The re-election of US President Donald Trump has played a key role in prompting the launch of the ReArm Europe Plan, an initiative aimed at advancing Europe’s strategic military autonomy. Notably, the plan does not establish a common European defense force. Rather, it sets up a shared fund – worth €800 billion – to support individual EU member states’ military expenditures.
To better understand the implications of this shift, Reset DOC spoke with Dan Smith, Director of the Stockholm International Peace Research Institute (SIPRI) and one of the world’s leading experts on armed conflict, defense policy, and disarmament, during the Festival of Human Rights in Milan.
Is it possible to determine which nations are producing the largest number of weapons and which are purchasing the most?
It’s difficult to get precise answers because there are many uncertainties in the data. The more detail you look for, the more imprecision you encounter. However, if the question is kept relatively general, then it’s possible to answer it with a high degree of confidence. There is absolutely no doubt that the United States is the world’s largest producer, purchaser, and seller of weapons. It dominates the global statistics on both military spending and the arms trade, currently accounting for over 40 percent of all international arms exports.
There is also a practice of transferring weapons from one country to another and then on to a third party – the so-called triangulation mechanism – in order to evade international scrutiny. But in practice, this doesn’t work very well. Most major arms transfers remain visible to international observers like us. The finer details may be imprecise, but the overall picture is quite clear.
Nowadays, there’s an ongoing debate between those who view the new rearmament plan – the Plan for Defense – as a project to support the defense industries of individual nations, and those who see it as the first step toward a common European defense. Who is right?
We talk about “rearmament” as if the European Union was currently unarmed, and that simply isn’t true. European Union member states, along with the United Kingdom, already have very high levels of military spending – much higher than Russia – and together they have quite capable armed forces. However, those forces and their defense industries are still largely fragmented.
One of the questions that has been part of the European defense conversation for at least the last 50 years is whether European arms industries and armed forces should move closer together. Should they not only conduct more joint activities but actually engage in joint formation?
Think about it: 28 states, each with their own armed forces, means very high transaction costs. You have that many general headquarters, that many ministries of defense, that many pension systems, and so on. There are no economies of scale. That’s why larger countries with much bigger populations – like the United States, Russia, or China – can do far more. They benefit from economies of scale.
Will this plan move the national military forces closer together?
This so-called rearmament plan doesn’t offer a clear answer in either direction. It could be implemented in a way that encourages the unification of arms industries, alignment of procurement policies, and possibly even greater coordination among armed forces. But it could just as easily move in the opposite direction—reinforcing national arms industries and maintaining the separation of military forces.
As long as those forces remain divided, the industries will too, because they are responding to national markets. This is a question that has been around for decades, and it may not be resolved now either.
But perhaps the Trump presidency changed the situation?
Yes. Because of Trump, the leadership of most European governments has become very concerned that they can no longer rely on the USA for their security. And that, in turn, is likely to encourage greater European unification in military efforts.
Is this really a good thing or a bad thing?
Simply saying that the solution to the challenges we face – particularly in light of Russia’s aggression against Ukraine – is to spend more money isn’t necessarily the right answer. Generally speaking, if you throw a lot of money at a problem, you don’t get a solution—you get inefficiency, waste, and corruption. The focus shouldn’t just be on how much we spend, but on how we spend it.
What are the economic effects of this military spending?
I think the long-term evidence is mixed. You can say, for example, that World War II saved the US economy after the 1929 crash and the Great Depression of the 1930s. But during the 1950s, ’60s, and ’70s, it was very clear that the countries with the fastest economic growth were those with lower levels of military spending. Investment in the civilian sector proved to be much more profitable. Military spending, on the other hand, often displaced investment in the civilian economy and led to lower overall growth.
In more recent years, especially in Europe, the picture has become more mixed. Long-term growth rates have been declining, and with each new crisis, recovery tends to be slower. I’d be very surprised to see solid evidence showing that military spending generates sustained growth and job creation over a decade. In the short term, you might see some impact – especially if the economy is weak – but that effect tends to fade over time.
Military spending should never be justified purely on economic grounds. If your goal is to create jobs and promote growth, you can achieve that by investing in hospitals, schools, and similar public infrastructure.
Based on the data in your possession, can it be said that countries cut back welfare spending in order to purchase weapons?
In principle, there are three ways to fund increased military spending. First, if your economy is growing, then overall government spending can increase—including both military and welfare budgets. Second, you can raise taxes, especially on the wealthy, and use that additional revenue to fund higher military spending.
But if the economy isn’t growing and raising taxes isn’t politically feasible, then the third option is to cut spending elsewhere. The first area usually targeted for cuts is overseas development assistance. That’s still welfare spending, but it’s external rather than domestic. However, this represents only a small share of national income. In the UK, for example, the government reduced spending from 0.7 percent to 0.3 percent of gross national income to help fund increased defense spending. That’s just a 0.2 percent shift—so any significant increase would have to come from cuts to other areas like infrastructure, welfare, policing, communications, and so on.
There is evidence that some countries, at various points in time, have either reduced or restrained welfare spending to support military budgets. Sometimes it’s not about outright cuts but about holding back growth in social spending – a form of austerity in social programs, while the military budget continues to expand.
Cover photo: 17 September 2024, Saarland, Saarlouis: Soldiers carry out an exercise during the visit of Federal Minister of Defense Pistorius’ Airborne Brigade 1 to the Graf-Werder barracks. (Photo by Laszlo Pinter / DPA / dpa Picture-Alliance via AFP)
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