The Kyiv School of Economics released an estimate that as of March 24th the direct damage caused to Ukraine’s infrastructure during the war has reached almost $63 billion. Global economic losses due to the war are $543–600 billion. The cost of lost lives is undoubtedly even higher. Every day, the price of war rises.
Thus, we must do everything in our power to reduce the cost. Insufficient action for the defeat of Russia today will weigh on the world for generations, spiraling into a new arms race.
On Monday, March 28th, Joe Biden proposed a new budget for 2023. Among the various line items, the single largest was $813 billion for the Pentagon, of which $682 million is directly allocated for military and logistical support in Ukraine. This would be a 4% increase from the $782 billion allocated this year. Biden is one of many heads of state to recently announce large military spending packages. Germany’s Olaf Sholz proposed a one-time €100 billion increase in military spending, effectively doubling the defense budget. Similarly, Belgium, Romania, Italy, Poland, Norway, and Sweden have all pledged to increase their military spending. A clear message is being sent to Russia. The western nations will act in support of their interests abroad by militarily countering Russian aggression.
Spending increases today will seem petty in the future if Russia is not defeated and reintegrated into the world. The failure to sufficiently curtail Russia may lead to a new cold war, the remilitarization of Europe, and significant economic loss for the world. A new cold war will not only sanction unnecessary death through proxy conflicts like those we witnessed in the past, such as the Korean War, the Vietnam War, or the Soviet-Afghan War but will reallocate trillions of dollars away from productive civilian purposes to an ever-growing strategic arms race.
NATO member states have a nominal GDP of $42 trillion. Of that total, 2.5% is spent on defense. Just a one percent increase in GDP spending on defense will result in an increase of over $400 billion, similar to the entire output of the medium-sized economy of Austria. Unfortunately, a cold war risks more than a one percent increase in spending. During the height of tensions between the Soviet Union and the United States US military expenditures were around 9% of GDP in the 1960s. Today, they are around 3.5%. Comparatively, we spend less than 5% of our entire national income on education. A cold war-like military spending spree by NATO alone would amount to over $3 trillion. This is similar to the entire output of Germany, the world’s fourth-largest economy of 80 million people. And if 20th century Cold War spending levels return on a global scale, $7 trillion would be spent on our collective defense. This value is so large that only the economies of China and the United States are even comparable in scale. To put that into perspective, a cold war defense spending hike would cost each American five thousand dollars per year.
It is true that some money spent on military funnels back into the private sector through military purchases of goods and services. Military bases support small businesses that serve their operations. Militaries directly purchase goods such as fuel, food, and vehicles among others. Militaries also employ a significant share of developed economies. However, it is clear that military spending is made as a substitute for other public spending. Every tank, shell, and rifle is an exchange for schools, roads, and hospitals. This is not to mention the human cost that large armies levy on their populations through mandatory service. Conscripted soldiers are lost workers. Some of these individuals lose vital productive time, delay education and marriage, and are left poorer after service than in the absence of it. In fact, recent economic literature suggests that military spending and economic growth have a strong inverse relationship. Greater military spending discourages growth and makes us poorer.
By slipping into a new cold war, we risk slowing down growth and committing our resources to ballooning the defense industry. It is emphatically in the best interest of the European continent and the world as a whole to end the war in Ukraine as soon as possible and to prevent the militarization of Europe. Failure to act not only endangers the lives of those immediately at war but also impacts the well-being of people oceans away. It is our duty to ensure a free and prosperous Ukraine and in our best interest to defeat and reform Russia in order to avoid a costly arms race.
The authors do not work for, consult to, own shares in or receive funding from any company or organization that would benefit from this article, and have no relevant affiliations