For the first time in decades, the rich world is embarking on mass rearmament. Wars in Ukraine and the Middle East, the threat of conflict over Taiwan and President Donald Trump\u2019s impulsive approach to alliances have all made bolstering national defence an urgent priority. On June 25th members of\u00a0NATO<\/small>\u00a0agreed to raise their target for military spending to 3.5% of\u00a0gdp<\/small>, and allocated an extra 1.5% to security-related items (Spain insisted on a loophole). If they achieve that target in 2035, they will be spending $800bn more every year, in real terms, than they did before Russia invaded Ukraine. The boom goes wider than\u00a0NATO<\/small>. By one estimate, embattled Israel splurged more than 8% of its\u00a0gdp<\/small>\u00a0on defence last year. Even doveish Japan plans to stump up.<\/p>\n\n\n\n
Such vast sums could reshape the global economy, by squeezing public finances and shifting activity within countries. As politicians sell the benefits of rearmament to voters, many will claim that military spending will bring economic gains as well as security. Sir Keir Starmer, Britain\u2019s prime minister, promises defence will offer \u201cthe next generation of good, secure, well-paid jobs\u201d. The European Commission says it will bring \u201cbenefits for all countries\u201d. However tempting politically, such arguments are wrong. Using defence spending for economic objectives would be a costly mistake.<\/p>\n\n\n\n
The most obvious economic consequence of bigger defence budgets will be to strain public finances. Debts are already high and the financial pressures on governments, caused by ageing populations and higher interest rates, are mounting. The average nato <\/small>member, excluding America, will need to raise annual defence spending by 1.5% of gdp<\/small>.<\/p>\n\n\n\n
Read it all<\/a>.<\/p> How the defence bonanza will reshape the global economy
As they spend big, politicians must resist using one pot of money to achieve many goalshttps:\/\/t.co\/p7w5mjGcho<\/a><\/p>— Juhani Huopainen (@Huopainen) June 26, 2025<\/a><\/blockquote>