Thursday, 21 November 2013


A lot of time and energy is being spent trying to decide how to replace Canada’s F-18s. The question of just which of the various candidates is the right choice has focused attention on the technical merits of the aircraft. Is this really the question we should be asking?

In a July 08 post James Hasik pointed out that the F-35 is acquiring the economic status of a ‘staple’ the Canadian government has been planning to buy-to-budget with its fighter program (assuming that it sticks with the F-35). This means that as the price goes up, the number of planes bought goes down, even if the total outlay remains the same. So what does that suggest about how they value the F-35? The buy-to-budget idea is arguably a domestic political stratagem for emphasizing certainty in military budgets over certainty in military capabilities. But if it has a classical economic interpretation, one could put Canadian demand for the F-35 right on the line between normality and inferiority.”
“.. It’s an assessment of how the primary buyer values it. Alongside steak, it’s the potato—the thing that you’re going to buy regardless, and on which you’ll double-down if you don’t think that you have options. In short, it’s a staple of the pantry. Indeed, the appropriate characterization of demand may be stronger than that. For until recently, as the forecast price kept rising, the Pentagon kept allocating more future monies to the purchasing plan for the F-35. Does that make the Joint Strike Fighter a Giffen good? A Giffen good is a rarely-seen thing, an inferior good of which one buys more when the price increases. It’s something you’ve just got to have regardless of what it costs, and how much or little you actually like your predicament. The classic example in the textbooks is (again) potatoes during an Irish potato famine...”

One of the things that makes the staple argument interesting, from an economics point of view, is that staples can be replaced. Sometimes pasta can replace potatoes, sometimes it turns out that eating too many potatoes isn’t even good for you.

In his September post Richard Aboulafia of the Teal Group explains why Korea has done a u-turn on its F-15 purchase and is now expected to buy F-35’s. He writes that,” South Korea faces two divergent strategic requirements. The first is the nut job regime that has hundreds of artillery tubes and thousands of tanks positioned just a few miles north of Seoul. A large force of F-15s, with their massive weapons payload, is the ideal weapon for that threat. The second is the long-term threat of being in a dangerous neighborhood with lots of technologically advanced regional rivals (China, Japan, and Russia). Something able to deal with the Anti-Access Area-Denial (A2AD) environment is essential for that, which means F-35s. Thus, as South Korea’s perception of these threats (in terms of timing and severity) change, preference for one plane over another shifts. One of them offers ordnance, the other emphasizes survivability

Fortunately Canada does not share Korea’s security situation. Like Korea however, we do have mixed security needs. We need aircraft for ‘homeland defence’ and aircraft for alliance participation in expeditionary warfare. These divergent needs can not necessarily be met by just one aircraft type.  The problem of buying just one kind of, expensive, aircraft to meet our diverse needs is that, as Hasik points out “as the price goes up, the number of planes bought goes down”.

It is important to remember that for all the attention that has been focused on the technical aspects of various aircraft, it is Air Forces that fight the wars. It is the organization and planning ability of your Air Force that typically determines the outcome of the battle. The most obvious example is the Battle of Britain. Often celebrated as the victory of Spitfires and Hurricanes over Messerschmidt Bf-109s and Heinkel bombers, it was the triumph of one organization over another.

In many ways Britain's preparation for the battle actually began in the early 1920s. A committee, created by Air Commodore Steel and Colonel Bartholomew in 1923, produced a plan of defence based on the assumption that any attack on Britain would come from France and concentrate on the South coast. The plan, based on various defence zones, was modified over time to allow for changes in technology, such as radar and aircraft speeds. What didn’t change was the understanding that it was the organization, not what we would now call hardware, that mattered most.

The truth is that getting a Canadian government to spend money on defence is never going to be easy. As Eric Morse pointed out in the Ottawa Citizen, “All our wars have been expeditionary, therefore by strict definition optional, and all have been fought as mid-level members of coalitions. It is very hard to imagine Canada fighting any other kind of war. That makes an easy recipe for strategic isolationism, if only because it makes such a hard sell for peacetime defence spending”.

Given a choice Canadian politicians will always keep defence spending down to the lowest level they can get away with. But as Morse writes,” Canada is trying to plan in a geopolitical vacuum it cannot afford to fill. Going by history, that situation won’t last forever, and when at last war happens, it still won’t happen when we can afford it. In the meantime, the best preparedness is not hardware but brains. Whatever equipment a nation has or doesn’t have, trained and educated men and women are never wasted in or out of the military”

The question should not be, ‘What kind of Fighter should Canada buy?’ but rather “what kind of Air Force does Canada need?’

How to Kill the Joint Strike Fighter, Part III: Marketing against a Staple Product, 08 July 2013

Dear Fellow Fighter Requirements Aficionados

Behind the Battle of Britain

The hard sell for peacetime defence spending
 Eric Morse, Ottawa Citizen November 10, 2013