The British daily points out that she herself The UK plans to spend around £36 billion a year on defense over the next decade. In the opinion of economists, this level of financing will only bring short-term economic growth, less than in the case of allocating funds, for example, to infrastructure or education. For the fiscal impulse to be lasting, the funds should support the development of competences, the reconstruction of the industrial base and the increase in exports, experts emphasize.
Read also: Germany will release “Big Bu” to Poland. He will be in this prison
The authors of “FT” indicate that military spending can play a positive role if it stimulates innovation in smaller enterprises and translates into increased productivity throughout the economyinstead of focusing only on orders from the largest arms producers.
Louis Knight from the Third Bridge analytical company estimates that The European defense industry is not prepared for long-term increases in demand. In turn, Claus Vistesen from Pantheon Macroeconomics warns that without expanding production capacity, additional resources may actually only fuel inflation — countries will spend more, but on the same products and services.
Prof. Ethan Ilzetzki from the London School of Economics points out that for many governments struggling with budget constraints Investments in transport, energy or education may be a more beneficial solution. However, as “FT” reminds, the European Central Bank in its analysis indicated that some of the defense funds could support research and development, increasing the productivity of the entire sector.
Read also: The German military is “concerned” about questions from the AfD
Guntram Wolff from the Bruegel think tank notes that financing new weapons technologies can bring broad economic benefits, although – as Prof. adds. Paolo Surico from London Business School – public investment in health and education continues to generate greater long-term returns.
Surico's research shows that increase in military spending by 1 percent. In the long run, GDP can increase production by up to 2%, but only if the funds are directed to research and development projects. Meanwhile, Europe spends only a fraction of what the United States does for this purpose – in the EU it is about 0.04%. GDP, in the UK 0.12%, while the US spends over five times as much. Additionally, the American venture capital sector invests much more actively in military technologies than the European one.
