Defense planning and military expenditure in Korea: An analysis of national security policy for an uncertain era

For a country with serious security threats like South Korea, how to structure the nation's defense policy is one of the most important decisions an administration must make. This study first examines Korea's political, economic and military history as it relates to security issues in order to provide a context for Korea's military planning over the past several decades. Given the degree of conflict and tension between the two Koreas, South Korea's allocation for defense is neither excessive nor beyond the country's economic capability. The universal conscription military system and the presence of U.S. forces have enabled South Korea to maintain a high level of military preparedness without excessive investment in the military for past several decades.;This study reviews several internal and external factors that impact defense spending in Korea and pays close attention to budgetary incrementalism, the arms race model, and the alliance effect. Regression analysis demonstrates the significance of budgetary incrementalism in defense budgeting. Also, as the "action-reaction model" suggests decision-making on security issues in South Korea has been sensitive to the behavior of the primary military adversary, North Korea.;This study also investigates the direct and indirect effects of military preparation on the economy. As a consequence of military preparation, military spending tends to stimulate economic output. Although military expenditure contributes directly to Korea's economic expansion, however, the externality effect of military spending on the growth of the economy has been negative.;The statistical results suggest that the extinction of the military threat posed by North Korea would not result in the financial rewards South Koreans expected. Although the peaceful settlement of the South-North relationship could generate positive externalities on the economy, it is hard to expect an immediate significant reduction in military expenditure or a realization of the benefits of a "peace dividend," considering the substantial influence of incrementalism on the defense allocation process and perplex effects of defense spending on economic growth.;If a unified Korea needs a 500,000-personnel military force, with the current conscript system, the estimated military expenditure as a percentage of GNP would be about 2% for the next decade. If it needs a small but professional military force, a unified Korea should spend more than 4% of its GNP on the military for the next ten years, maintaining 300,000-personnel all volunteer forces if unification occurs today.