Money does not stink

An alarming factor: the world economy is increasingly being restructured on a war footing

The global confrontation is definitely dragging on. Apparently, for a long time and seriously. The military-political situation itself is alarming. Tensions are rising in many parts of the world. Frozen conflicts, one after another, develop into confrontation and transform into hot spots. But there is another worrying trend: the world economy is moving along the track of militarisation. The production and sale of weapons and military equipment, dual-use goods have always played a fairly important role in both the public and commercial sectors in many countries. But today this industry is almost the engine of the economy of some states. Demand for military goods generates investment in these industries and expansion of production. And serious financial and economic interest is added to the geopolitical discord.

Militarisation of all countries

Last year, global arms spending rose 23 percent, breaking a Cold War-era record of more than $2.2 trillion. This is almost 2.5 percent of global GDP.
Experts note: the demand for weapons is only growing. And the only problem of the global military-industrial complex is increasing capacity. There is no end to consumers in the geopolitical situation. 

The Persian Gulf countries remain the leaders in consumption of military-industrial complex products. Ukraine came in third place in the world. But if in the past decade the countries of the Asian and Pacific regions were major buyers, now the emphasis is shifting towards European countries. They are also given priority by specialised international corporations, redistributing supplies in favor of NATO partners, postponing the fulfillment of orders for other buyers.

Guns before butter 

The conflict in Ukraine has significantly increased the demand for both weapons and ammunition. And today, companies in the military-industrial sector and the production of dual-use goods demonstrate some of the best financial and economic results on the market. Recently, large companies reported their profits, which increased significantly. And their leaders have only positive forecasts. Moreover, the war between Israel and Hamas will only push up demand. In particular, Lockheed, General Dynamics and RTX corporations recently announced that their financial results exceeded all expectations.
“We’ve gone from 14 thousand artillery rounds per month to 20,000 very quickly. We’re working ahead of schedule to accelerate that production capacity up to 85,000, even as high as 100,000 rounds per month,” General Dynamic Chief Financial Officer Jason Aiken said on a call with Wall Street analysts last week. “And I think the Israel situation is only going to put upward pressure on that demand,” he added.
It would take a long time to list the financial successes of the military industry around the world. By the way, almost half of the leading companies come from the USA. And today, corporations that have ‘combat’ divisions are among the most attractive to investors. Stock quotes are also turning in their direction. This means that the circle of beneficiaries of militarisation is gradually and steadily expanding. To this we must also add the interest of the financial sector, which issues loans and credits for the production and purchase of weapons.

There is another alarming trend: weapons are being produced at the expense of civilian products. It turns out that the growth of the global military-industrial complex does not provide a ‘pure’ advantage to the economy, but a substitutive one.

In other words, the famous formula begins to work: guns before butter. More precisely, not butter yet, but civilian equipment and products. However, if this trend continues, militarisation, at least in the Western Hemisphere, may also affect food. 

Diseases of military confrontation

The world is definitely overheated with numerous contradictions. Unfortunately, they are rapidly moving from the diplomatic plane into the hot phase. Undoubtedly, in many conflicts there are objective and subjective factors. It may not always be possible to directly blame the West (collectively or one of the individual states) for initiating conflicts. However, we admit: given that the United States and the EU laid claim to world leadership, regardless of the circumstances, part of the responsibility lies with them. At least part of it.

In fact, tension began to hover in the planetary air already in the last decade. And the degree of confrontation constantly increased. 
However, we have to admit: the main beneficiary of the current international solitaire is the United States. To a lesser extent, France and Germany.

Washington has not given up on promoting either democracy or liberal values around the world. But now it acts according to the formula not of Wilson, but of Hamilton. The first assumed the active participation of the United States in world affairs, acting as an arbiter. Including with weapons in hands. The second version of foreign policy involves comprehensive assistance to all forces friendly to Washington: money, weapons, diplomacy —  anything you like, but without direct armed support. The last transition chord was the US withdrawal from Afghanistan. Meanwhile, support from allies (old and new) for arms supplies and financial assistance has increased significantly.
As well as income from arms supplies. Today, physical security of sovereignty is a national security priority for most states. Accordingly, defense spending is rising around the world. And a lot of these funds end up in the accounts of American companies. In fact, the military-industrial complex is becoming one of the leading industries in the United States

We must not forget that the arms market is not simple commerce, but a factor in big politics. Recipient countries of military equipment one way or another become dependent on the supplier, who must provide them with spare parts, maintenance, and ammunition. And this fact is a significant trump card in the formation of foreign policy. 

Will the arms race cause American inflation to rise? There is a significant risk, and a systemic one at that. Promoting military production is not an easy task. But even more difficult is to return industry to civilian lines. Conversion is an expensive proposition. And in this context, no one learned the lessons of the Cold War.

By Vladimir Volchkov