Tom, you’re right that military spending should not be based on GDP. Unfortunately, and somewhat paradoxically, as Hoppe has argued, countries (especially larger countries) that have relatively liberal internal economic policies tend to be richer, and thus their states tend to be more militarily powerful, and thus more aggressive, than states of developing or smaller countries. Only the US, with a $14 trillion GDP that could only result from a large, relatively free internal market, could afford to squander $3 trillion on the Iraq war (on top of untold trillions for the recent bailouts), for example. This doesn’t mean we should hope the state destroys the economy, though I suppose its ensuing reduced ability to wage war would be a silver lining; but it does provide another reason why decentralization is good: it leads to smaller states, with a reduced ability to wage war.

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