What is the best way for sharing the economic burdens of a military alliance?

According to Pincus (1965, p. 58), there is no consensus or mechanism for reaching it, on such issues as measuring different countries’ capacities for efficient production of military equipment, for meeting a share of the total costs of a military alliance; estimating the benefits of a military alliance to any particular country; and consequently coming up with a system that would equitably reflect those benefits.

One common normative approach to all types of burden sharing is the ability-to-pay principle. According to this assumption, defence contributions should be progressive, very much like a domestic income tax. Such an approach would involve measuring each country’s income in terms of such measures as GNP, and them asking the countries with higher incomes to pay progressively larger shares of the common defense expenditures of the alliance (Pincus, 1965, p. 59).

Carrying this scheme out has proved to be impossible, however, in part because economic analysis has never been able to give a good answer to the question of what degree of progressiveness would be most equitable (Pincus, 1965, p. 59, 60).

Whatever may be the best way for sharing the economic burdens of a military alliance, empirical evidence from 1960 shows that the United States has contributed to combined NATO defense expenditures, during that year, considerably more than can be expected from using all but the most progressive exchange-rate and real-income formulas (Pincus, 1965, p. 76).

References

Pincus, J. (1965). Economic Aid and International Cost Sharing. Baltimore: The Johns Hopkins Press.