Literature Survey: Measuring Global Military Expenditure and Strategic Implications

Abstract

This literature survey examines the methodologies employed to measure global military expenditures, with a focus on Market Exchange Rates (MER), Purchasing Power Parity (PPP), and the Relative Military Cost (RMC) Index. These methods significantly impact how military power is understood, with MER often underestimating the capabilities of nations like China and Russia due to its reliance on nominal exchange rates. In contrast, PPP and RMC offer more accurate insights by adjusting for local price levels and accounting for sector-specific costs such as procurement and labour efficiencies. The survey incorporates detailed case studies of China’s military modernisation and Russia’s economic constraints, illustrating the practical implications of these methodologies for strategic planning and international security. Additionally, the importance of data transparency is emphasised, as gaps in military spending data can distort assessments. Ultimately, this survey underscores the need for a multi-method approach that integrates MER, PPP, and RMC to produce a more comprehensive understanding of military capacities, aiding policymakers in forming more accurate and informed strategic decisions, while providing defence analysts with better insights for assessment.