AI-generated illustration from Magnific
No study has ever shown that military spending outperforms civilian investment.
What Europe’s leaders say about rearmament and the economy
“Europe must build a strong defence industrial base — it will create jobs and drive innovation.”
— Ursula von der Leyen, President of the European Commission (2024)“Investing in defence is investing in Europe’s economic future.”
— Thierry Breton, EU Commissioner for Internal Market (2023)“Rearmament is an opportunity for European industry and for growth.”
— Emmanuel Macron, President of France (2022)“The €100 billion special fund will strengthen Germany’s economy and technological base.”
— Olaf Scholz, Chancellor of Germany (2022)“Increasing defence production will create Danish jobs and support our economy.”
— Mette Frederiksen, Prime Minister of Denmark (2023)“Defence investments are also investments in Finnish industry and competitiveness.”
— Petteri Orpo, Prime Minister of Finland (2023)“Our defence expansion is a stimulus for the Polish economy.”
— Mateusz Morawiecki, Prime Minister of Poland (2022)“Higher defence spending strengthens our economies and our industries.”
— Jens Stoltenberg, NATO Secretary General (2023)
European leaders repeatedly tell their citizens that rearmament is good for growth, good for jobs, good for innovation, and good for competitiveness. They present defence spending as a kind of industrial policy — a stimulus package wrapped in camouflage. These quotations are not marginal statements; they come from the highest political offices in Europe. They form the dominant narrative of Europe’s new militarisation.
This article examines that narrative against the best available economic evidence. What follows is not ideology, not opinion, not geopolitics — but economics: multipliers, opportunity costs, capital productivity, market structure, and long‑term welfare effects. And when these economic facts are placed next to the political claims above, the contrast becomes impossible to ignore.
1. What we concluded in the 1970s and 1980s
When economists and peace researchers examined the economic effects of military spending in the 1970s and 1980s, they did so with a seriousness and intellectual independence that is almost absent today. Scholars such as Seymour Melman, Emile Benoit, Kenneth Boulding, Milton Leitenberg, Dieter Senghaas, Ruth Sivard, Mary Kaldor, and Lloyd J. Dumas produced a body of work that remains unmatched in clarity and empirical grounding. Their analyses — and the debates they inspired — shaped an entire generation of thinking about the military–industrial complex, economic conversion, and the real social costs of rearmament.
Across countries, models, and datasets, the conclusion was remarkably consistent: military expenditure did not generate higher economic or social returns than equivalent civilian investments. The only way to make military spending appear “beneficial” was to assume that no comparable civilian investment would take place. In other words, the military sector looked good only when the civilian alternative was artificially removed from the equation.
These researchers also showed that the primary beneficiaries of military production were the arms manufacturers themselves. A small number of large firms captured the bulk of the profits, while the broader civilian economy saw limited spillovers. Smaller subcontractors benefited only marginally and often only temporarily. And they demonstrated that military spending was consistently low‑employment, low‑consumption, and low‑multiplier compared with civilian alternatives. One hundred dollars invested in health care, education, infrastructure, or culture created more jobs, more income, and more domestic demand than the same amount spent on weapons systems.
These findings were robust. They were replicated across countries and time periods. They were politically inconvenient. And they were quietly ignored.
2. Why these conclusions are even more true today
Half a century later, the empirical picture has not changed. If anything, it has become clearer. What is striking today is that the most rigorous analyses of defence spending do not come from defence ministries, security think tanks, or academic institutes. They come from banks — Nordea, SEB, Danske Bank, Swedbank, DNB — and from macroeconomic institutions such as the ECB and the IMF. These actors have no ideological stake in the defence debate. They simply need to understand fiscal risk, labour‑market dynamics, and long‑term debt sustainability. And their findings are remarkably consistent with what Melman, Benoit, Boulding and others concluded decades ago.
The European Central Bank is the most authoritative source. In its 2025 model‑based assessment of raising defence spending from 2 to 3 percent of GDP, the ECB concludes that “the short‑term output effects of higher defence spending are modest and depend critically on financing conditions.” It also warns that “import leakages reduce the domestic impact of defence expenditure,” and notes explicitly that “public investment in civilian sectors generally exhibits higher multipliers.”
The IMF’s 2026 panel study of the EU‑27 reinforces this picture, showing that defence spending stimulates activity only under narrow and favourable conditions — conditions that civilian sectors meet far more easily.
The Central Bank of Denmark warns that “a significant share of defence procurement is imported, which limits domestic economic effects,” and that “higher defence spending may require prioritisation of other public expenditures.”
Even Danske Bank Research notes that “defence spending is characterised by high import content and limited domestic multiplier effects,” and that “civilian public investment continues to deliver stronger employment and demand effects.”
Finally, even when banks write for defence‑sector clients, the economic reality still shines through: “defence production remains capital‑intensive and dominated by large corporate actors,” with limited spillovers.
What is most revealing is not only what European institutes publish, but what they never publish. No defence ministry, arms manufacturer, NATO‑affiliated think tank, or European research institute has ever produced a study comparing military and civilian multipliers. Even RAND Corporation — with unmatched modelling capacity — has never published such a comparison. If a favourable study existed, it would be cited endlessly. Its absence is definitive.
3. Military capital is negative capital
Weapons are not only economically sterile; they become negative capital the moment they are used. A fighter jet, a missile battery, or a tank that sits idle consumes resources without producing value. But once used, it destroys physical capital, human capital, infrastructure, and social welfare. An F‑35 that never leaves the ground is already a net drain on the economy — requiring more maintenance hours than flight hours, specialised labour, spare parts, fuel, and continuous upgrades. But an F‑35 that actually fires its weapons becomes far worse: it annihilates productive assets, kills or injures human beings who embody society’s most valuable capital, and triggers long‑term economic losses that dwarf its purchase price. In economic terms, military capital is not merely unproductive; it is structurally counterproductive. When activated, it becomes a mechanism for destroying the very foundations of economic growth.
4. Opportunity costs: the forgotten law of economics
People generally do not understand the concept of opportunity cost, even though it is the first law of economics: you cannot eat the cake and have it too. Every krone or euro spent on weapons is a krone or euro that cannot be spent on anything else. The question is never “Can we afford the F‑35?” but “What do we give up in order to buy it?” When governments invest in military R&D, the scientists, engineers, and research capacity involved are removed from solving the problems of climate adaptation, renewable energy, cancer treatment, artificial intelligence safety — or peace. Opportunity cost is not an abstract concept; it is a concrete loss of human capital, technological innovation, and social welfare. Military spending does not merely divert money — it diverts brains, time, and talent from the civilian challenges that determine our future.
Summary: Bridge to Part II to be published July 4
The economic case against rearmament is overwhelming. But the structural, political, and institutional dynamics behind Europe’s militarisation make the picture even more troubling. Part II examines the market structure of weapons production, the silence of European research institutes, Europe’s drift toward a war economy, and the forgotten history of conversion — once proven feasible, now ignored.