The Chair of the Finance Committee within the Irish Parliament invited me to make a submission to tell a – Scrutiny strategy of EU legislative proposals – particularly to debate proposals put ahead by the European Council to extend spending on defence. This weblog submit and the subsequent (tomorrow) will kind the idea of my submission which can go to the Joint Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation on Friday. The matter has relevance for all nations in the meanwhile, given the elevated urge for food for ramping up army spending. Some have termed this a shift again to what has been referred to as – Army Keynesianism – the place governments reply to numerous perceived and maybe imaginary new safety threats by rising defence spending. Nonetheless, I warning in opposition to utilizing that time period on this context. Through the fast Publish World Warfare 2 interval with the just about fast onset of the – Chilly Warfare – nations used army spending as a development technique and the time period army Keynesianism might need been apposite. These nation-building occasions additionally noticed an enlargement of the general public sector, which supported increasing welfare states and an array of protections for employees (occupational security, vacation and sick pay, and so on). Nonetheless, within the present neoliberal period, the elevated urge for food for additional army spending is being forged as a trade-off, the place cuts to social and environmental safety spending and abroad assist are seen as the best way to create fiscal house to permit the defence plans to be fulfilled. That trade-off is much more obvious within the context of the European Union, on condition that the overwhelming majority of Member States not have their very own foreign money and the funds obtainable on the EU-level are restricted. We are going to focus on that concern and extra on this two-part collection.
Latest Developments in Army Spending
It’s clear that world defence spending has accelerated lately within the aftermath of the Russian invasion of the Ukraine.
Many of the Member States of the – North Atlantic Treaty Organisation – have elevated the proportion of presidency spending dedicated to army spending each relative to the scale of their economies (measured by GDP) and as a share of complete authorities spending.
As soon as the tensions related to the Chilly Warfare have been diminished, NATO nations diminished their give attention to army expenditure.
In some instances, this was articulated as permitting social expenditures to increase.
The underlying premise, which for a lot of currency-issuing nations was false, was that the governments had monetary constraints and couldn’t preserve the degrees of army expenditure that have been widespread within the fast World Warfare 2 interval if the federal government wished to extend spending elsewhere.
There was clearly an actual useful resource constraint that might be binding at full capability which might outline some inflation ceiling by way of complete nominal expenditure.
However within the interval after the OPEC disaster of the Nineteen Seventies, economies hardly ever achieved something near full capability and so these actual useful resource constraints have been non-binding for many nations throughout this era.
With the onset of renewed tensions on the European continent, and rumblings in Asia, in addition to the quickly deteriorating state of affairs within the Center East, the sense of safety, which noticed diminished give attention to army expenditure by governments has been compromised.
We’ve seen exceptional statements from world leaders lately expressing that insecurity.
On March 30, 2024, the BBC report – Warfare an actual menace and Europe not prepared, warns Poland’s Tusk – quoted Poland’s Prime Minister as saying that battle is:
… not an idea from the previous … It’s actual and it began over two years in the past …
We live in probably the most essential second for the reason that finish of the Second World Warfare …
I do know it sounds devastating, particularly to individuals of the youthful era, however now we have to mentally get used to the arrival of a brand new period. The pre-war period.
Related remarks have been made on Could 22, 2024, by the then Secretary of State for Defence in his – London Defence Convention 2024 Defence Secretary keynote.
He mirrored on the interval of relative peace as a “golden period” in comparison with the current the place “ruthless, rule-breaking” nations had moved the worldwide setting from a:
… post-war to a pre-war period.
He mentioned that “An axis of authoritarian states led by Russia, China, Iran, and North Korea have escalated and fuelled conflicts and tensions.”
He mentioned this justified a major improve in authorities spending on the army.
And most governments have adopted swimsuit.
The Worldwide Institute for Strategic Research (IISS) report (February 12, 2025) – World defence spending soars to new excessive – famous that:
In 2024, world defence spending mirrored intensifying safety challenges and reached USD2.46 trillion, up from USD2.24trn the earlier yr. Development additionally accelerated, with the 7.4% real-terms uplift outpacing will increase of 6.5% in 2023 and three.5% in 2022. In consequence, in 2024, world defence spending elevated to a mean of 1.9% of GDP, up from 1.6% in 2022 and 1.8% in 2023.
A Briefing Doc ready for the Australian Parliament – Rising world defence expenditure (June 4, 2025) – by Nicole Brangwin confirmed that there was a 7.4 per cent actual development in world defence spending in 2024 (relative to 2023) and the proportion of GDP dedicated to defence rose from 1.8 to 1.94 per cent.
It was additionally famous, that knowledge from the Stockholm Worldwide Peace and Analysis Institute (SIPRI), exhibits there was a “37% world improve in army spending over the past decade, with the one largest improve for the reason that finish of the Chilly Warfare occurring in 2024”.
And the expectation for 2025 is for a good larger improve.
Desk 1 exhibits the NATO Member-States spending on army as a p.c of GDP for chosen years.
Solely 4 of the nations proven diminished their army spending as a p.c of GDP.
A few of the nations closest in geographic phrases to the Russian-Ukraine frontiers have expanded their army commitments relative to the scale of their economies considerably.
Non-NATO nations have additionally adopted swimsuit.
Desk 1 NATO Army Spending as a % of GDP, 2000 to 2025
Supply: SIPRI Army Expenditure database.
Observe: Iceland omitted resulting from lack of knowledge.
Many governments are additionally rising the proportion of their complete spending in the direction of army purchases.
Desk 2 NATO Army Spending as a % of Whole Authorities Spending, 2000 to 2024
Supply: Desk 1.
Observe: Iceland, Türkiye, and Montenegro omitted resulting from lack of knowledge.
Army Keynesianism
As a part of the political methods which have been deployed to justify this slightly important realignment of presidency priorities, the time period – Army Keynesianism – has been bandied round.
Army Keynesian refers to coverage selections to utilise defence spending as a development technique.
On April 14, 1950, the US Division of State and Division of Protection introduced President Truman with the key report – NSC 68 – or United States Goals and Applications for Nationwide Safety – which “supplied the blueprint for the militarization of the Chilly Warfare from 1950 to the collapse of the Soviet Union initially of the Nineties.”
The feelings expressed in that doc may simply relate to the present discussions in regards to the want for extra defence spending within the mild of elevated safety issues.
We learn that (p.4):
… the Soviet Union … is animated by a brand new fanatic faith1 antithetical to our personal and seeks to impose its absolute authority over the remainder of the world. Battle has, subsequently, develop into endemic and is waged, on the a part of the Soviet Union, by violent or non-violent strategies in accordance with the dictates of expediency. With the event of more and more terrifying weapons of mass destruction, each particular person faces the ever-present risk of annihilation ought to the battle enter the section of complete battle …
The Report famous that in contrast to the Soviet economic system, which it described as a ‘battle economic system’. the US had been devoted “to the supply of rising requirements of dwelling” (p.25) and that positioned it at a army drawback.
To justify its suggestion for larger army spending by the US authorities, the Report acknowledged (p.28) that:
… the US may obtain a considerable absolute improve in output and will thereby improve the allocation of assets to a build-up of the financial and army energy of itself and its allies with out struggling a decline in its actual way of life … With a excessive stage of financial exercise, the US may quickly attain a gross nationwide product of $300 billion per yr … Progress on this route would allow, and may itself be aided by, a build-up of the financial and army energy of the US and the free world …
Any such argument outlined ‘army Keynesianism’ as a structural development impulse, slightly than a cyclical response to poor financial cycle spending by the non-government sector.
Nonetheless, that doesn’t preclude utilizing army spending to kick-start an economic system throughout a recession.
Within the latter context, it’s broadly argued that the Nice Melancholy solely got here to an finish when governments elevated army spending to prosecute the Second World Warfare effort.
For instance, John Feffer in his 2009 article – The Threat of Army Keynesianism – mirrored on the fiscal decisions dealing with governments throughout the World Monetary Disaster and mentioned:
With authorities budgets shrinking and the financial disaster placing larger stress on social welfare packages, a shift of cash from army budgets to human wants would seem like a no brainer. However don’t count on a large-scale beating of swords into ploughshares. In truth, if early indicators are any indication, governments will largely shelter their army budgets from the present financial disaster.
Reference: Feffer, J. (2009) ‘The Threat of Army Keynesianism’, International Coverage in Focus, February 9.
There are lots of points which have been raised in opposition to governments adopting army expenditure as a main development technique, which we don’t canvas right here.
The issue we do tackle is that Feffer invoked the ‘trade-off’ card, like most commentators that need to criticise any buildup in army spending by governments.
Accordingly, to accommodate the elevated defence spending, cuts to social and different spending are required.
The choice method of claiming this within the phrases of Feffer is:
At a time once we urgently want funds for the meals disaster, the vitality disaster, the local weather disaster, the AIDS disaster, and different looming crises — all of which threaten human safety — army spending is nowhere close to the highest of the worldwide agenda.
Which means some monetary constraints on governments and inside that constraint there are higher issues for governments to spend their ‘constrained’ money on than defence procurements.
This narrative is dominant within the present discussions in regards to the want for elevated army spending.
On June 2, 2025, the UK Guardian article – Labour pushes ‘army Keynesianism’ to win assist for defence spending – reported that:
This “army Keynesianism” was emphasised on Sunday morning when ministers introduced plans to construct six new munitions factories, which might in time create 1,000 jobs and assist an extra 800, the Ministry of Defence mentioned.
The British authorities has claimed that the speedy enlargement in army spending would assist “create expert jobs, notably outdoors London, resembling at shipyards in Barrow, Devonport, Glasgow and Rosyth.”
They justified “diverting funds from abroad growth assist” the federal government may reinforce “the British industrial base”.
There may be some reality to that argument despite the fact that the federal government’s choice is being pushed by the fiction that it faces a monetary constraint.
The reality is that diverting spending that advantages the remainder of the world (the ODA) and channelling it into the home economic system will improve GDP and employment development in Britain.
The morality of that call is extremely questionable.
However there’s one other concern that’s most related within the case of the European Union’s plan, which we scrutinise later on this submission.
However whether or not it’s fascinating or not for Britain to be becoming a member of the ‘arms race’, if there’s actual useful resource house to accommodate the additional nominal spending on defence procurements in Britain with out reaching an inflationary ceiling, then the British authorities may have merely elevated its spending on the army with out compromising its world tasks to assist poorer nations by ODA.
The truth that they claimed the diversion was needed displays their adherence to flawed fiscal guidelines that assume the British authorities is financially constrained by way of its sterling spending capability.
We are going to return to that concern in Half 2.
The opposite fascinating side of the information introduced within the Tables above is that governments didn’t appear to depend on army expenditure throughout the GFC to revive development to their economies.
For the NATO nations, army spending as a share of GDP fell between 2008 and 2012 in 22 out of the 31 NATO Member States for which there’s suitable knowledge, whereas 2 of the States reported steady army spending relative to GDP.
So army Keynesian was not seen as a dominant fiscal technique throughout the GFC.
Additionally it is not a great characterisation of what’s taking place within the present setting, a degree we are going to flip to in Half 2.
Conclusion
In Half 2, I’ll give attention to the particular proposals being put ahead by the European Fee to extend army spending.
That’s sufficient for immediately!
(c) Copyright 2025 William Mitchell. All Rights Reserved.