One of my fellow economics students asked me recently what I thought about the military from an organizational standpoint. They’re often cited—mostly by politicians, military contractors, and segments of the media—as a model of efficiency. My response to him was brief, but I’ll elaborate here. [Keep in mind, economic analysis is about means, not ends. One’s opinion of the worthiness of the ends to which the military apparatus works have no bearing on this discussion of the means.]
First, it’s a very large government agency. That in and of itself ought to be the first clue of how inefficient it is. Military spending was $689 billion in 2010, 20% of the FY 2010 budget. With almost 1.5 million military employees and 700,000 civilian employees, any organization would be difficult to run efficiently. Add to this an unknown but large number of nominally civilian firms whose funding comes from the Department of Defense. When on top of this the organization is completely isolated from market signals—its incomes and expenditures are politically allocated—and is in many sectors a monopsonist, basic economic theory would lead us to think that efficiency is not even within the realm of real-world possibility.
For evidence, see here. The DoD’s legal deadline for audit readiness is in 2017. A more ambitious proposal would have it ready for a partial audit in 2014. We can’t know the specifics of the waste until this audit is completed, and the military itself cannot account for how its resources are spent either.
Second, the hierarchical structure implies that at every level there is a possibility that whatever efforts some subunit makes, be it an individual soldier, an office, or an agency, these efforts are always subject to being overruled and nullified by a higher authority right on up to the Commander in Chief. As there is not one clear task toward which everybody can aim, even the brightest, most honest, and most dedicated DoD employee is largely working in the dark. Again, efficiency is not within the realm of practical possibility.
Anecdotally, many people sympathetic to the military have complained to me at one time or another about defects in the system. A general is the type of person who is good at taking credit and deflecting blame—a politician—not necessarily also a person who is doing the best job. The people around him will be constantly trying to anticipate his next thought or action, not trying to anticipate helpful things he will not like to hear. Many of the lower ranks who enlist see the job as a meal ticket or a source of training and/or college tuition payments regardless of the quality of the job done. These issues of motivation are widespread, such that again we can hardly expect efficiency even when many DoD employees are truly dedicated to their tasks.
Lastly, the military budget is the true third rail of American politics. I know that it has lately been threatened with “cuts”, but these are DC-style cuts, which in non-political terms means “slower increases”. Any real talk of giving it less money this year than it got last year would be met with howls from all sides. If you worked at a branch of a large corporation and knew that any talk of even slowing down your budget’s growth would elicit unanimous condemnation from all the most powerful people involved in the discussion; knew that even without the discussion they’d be falling over themselves to increase your budget; knew that large sectors of the sources of funding think that its expenditure is exempt from all the usual complaints about the federal government—well, you get the picture.