Transcript Accounting for military activities in peace

A. Vanoli:
Accounting for military activities in peace-time and
war-time: Is war a process of economic production?
Swiss Federal Statistical Office
Philippe Stauffer
29th IARIW Conference
Session 7 A SNA (2)
08.07.2015
Military Expenditures:
A brief history of treatments
Pre-SNA 68
Final consumption expenditure of government
SNA 68
Intermediate consumption of government
SNA 93
1. Gross fixed capital formation (GFCF)
when
similar goods are potentially used for
civilian
purposes.
2. Intermediate consumption of government
for
all other goods.
AEG proposals
1. GFCF for goods which can be used
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Arguments in favor of treating
military expenditures as GFCF

Normative character of treatment in SNA 93 not clear to
users.

Treatment inconsistent with international accounting
standards.

Weapons:
1. provide a nation with economic benefits (protection of
liberty and property).
2. provide defense services.

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Treatment must be similar for equipment used by military
forces and private bodies in charge of security.
Implications of
AEG proposals:
1. Different nature of contribution of military expenditures to
output and final consumption expenditure of general
government.
2. Higher value added for general government and GDP.
3. Higher net saving of government.
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Arguments of A. Vanoli
against the AEG proposals
1. Analysis must be based on what military activities are in
time of war.
2. Military equipment and weapons are not economic assets
engaged in a process of production. They are political
assets.
3. Confusion between output and outcome.
4. Not all assets are economic assets.
5. Not all assets have to be treated in a uniform way in the
system.
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Alternative treatment proposed
by A. Vanoli
1. All military expenditures should be considered as final
consumption expenditures
2. A notional government sector should be introduced
3. A satellite account should be created
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Questions to the
author (A. Vanoli):
1. What about the argument that the vast majority of military
equipment is not engaged in acts of combat ?
2. What about the analogy with the public or private sector
(police forces and criminal justice system), where
deterrence is considered as being the output ?
3. Is the fact that military equipment can be resold not an clear
indication that these equipments are economic assets ?
4. What is the use of a satellite account in this context ?
08.07.2015