Who’s Hiding under the U.S. Umbrella? Students of the Cold War learn that, to deter possible Soviet aggression, the United States placed a “strategic umbrella” over NATO Europe and Japan, with the United States providing most of their national security. Under President Ronald Reagan, the United States spent 6 percent of GDP on defence, whereas the Europeans spent only 2 to 3 percent and the Japanese spent only 1 percent, although all faced a common enemy. Thus the U.S. taxpayer paid a disproportionate share of the overall defence spending, whereas NATO Europe and Japan spent more on consumer goods or saved.

a. Explain the free-rider problem described in this news clip.

b. Does the free-rider problem in international defence mean that the world has too little defence against aggression?

c. How do nations try to overcome the free-rider problem among nations?