Tanks instead of bread

The militarisation trend could cost the global economy dearly

Economics is a peaceful science. Nevertheless, the mainstream of the forum in Davos was rather war. They have long debated the problems of containment, increasing the production and supply of weapons to different regions of the world... Actually, what does the economy have to do with it? Or rather, the West has finally switched to the rails of militarisation. The path is a dead end in terms of development. Of course, one can make money in war. And quite a few entrepreneurs began to build their empires on military supplies. But the devil lies in the fact that few people make money on weapons, ammunition and other military supplies, and production as a whole stagnates rather than develops. As a matter of fact, what we observe in the same Europe.

Weak stimulus

Of course, there is a popular opinion from variations on the theme of neo-Keynesianism: they say that the buildup of weapons can be considered one of the ways the state invests in infrastructure. Indeed, what, in fact, does it matter, through which projects budgetary influences create demand: the construction of autobahns or the production of tanks? And the difference is really huge.

The military industry has the lowest value added multiplier compared to other industries. By the way, it was Western economists who conducted a whole series of studies on this topic. Mathematically and empirically proved: excessive production of weapons is not a significant incentive for the economy.

True, specialised concerns in the same America are promoting a different idea. Another issue is that their opinion is not scientifically substantiated.
The facts say that every dollar invested in the military-industrial complex generates only 1-2 dollars of added value in other industries. While for construction this indicator is $4-5, and for mechanical engineering it fluctuates between $7-12. Therefore, the deployment of massive production in the United States of multiple rocket launchers, ammunition, various anti-aircraft and missile systems will not be a significant incentive to revive the economy as a whole. Although a certain layer of entrepreneurs (but very narrow) will bring huge profits. But the rest of the people will be left with nothing.

Ram lobby

The situation is even more dramatic in Europe, which cannot fully ensure its security, so it imports a lot of military equipment and systems.

Naturally, from the same USA. Among other things, military infrastructure is being actively built in a number of European countries. I want to note: at all times, construction has been an important factor in any war. In the Middle Ages, castles were built, then fortresses, and other strategic objects. And every year the importance of construction is only increasing, as well as investments in military communications: logistics, transport, information and others. By and large, NATO did all this in the same Baltic countries. Huge investments have been made. What about the effect? There is practically no economic effect. The Keynesian model works very poorly in this case. More precisely, it doesn’t work at all. Military objects do not form multiplier effects. Although, it should be noted, a narrow circle of specialised companies makes great money. As well as some officials.
Therefore, the military industry has a ram lobby in the Western world. A term that is customary to cover up banal corruption in the liberal world.
Once upon a time, the World Economic Forum was distinguished by pragmatism. Before the pandemic, for example, its participants discussed the problem of systemic restructuring of liberal economic models, since they no longer correspond to the modern world order. But these questions are now forgotten. And many discussions were replaced by militaristic rhetoric. It will not lead anyone out of the recession. On the contrary, it will drive them even further into waste. Indeed, some officials and commercial structures got rich on the construction of NATO infrastructure in Poland, Lithuania, and Estonia. But investments in the modernisation of ports, the construction of new terminals, logistics facilities that would create jobs and generate demand for services, maintenance, and operation — there was no money for these projects. A multiplicative effect would have worked here, when one industry pulls a few more related ones like a train.

There is no happiness

Nonetheless, the vector towards the fragmentation of the world economy, the forced sanctions severance of relations and, in general, some economic ties with the ‘wrong’ regions generally killed some industries. And the reverse animation has already worked. Therefore, there is NATO infrastructure in the same Eastern Europe, but there is no economic happiness.

Of course, there will be opponents who will argue that the conflict in Ukraine has put the issue of security squarely. No one can grudge money for it. All for victory. But if we plunge into the chronology, then the activity of the alliance began on the eastern flank not yesterday, but at the beginning of the last decade. When there was no conflict between Kiev and Moscow.
Furthermore, the American economy also sags somewhat from excessive military spending. But overall it wins. First, after all, the United States provokes the export of its weapons and other military goods and services. And this is no money. Secondly, now the American economy will definitely be stronger than the European one. Therefore, Washington can play for a fall based on the formula ‘the worse, the better’.
Indeed, they will burn their fat a little, but during this time only the skeleton will remain from the EU. At least from small states. Sure thing, I mean in economic terms. Therefore, in Davos, they did not discuss how to save the economy, but worked out ways to ruin it even more. However, there are too many contradictory, illogical and simply stupid events and processes taking place in the world now, so you should not be surprised.


By Vladimir Volchkov