter in the event we actually need to fight.

National Post

Vice-admiral (Ret’d) Mark Norman is a former naval officer and vice-chief of the defence staff.