The Economic Consequences of Military Expenditure
S.B. Bot (TU Delft - Technology, Policy and Management)
Servaas Storm – Mentor (TU Delft - Economics of Technology and Innovation)
U. Pesch – Graduation committee member (TU Delft - Ethics & Philosophy of Technology)
M. de Kruif – Graduation committee member (Royal Netherlands Army (retired Lieutenant-general))
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Abstract
The perspective of politicians and academia on military expenditure and its economic consequences is too often viewed from a short-term perspective and neglect the longer-term. Rising global turmoil has revealed this fragile thinking in many European countries, demonstrating that economic power is insufficient to protect their fundamental values and that it also requires military capacity (which declined significantly after the end of the Cold War). This study examines the economic consequences of military expenditure from the political, economic and military domains, focusing on Germany and the Netherlands. To determine the economic consequences, economists commonly refer to the fiscal multiplier. This study concludes that the fiscal multiplier can be used purely as a theoretical concept. Measurable data are insufficient to capture short- and long-term effects on the economy. The intangible part looks at components of economic consequences in a broader view, covering hybrid warfare, the role of climate, innovation, as well as the role of the free market, cooperation and dependency. This reveals that military expenditure is of greater importance than measurability suggests. A novum modus operandi takes a step towards a new perspective on the economic consequences of military expenditure. Herein, themes on uncertainty, unpredictability, asymmetry, efficiency and non-linearity are explored (such as whether NATO and the EU are too big).