The $32,000 Hamburger – Macroeconomic analysis can rapidly contextualize foreign military expenses

By Jeff Wright                                                       
     Estimated Read Time: 12 Minutes

Is it affordable to purchase something for the price of $1 million?

The answer, of course, varies with context.  To a multi-billionaire, or someone working in aerospace procurement, the answer is far different than someone for whom this sum represents many generations of their entire village’s economic output.  Affordability is a function of available resources, not the absolute cost of a given expense.  When trillions of dollars are available (e.g. United States Government (USG) budget), a $1M USD expense has an entirely different context than if the same $1M expense were incurred by a country of modest financial means.

This paper proposes a simple heuristic to give context to a given foreign-state expense by calculating the equivalent domestic expense: “What would the equivalent cost be from the USG perspective?”  By using the two countries’ gross domestic product (GDP)[1] as a rough measure of collective resources available, this technique can help developed countries understand the implications of military hardware acquisition, maintenance, and operational costs for partners with significantly different economic positions.

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The result of this technique is Equivalent Domestic Cost (expressed as Cost, Domestic or Cd) for a given partner expense (expressed as Expense, Partner or Ep).  To begin, divide foreign gross domestic product (GDPf) by its domestic equivalent (GDPd) to yield the Affordability Quotient, expressed as A.

Next, divide the given partner expense (Ep) by the Affordability Quotient. This yields the equivalent cost from the domestic perspective (Cd).

Cd is the sum of money that represents an equivalent expense from the domestic perspective; we can say that the sum of money represented by Ep has equivalent utility and dearness to Cd. This equivalence is the point of the exercise: it allows planners to contextualize expenses by thinking along the lines of “When country X purchases Widget Alpha, it has a similar financial impact as the United States purchasing Widget Bravo.”

Consider the following example, given the 2017 GDP of Africa’s most prosperous county (Nigeria – $375B[2] USD) and United States GDP of $20T USD.

The Affordability Quotient (AQ) is 0.0188. Thus, if we invite a visiting official from Nigeria to lunch at an American restaurant (Ep = $20 USD), we impose on his treasury[3] a cost with an equivalent economic weight of Cd = $1,050.

If we invite an official from Niger[4] (GDP = $8.12B), the cost can be calculated as follows: (Note: Niger and Nigeria sound alike: see footnote if unfamiliar)

We have thus invited our Nigerien friend out for a $32,000 hamburger.  Without this analysis, well-meaning American counterparts may be unprepared to understand the implications of what is to us an unremarkable, quotidian expense.

As expensive this lunch is to the Niger’s government, airpower analogies[5] with this methodology are even more sobering.  Light attack aviation (LAA) is often proposed as a cost-effective solution suitable for problems faced by nations who cannot afford the fighter jets that habitually provide close air support (CAS) to Western countries.  Given that an A-29’s cost per flight hour (CPFH)[6] is roughly $1,000 USD, it certainly is more cost effective than using 4th generation fighters to perform the same function. Just because something is less expensive than an alternative does not mean that it is affordable, however. Consider the following calculation, where we apply AQ to the cost of a LAA flight hour:

Note: In the interest of brevity and flow, this article does not show the arithmetic behind subsequent calculations.

This technique allows us to understand LAA affordability through Niger’s point of view: flying the A-29 for an hour entails an expense that carries an analogous financial cost of $2.4M from the American perspective. This means that A-29 CPFH is over 50x as expensive to Niger than the F-35 CPFH ($44,000)[7] is to the United States.  Put another way, operating costs for a single A-29 impacts the treasury of Africa’s richest country as if the United States Air Force were to conduct an ‘elephant walk’ involving two full squadrons of F-35s. 

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Exploring this concept further, we see that US assistance to Niger’s C-130H program (a package worth roughly $60M USD) is worth 0.074% of their total GDP.  The US equivalent Cd is a jaw-dropping $140 billion USD – enough to buy 8x Ford-class aircraft carriers and a full complement of F-35Cs to go with them.  The CPFH calculations are similarly staggering: assuming C-130H CPFH of ~$5000, this well-meaning gift resulted in a capability that costs Niger the local equivalent of $12M per flight hour.

While the US’ generous contribution was warmly received, perhaps the American military officials who facilitated this program would have adopted a different course of action if considering the scope of the associated costs from the Nigerien perspective.

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Above: What an equivalent share of GDP buys each country.

Policy Application Use Case

In keeping with the Lake Chad Basin (LCB) example, consider the challenge of supporting regional powers to counter their own domestic terrorism concerns – namely, Boko Haram.

Without an asymmetric advantage, partner nation forces are generally outmatched. They fight an ‘away game’ against an enemy that tends to have advantages in intelligence, experience, logistics, and motivation. To prevail, they require asymmetric advantages such as the ability to detect and destroy enemy forces with airborne weapons systems. Without the kind of analysis that this paper recommends, however, well-meaning allies can do more harm than good by diverting resources toward solutions that are unaffordable to the host nation.

Providing A-29s to LCB nations[8] may be exactly such a case of good intentions gone awry. The United States Cd of A-29 CPFH (without accounting for procurement, weapons, or aircrew-related costs) for the states concerned is $560,000 for Chad, and $200,000 for Cameroon. Even for comparatively wealthy Nigeria, the Cd of light attack CPFH is over $50,000.  This analysis suggests that even though the A-29 is inexpensive from the perspective of the United States, it is still unaffordable and thus unsustainable for the LCB’s counter violent extremist organization (C-VEO) fight.

Could remotely piloted aircraft (RPA) be the solution? A single Grey Eagle (MQ-1C) launch-and-recovery element in Abuja could cover all of Nigeria and support multi-national operations in the LCB as well.  Given aircraft endurance of greater than 24 hours and the wide availability of precision weapons, this seems to be an attractive option. The operational costs, however, are prohibitive even for Africa’s wealthiest country.  With an CPFH Ep of $3800 (and waving away procurement costs), Cd is a steep but plausible $195,000. The chances of Abuja-based aircraft responding to an emerging situation in a timely manner are slim, however, given the aircraft’s slow transit speed. Even if they were at the right place and the right time, shooting a Hellfire missile (Ep = $117,000[9]) has a commensurate Cd of over $6 million USD. The nearest cost-equivalent US munition is the LGM-30 Minuteman, a nuclear ICBM with Ep = $7M.  That a Hellfire is analogous in cost to a nuclear missile should be a clear sign to defense policy makers: the A-29 and MQ-1C are simply not financially sustainable for our LCB partners.

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If even these systems are unaffordable, what is an acceptable price range?  The answer can be derived by applying the inverse of the process detailed above. We start by considering the cost of a United States fighter/attack sortie, using a composite CPFH of the F-16, A-10, and F-18: $13,000. We then multiply this Cd, by A = .0011 (average of Chad and Niger, the lower end of LCB budgets) to yield a target ECPFH of just $14.30.  Before assuming that no aircraft could possibly provide an hour of CAS/ISR for the cost of a pizza, let’s calculate viable procurement cost to give an idea of target price range.

Assuming a $20M purchase price for US equivalent platforms (an average of fourth-generation fighters, RPAs, and LAA), multiply Cd by .0011 to yield a target Ep of $22,000. If we were to argue (cogently[10]) that the United States’ COIN CAS/ISR requirements can be solved far cheaper than is standard practice, we should also multiply the AQ against the cheapest viable manned solution: a used and modified Cessna 208’s purchase price of $2.5M.  This yields a low-end target Ep of $2750.  With Affordability Quotient analysis in mind, we see that it would be sensible to shop for solutions in the range of $2,750 – $22,000 for procurement cost with CPFH of around $15. There is only one category of aerial system that could possibly be procured for this amount: small unmanned aerial systems (sUAS) of that kind that can be brought to combat in a soldier’s ruck or truck. 

Options abound from the top-end Lockheed Martin Stalker XE system, a mid-range Turkish quadcopter armed with a light machine gun. American entrants firing standard 40mm grenades, or even a customized commercial drone retrofitted with an M203 under-barrel grenade launcher (UGL) with recoil mitigated by light, frangible components.  This approach gives soldiers the tools they need, when they need it – and arguably provides a better weapon/sensor to target match than traditional CAS or ISR platforms.  Collateral damage limitation, circular error probable (CEP), and time of fall (TOF) could easily exceed performance of far more expensive systems (for example, Joint Direct Attack Munitions (JDAMs) dropped from 30,000’); by reducing slant angle and increasing operator situational awareness, small-scale ordnance can be quickly placed on the right target with little doubt as to what is being engaged.

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For electrically-powered systems, fuel costs are limited to electricity and battery replacement cycles – a few cents per hour.  Maintenance costs are in the single digits of dollars; most parts can be 3D printed or fashioned locally.  Munitions themselves are commensurate with US equivalent costs: while a Hellfire missile has a Cd of millions from the perspective of an LCB nation, calculating in reverse yields an Ep of $125 – roughly what DoD pays for a high-explosive 40mm grenade.

Photo curtesy of MSgt “LS”, USAF Special Tactics

It is also wise to consider the second order effects of choosing a less costly solution; this may deny the country (and critically, its leaders) a certain measure of prestige that comes with owning and parading expensive military hardware.  Sometimes, a militarily or strategically irrational decision is the politically sensible one.  Applying the techniques made possible by the Affordability Quotient allows us to understand the degree to which prestige-related concerns may be driving a partner’s drive to acquire the expensive technologies employed by countries operating with dramatically different financial resources.

Conclusion

This last concern is yet another reason why USG officials should be alert to the possibility that they proffer solutions that are poorly suited for the country they intend to assist.  Systems that are unaffordable will likely go unused for lack of ability to pay overhead costs, or be used so sparingly as to render them inconsequential. The result of an unaffordable solution is a worse outcome than having done nothing at all; time and money are depleted, and the fact that the problem goes unaddressed is masked by the presence of hardware that works in other use cases, but not for the partner in question.

Instead of asking “What is our habitual solution to this problem?” the first question must be “What is the price range of affordable solutions, and given this restraint, what options are available to the government in question?”  The Affordability Quotient can be used to quickly answer the first part of this question; failing to consider it at all could turn the best intentions into the imposition of a “$32,000 Hamburger” on our allies and partners.


Lt Col Jeff Wright is a USAF Special Tactics Officer, Joint Terminal Attack Controller-Evaluator (JTAC-E) and a Marine Weapons and Tactics Squadron-One (MAWTS-1) Weapons and Tactics Instructor (WTI).  He is currently assigned as Targeting Branch Chief, Special Operations Command – Pacific.  This paper was written while a student at Air Command and Staff College’s Multi Domain Operations Strategy (MDOS) program. 

He can be reached via Twitter @TweetsFromJDW

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Department of the Air Force or the U.S. Government.


Featured Image Source: https://armadainternational.com/2020/02/north-african-air-power/

[1] This article uses Gross Domestic Product as the primary measurement of comparative wealth because it represents what is collectively available. Measures of average individual wealth do not have the same meaning. For example, Luxembourg has among the world’s highest per capita incomes, at $114,000 USD.  Still, their total GDP is only $62B.  Individual citizens can afford to spend luxuriously, but their defense budget cannot.  China, by contrast, has a per capita income of about $9,000 USD, but has a GDP of $12 trillion.  The author also experimented with tax revenue and defense budgets, but these measures reflect priorities and policy, whereas GDP strictly measures how much wealth is available without regard to how it is allocated.  Thus, GDP is the best figure to explain what a given unit of currency means to that country’s decision makers.

[2] For the sake of expediency, dollar amounts in this paper are rough expressions of the reported amounts. While it is more accurate to say that Nigeria’s 2019 GDP was $376.361B USD instead of the $375B figure this paper uses, the additional precision detracts from analytical clarity without adding to understanding of the critical concepts.

[3] In this example, we assume that the general will claim the hamburger as a travel expense, and thus that the cost will be borne by the Nigerian treasury. We can use the same process to calculate the relative expense if he were to use personal funds by calculating with GDP per capita instead of raw GDP. ($1970/$55,000) = .0358, and $12/.0358 = $335. That this exact scenario probably occurs on a weekly basis at PME programs across the force.

[4]Oil-rich, Anglophone Nigeria (pronounced “Nigh-ZHEER-ee-uh) shares a border with Francophone Niger (pronounced “knee-SHARE”), among Africa’s lowest GDPs. The similar names can be easily confused, leading readers to mistake Africa’s wealthiest country for one of its poorest. The proper demonym for citizens of Nigeria is “Nigerian,” while the demonym for Niger is “Nigerien.” The letter ‘e’ or ‘a’ makes all the difference.

[5] Over the service life of an airplane, maintenance costs significantly exceed procurement costs. This paper assumes that the decreases in labor costs experienced by African nations are offset by decreased economies of scale and difficulty/expense in obtaining parts.

[6] Cost per flight hour (CPFH) reflects money spent on fuel, scheduled maintenance, and reactive maintenance. They are difficult to calculate, and vary significantly between types of missions: sorties where an F-16 is subjected to > 8Gs have over 3x the amount of maintenance demand as simple cross country flights (Hawkes, 2007). Accordingly, this paper does not present CPFH figures with anything like precision. Rather, rough figures are used to explore the concepts of what is, and what is not affordable to a partner nation. Note that the DoD’s ‘reimbursable rates’ are deliberately not used, as they tended to be outlying data points when compared to other available averages.

[7] F-35 CPFH is decreasing with time, and is a politically sensitive matter. Sources vary accordingly. The lowest estimate comes (unsurprisingly) from Lockheed Martin’s F-35 program manager Greg Ulmer: $35,000 (Freed, 2019). The highest estimate comes from the US Air Force, at $67,550 per hour (Nudelman, 2016) – but it is worth noting the age of this source. This paper uses a mid-point between the two that is cited in several other locations: $44,000 (Mizokami, 2019).

[8]NB: Simply providing the capability is only part of the solution. Integrating airpower with a ground scheme of maneuver is difficult even for NATO forces with robust staff academies and deliberately joint structure. Achieving these effects elsewhere is even more difficult. USAF Special Tactics Squadrons are actively engaged in Foreign Internal Defense (FID) missions in Africa and elsewhere, helping to develop partner nations’ air-ground integration (AGI) capabilities.

[9] Like the F-35, cost estimates vary even among members of the US DoD. Costs range from $27,000 to $273,000 depending on whether the missile is purchased through programs of record, overseas contingency operations, by different branches of service, and what model of missile it is (Trevithick, 2020). This article uses $115,000 as a mid-point.

[10] Whether the United States can afford our own COIN CAS habits bears considerable analysis but is outside this paper’s scope.

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