Military Spending Research Articles

Economic Theory of Alliances: Sixty Years Later

The main purpose of this retrospective of the economic theory of alliances is to characterize three basic paradigms: purely public deterrence, spatial connectivity, and joint products. For each model, allies’ military expenditure (ME) responds differently to the aggregate ME of the other allies, known as defense spillins, thereby resulting in diverse burden sharing, allocative implications, membership composition, and institutional recommendations. The underlying theoretical models determine reduced-form equations for allies’ interdependent defense demands. We examine how changes in strategic doctrines, weapons technology, enemy threats, and membership composition affected NATO burden sharing and its allocative efficiency over time. Generally, changes that increase the share of excludable defense benefits possess a better prognosis for burden sharing and allocative efficiency. Principles and insights from the economic theory of alliances are related to defense demands at the operational level and for non-NATO alliances.

Indonesia’s defense acquisition strategy

ABSTRACT Indonesia is a huge archipelagic state, whose maritime security faces a growing strategic challenge from China. Jakarta's ability to respond, however, is hampered by its low share of military expenditure in national income. The resultant unaffordability means that military capability is dependent on loans from overseas’ contractors and banks to fund weapons acquisition. Consequently, Indonesia’s acquisition strategy has been focused on closing the gap between capability aspirations and budgetary reality. It represents a case study of unorthodox funding options, comprising export credits, countertrade and institutional loans. In turn, Indonesia’s acquisition pathways have been shaped by budgetary inadequacy, and include 2nd hand equipment markets, barter and international technology-sharing programs. Future acquisition policy reform is essential to remove the inefficiencies associated with the present cost-minimization approach.

Reducing U.S. military spending could lead to substantial decreases in energy consumption

The U.S. military is a significant contributor to the climate crisis and other sustainability concerns. However, there is very limited research on how changes in U.S. military spending directly impact Department of Defense energy consumption and thereby greenhouse gas emissions. Here, we conduct a time series analysis of the relationship between U.S. Department of Defense (DOD) direct energy consumption and U.S. military expenditures from 1975 to 2022, and we test for directional asymmetry in the effect of expenditures on energy consumption. We estimate error correction models, which we ensure are free from residual autocorrelation and structural breaks. We find that a decrease in expenditures has a larger effect on decreasing energy consumption than an increase in expenditures does on increasing consumption. Further analyses reveal that this is due to cuts in DOD energy consumption from facilities and vehicles and equipment, and jet fuel in particular. We also illustrate the potential impacts of different spending decisions on DOD energy consumption and present a forecast from 2023 to 2032 for seven different scenarios. We show that sustained cuts to U.S. military expenditures could result in annual energy savings on par with what the nation of Slovenia or the U.S. state of Delaware consumes annually by 2032.

The Long-Run Effects of Government Spending

Military spending has large and persistent effects on output because it shifts the composition of public spending toward R&D. This boosts innovation and private investment in the medium term and increases productivity and GDP at longer horizons. Public R&D expenditure stimulates economic activities beyond the business cycle even when it is not associated with war spending. In contrast, the effects of public investment are shorter-lived, while public consumption has a modest impact at most horizons. We reach these conclusions using BVAR with long lags and 125 years of US data, including newly reconstructed series of government spending by main categories since 1890. (JEL E21, E22, E23, E62, H50, H56, O30)

Security Expenditures and Fiscal Strain: The Impact of the Farmer-Herder Conflict on Public Finance in Northern Nigeria (2015–2024)

Nigeria has been entrapped in a cycle of insecurity which has not only affected the lives and properties of its citizens, but as had a colossal effect on the macro-economy of the state. The waves of insecurity since the genesis of the fourth republic have created patterns of unending micro and macro insecurity, with a resounding feature of immediate and relative financial consequences. This insecurity in multiple parts of the Northern part of Nigeria broadens and stretches the state’s efforts to thwart the violence. So, this study examines the fiscal implications of insecurity on Nigeria’s public finance between 2015 and 2024, with a focus on defence expenditure, social sector allocations, and revenue generation. Using panel data and the systems theory framework, the research explores how escalating insecurity driven by insurgency, banditry, and herder-farmer conflicts has shifted fiscal priorities towards defence spending at the expense of critical sectors like education, health, and agriculture. Empirical findings reveal that insecurity has led to a disproportionate allocation of resources to defence, rising from $16 billion in cumulative spending between 2008 and 2018 to N3.25 trillion in 2024 alone, representing 12% of the national budget. Concurrently, revenue generation has declined due to disruptions in agricultural production, trade, and investment in conflict-prone areas, thereby constraining fiscal space. Comparative insights from conflict-affected countries such as Afghanistan and Somalia further illustrate the destabilising economic effects of prolonged insecurity.

Problems of Employment of the Older Generation during the Period of Raising the Retirement Age in Russia

The subject of the work is the balance of labor resources of the Russian Federation in the medium term, taking into account the specifics of employment of the older generation and other age groups of the population. The influence of the economy and other processes and phenomena external to the labor market on the employment of the population is considered. The relevance of the study is determined by modern changes in politics, economics and the demographic situation, including the reform of the retirement age, COVID-19, CBO and a sharp increase in defense spending. The aim is to test the traditional methodology of labor resource balance as a tool for integrating the flows of economic, demographic information and taking into account the political situation in the process of forecasting employment. As a result of the study, variant estimates and forecasts for 2025-2027 were developed for the number and structure of the Russian labor force, including the able-bodied population of working age, people beyond working age and migrant workers, employed and unemployed. It is assumed that in the medium term, the trend of economic growth will continue, which will gradually weaken pressure on the labor market, supporting the systemic shortage of labor resources that formed during the 2010s and 2020s, and create a base for employers to compete for labor and increase wages. The demographic situation in the medium term will consist of periodic increases in the nominal working-age population during the final stage of pension reform, which will not have a significant impact on the number of workers. The regulatory role in the number of labor resources and labor force will remain with external labor migration. Unemployment will remain at the current level, which tends to zero in the macroeconomic sense.

The Impact of The September 9/11 Terrorist Attacks on the Arms Trade and Defense Expenditures of States

Defense expenditures are important for the protection of states from internal and external threats and for ensuring security. In this context, the securitization of defense expenditures after the September 11 terrorist attacks increased the defense spending of countries and brought about the globalization of terrorism together with the changing agenda of security. The September 11 terrorist attacks caused an increase in the defense expenditures of states. With the increase in asymmetric threats and the deepening and expanding security discussions, states started to take joint action against the risk of global terrorism after September 11. In this case, the uncertainty experienced in the nature of the threat after the Cold War had a significant impact. This uncertainty experienced in the nature of the threat caused states to seek security, especially with the September 11 terrorist attacks, as the reference object of security to be protected as the referent object of protection. This search for security led to an increase in defense expenditures. In this sense, the aim of the article is to analyze the change in the defense expenditures of states after the September 11 attacks through the Copenhagen School securitization and desecuritization approaches, which are critical security approaches.

Geopolitical Risk and Military Spending in Poland

Objective: To examine the impact of geopolitical risk on military spending in Poland in the years 1993–2022. Research Design & Methods: Autoregressive distributed lags, error correction, and Granger causality test were used. Findings: Polish budgetary spending on defence is influenced by geopolitical risk in both the short and long term. Implications / Recommendations: An increase in geopolitical risk motivates the Polish government to increase its military spending. Contribution: The research verifies the theoretical nexus between external security risk and defence burden in Poland, a study which had never been done.

ПРАВОВЕ РЕГУЛЮВАННЯ ГОТІВКОВИХ РОЗРАХУНКІВ У СФЕРІ БАНКІВСЬКОЇ ДІЯЛЬНОСТІ В ГАЛИЧИНІ (1772–1918)

The article provides a historical and legal analysis of the legal regulation of cash settlements in the banking sector in Galicia (1772–1918), which has a practical significance for the current processes of improving the current legislation of Ukraine. It is noted that the financial reform of 1892 in Austria-Hungary was a key step towards the modernization of the monetary system of the empire. The reform contributed to the integration of the economy of AustriaHungary into the international financial system and the strengthening of its financial reputation. It is shown that before the reform of 1892, the main calculations were carried out in silver guilders. Gold was used to preserve wealth or for large commercial transactions. However, the shortage of gold in circulation limited its use in everyday transactions. After the reform of 1892, gold crown coins were used for large transactions and to ensure international payments. Silver coins remained common among the population for small payments. During the First World War (1914–1918), due to military spending and the economic crisis, the circulation of gold and silver decreased significantly. The monetary system actually switched to paper money, and the exchange of banknotes for gold was suspended. Gold reserves were used to finance the war. The war ended the era of the gold standard, pushing the monetary system to paper money and inflation. It is emphasized that the state budget of Austria/Austria-Hungary was formed at the expense of taxes on the population (land, income, trade), customs duties, state monopolies (in particular, on salt, tobacco) and income from state estates. Before the formation of AustriaHungary in 1867, the state budget was formed on the basis of a centralized management system. The main body responsible for drawing up the budget was the imperial court. A significant role in planning budget items was played by the Court Chancellery. The main expenditures included military needs (a relatively large percentage due to constant wars in Europe), maintenance of the administration and the monarchical court, and provision of infrastructure projects (construction of railways, ports). Galicia provided insignificant revenues to the budget, mainly through taxes and customs duties. The agricultural sector played a special role, since Galicia remained an agrarian region, as well as the exploitation of natural resources such as salt. Investments in the region's infrastructure were significantly lower than in other parts of the empire (banks tended to provide loans to large landowners, not industrialists). Therefore, Galicia remained one of the poorest regions of the empire. Economic difficulties prompted the mass emigration of Galician peasants overseas in the late 19th and early 20th centuries. At the beginning of the 20th century, Galicia became an important center of oil production, which affected its economic role in the state. Oil production in Drohobych and Boryslav at the end of the 19th century brought additional revenue to the budget.It is substantinated that the legal regulation of cash payments in Austria and AustriaHungary ensured the stability of the currency system, promoted economic development, but required constant improvement under the influence of crisis phenomena. In the period of 1772– 1918, when Galicia was part of the Habsburg Empire, the legal regulation of cash payments was based on special laws, imperial circulars, which established uniform rules for the issuance, circulation and withdrawal of cash, as well as international agreements. The Vienna Monetary Convention of 1857 ensured the stability of the monetary system, harmonized the circulation of currencies with neighboring states and promoted the development of international trade. The transition from bimetallism (silver and gold standard) to the gold standard in 1892 allowed to create a more stable financial system, although crisis phenomena during military conflicts reduced its effectiveness. The regulatory role of imperial decrees and circulars was important for ensuring legal regulation, but in conditions of economic challenges (crisis) the system was often forced to adapt through emergency measures. Keywords: legal regulation, cash payments, banking, reform, financial system, banking system, Galicia.

Michael J. Boskin, John N. Rader, and Kiran Sridhar (eds.): Defense Budgeting for a Safer World: The Experts Speak

Michael J. Boskin, John N. Rader, and Kiran Sridhar (eds.): Defense Budgeting for a Safer World: The Experts Speak

PAKİSTAN İSLAM RESPUBLİKASININ MÜASİR DÜNYADA HƏRBİ‒SİYASİ YERİ VƏ ROLU

An analysis has been conducted on the current geostrategic situation of the ‎Islamic Republic of Pakistan. The internal, regional, and international situation of ‎Pakistan, the only nuclear-armed state of Islamic world, has been analyzed. Against the ‎backdrop of territorial disputes between regional states, the main elements threatening ‎Pakistan's national security have been discussed. The impact of the ongoing global ‎power struggles on Pakistan has been analyzed. The interests of major powers within the ‎context of Pakistan have been highlighted. A brief analysis of the challenges and ‎opportunities Pakistan faces due to its geostrategic position has been conducted. From a ‎military perspective, it has been demonstrated how critical the territorial factor is for ‎Pakistan in a potential conventional war with India. A brief analysis of Pakistan's defense ‎strategy and military power has been provided. The key outlines of Pakistan's nuclear ‎doctrine have been shown. Attention has been drawn to the dangerous nature of the ‎‎"Hindutva" ideology of the current Indian government, which is attempting to create ‎hegemony in the region. The analysis also includes India’s rapid economic growth and its ‎increasing military spending, which has placed it among the top in the global arms race.‎

Policy Pathways for Progress: Study of Economic, Environmental, and Governance Determinants of HDI in Pakistan

This study examines the key economic, environmental and governance determinants of the Human Development Index (HDI) in Pakistan, using a multidimensional framework to analyze their long- and short-term dynamics. Using annual data from 1990 to 2022 the research applies Johansen Cointegration Test and Vector Error Correction Model (VECM) to assess the relationships between HDI and factors that may exert influence on its dynamics, including exports, remittances, military expenditure, carbon dioxide emissions, debt service, population growth, and women’s parliamentary representation. Its findings reveal that governance and demographic factors, particularly women’s representation in parliament and population growth, have significant positive impacts on the country’s HDI in the long run, highlighting the importance of inclusive governance and resource management. Conversely, economic variables such as exports and remittances appear to have negative long-term effects on the HDI, suggesting structural inefficiencies in Pakistan’s trade and remittance policies. Environmental degradation, represented by carbon dioxide emissions, poses a significant challenge with adverse effects on the HDI, in both the short and long term. Military expenditure demonstrates dual effect: while it supports the HDI in the long run by fostering stability, in the short run it diverts resources away from critical social investments. The study emphasizes the need for policy reforms to diversify exports, formalize remittance channels, and adopt sustainability-focused environmental strategies. To promote equitable development, it is essential to increase women’s representation in governance and balance the defense and social spending. This research contributes new insights by integrating economic, environmental, and governance dimensions into unified analytical framework tailored to Pakistan’s socioeconomic context and provides actionable recommendations for policymakers to prioritize sustainable and inclusive development initiatives in line with the global Sustainable Development Goals (SDGs).

Indicators of population safety and country involvement in armed conflicts worldwide (2014–2023)

Relevance. Given the unstable geopolitical situation in the world, there is a need to clarify international indicators that reflect the safety of living conditions for the populations across countries.The objective is to analyze the involvement of countries in armed conflicts and the safety of their populations using the Global Peace Index (GPI) and its components over the decade from 2014 to 2023.Methods. We studied world data on armed conflicts, their casualty rates, and economic costs provided by the Uppsala Conflict Data Program (UCDP) and the Peace Research Institute Oslo (PRIO). Obtained for over a decade, Global Peace Index data and their components were analyzed for 162 countries, based on annual reports published by researchers of the Institute for Economics & Peace. Due to high political sensitivity, data for Russia were not analyzed. We tested the data for normality distribution using the Kolmogorov–Smirnov test. Arithmetic means and standard errors (M ± m) were taken in account as well. Trends were evaluated using time series analysis and second–order polynomial trend modeling.Results and analysis. According to UCDP/PRIO, from 2014 to 2023, a total of 538 armed conflicts and wars were recorded globally. Those include 19 (3.5%) interstate and 519 (96.5%) intrastate conflicts. These conflicts and wars resulted approximately 1.479 million deaths, including 1,011,600 combatants (68.3%), 235,900 civilians (16%), and 231,700 unidentified individuals (15.7%). A trend towards increase was noted in both the number of conflicts and fatalities. The economic costs associated with preventing, mitigating, and responding to violence globally totaled 153.6 trillion USD. Those include 42.4% of military expenditures and 28.8% of domestic security spending. The average annual cost was $15.4 ± 0.6 trillion, accounting for 12.2 ± 0.3% of global GDP and 2,024.2 USD ± 58.2 per capita. Over the decade, 22.1% of countries improved their involvement in ongoing internal and external armed conflicts; 69.3% experienced deterioration; public safety and security improved in 66.9% of countries and worsened in 29.4%; militarization improved in 15.3% and worsened in 70.6%. The distribution of countries by GPI rating was: 8.6% for very high peace level countries; 29.1% high; 40.1% medium; 14.2% low; and 8.0% very low. GPI improvements were observed in 43% of countries, declines in 52.1%, and mixed trends in 4.9%.Conclusion. There is a noticeable trend of declining Global Peace Index score, increased militarization, and growing economic costs associated with violence prevention. These findings may help improve policies and programs aimed at enhancing population safety in various countries.

Ulysses S. Grant and the Panic of 1873

Ulysses S. Grant’s national financial understanding and expertise (including monetary policy) progressed across his presidency, enabling him to effectively manage the Panic of 1873 and its aftermath. To appreciate the financial challenges President Grant faced we first profile how the Civil War changed the United States economically. The article then turns to a discussion of the post–Civil War investment boom, which famously ended in panic on September 18, 1873. Causes of the panic are not explored or analyzed except to say that the panic (the bust) was implicit in the Civil War expansion of money and credit, which was redirected from wartime military spending to industrial production (including railroads) after the war (the boom). The failure of influential banker Jay Cooke triggered the panic, which set off a recession that was known at the time as the “Great Depression.” Pleas for the government to help by inflating the currency occurred immediately. Responses to the panic by President Grant and the New York Clearing House are discussed and are shown to have together effectively mitigated the effects of the panic. The narrative then turns to Grant’s postpanic national financial actions; namely, his veto of the Currency (or Inflation) Bill of 1874 and his sponsorship of, and signature on, the Specie Resumption Act of 1875. Both actions are consistent with Austrian economic theory and, along with Grant’s reduction of the national debt in seven of the eight years of his presidency and quiet leadership approach, contrast sharply with modern national financial policies, practices, and beliefs. Nevertheless, they set the foundation for “America’s greatest period of growth and wealth creation” (Stockman 2024, 167) and thus should be reexamined given the current state of national finance in the United States and the risks it poses.

The Global Revolution in Military Affairs and Comat Effectiveness: Challenges and Prospects for Nigeria

The advent of the Global Revolution in Military Affairs (RMA) has fundamentally transformed the character of warfare, emphasizing technological superiority, precision weaponry, information dominance, and network-centric operations. This paper examines the implications of the RMA on Nigeria’s combat effectiveness, assessing the challenges posed by structural deficiencies, limited defense spending, inadequate technological capacity, and institutional inertia. Using qualitative analysis and a review of secondary data, the study reveals a significant gap between Nigeria’s current military capabilities and the strategic demands of modern warfare. However, it identifies key prospects for improvement through policy reforms, enhanced investment in defense technology, regional partnerships, and the integration of artificial intelligence, cybersecurity, and drone warfare. The paper concludes that while Nigeria faces substantial obstacles in aligning with the dynamics of the RMA, strategic commitment to modernization and innovation can enhance its combat readiness and national security architecture. Keywords: Revolution in Military Affairs, combat effectiveness, Nigeria, military modernization, information warfare, defense technology

COLLECTIVE DEFENSE – A MEANS TO ACHIEVE A MORE SUSTAINABLE FUTURE

The report analyzes the geopolitical situation in the world at the beginning of 2025. NATO is entering its eighth decade as a successful military-political alliance but faces new threats, which we will examine in this study. The conflict between Russia and Ukraine highlights the need for adaptation, deterrence, and innovation. NATO’s Strategic Concept until 2022 reaffirms its commitment to unity and security. This study uses the Thomas L. Saati and Lotka–Volterra equations for security analysis, identifying key dependencies in the changing landscape. It outlines five main challenges: adapting NATO and the EU to new threats, modernizing military systems, prioritizing military security in Bulgaria, increasing the military budget by 2027, and emphasizing collective defense for European resilience. An interdisciplinary approach is crucial to address these challenges effectively.

State budget expenditures under martial law: Case of Ukraine

The direction of the state budget to defense and the military-industrial complex under martial law imposes more stringent requirements on the system of formation and execution of state budget expenditures. The study aims to determine the efficiency of the distribution of state budget expenditures and their impact on the country’s macroeconomic stability under martial law. To evaluate the implications of martial law on the expenditure component of Ukraine’s state budget, a correlation regression analysis was employed to investigate the relationship between the budget deficit and the levels of total state budget expenditures and defense spending. The empirical findings indicate that fluctuations in state budget expenditures are a significant determinant of the budget deficit. In particular, a 1 billion UAH increase in total expenditures is associated with an average rise in the budget deficit of 1.19%. This result underscores the importance of a sound fiscal policy that ensures the efficient and rational allocation of budgetary resources, particularly under conditions of heightened military and security needs. Based on analytical results, medium-term budgetary projections for the period of 2025–2027 were developed. The forecast estimates that state budget expenditures will constitute approximately 45.74% of GDP, while the budget deficit is projected to reach 18.84% of GDP. The findings emphasize the need for effective expenditure management and strategic prioritization of fiscal resources under martial law. The paper offers directions for strengthening the macroeconomic stability and financial resilience of Ukraine under martial law through the rational distribution of budget expenditures.

The Evolution of Türkiye's Defense Spending: A Comparison with NATO Countries

Defense expenditures are the expenditures that a country allocates from its national income to ensure its security and protect its sovereignty. These expenditures are vital to a nation’s future and prosperity and are prioritised for political and strategic reasons. It is therefore difficult to reduce or completely abandon defence expenditures. As a key factor in shaping national security policies and international relations, defense expenditures of NATO member states influence both the balance of power among them and the foundation of strategic relations and national security perceptions. This study provides a better understanding of the evolution of NATO member states’ military strategies and their role in the broader security framework, as well as information on their defense expenditures. The primary objective is to compare Türkiye’s defense expenditures with those of other NATO members. Additionally, the research explores NATO’s historical background, examines defense spending patterns, identifies key factors influencing these expenditures, and analyzes NATO’s budget allocation for defense. In examining NATO’s historical development, the most recent members, Finland and Sweden, are also included within this framework. The analysis encompasses the period from NATO’s establishment in 1949 through to 2024, offering a comprehensive view of changes in defense spending over time.

War, opium and economic growth in Afghanistan

ABSTRACT This study examines the association between armed conflict, opium production, and economic growth in Afghanistan from 1978 to 2022, emphasizing the complexities of its conflict-driven political economy. While war generated short-term artificial economic growth through foreign aid and military spending, it simultaneously fostered dependence on opium production. Escalating violence enabled the expansion of the opium economy, which became a vital survival strategy amid persistent political instability. Foreign military assistance, aimed at promoting stability, often prolonged conflict and reinforced illicit economic structures. The study further highlights the role of weak governance, measured by executive corruption, in driving economic decline and fostering illegal economic activities. These findings underscore the paradoxical effects of war and foreign intervention, generating artificial war-driven economy while entrenching long-term fragility. The study concludes by stressing the need for governance reform and a critical reassessment of foreign policy to disrupt Afghanistan's persistent cycles of violence, opium production, and economic vulnerability.

The Spatial Dynamics of Terrorism, Military Expenditure and Income Disparities Across Nations

Terrorism has both temporal and spatial dimensions. In response to terrorist incidents, a country may increase its military expenditure. This increment in military expenditure has spatial differences. Besides, the income (GDP) of a country has been found to be somewhat related to the terrorist incidents within a country. In this background, this research explores the spatial dimension of the interrelation between terrorist incidents, military expenditure, and income of the countries. Using secondary data sources from different sources, and considering 86 countries, this study investigates the latest condition of spatiality by testing two hypotheses – (1) a high number of terrorist incidents leads to military expenditure, but not for the high-income countries, and (2) the countries with high number of terrorist incidents and high military expenditure (both in comparison to each other), are regionally in the safe haven for terrorists, as proposed by the USA. The findings suggest that both the hypotheses are correct, but refine the hypotheses by additional observations. Whereas the low-income African countries of Burkina Faso, Mali, Chad, and Togo have high military expenditure as percentage of their GDP in response to high number of incidents of terrorism, the Latin American country Colombia, and the South Asian Countries Myanmar and Pakistan are in the same foot, albeit they belong to higher income-groups. The countries in the Middle East and Egypt, although considered to be safe haven for terrorist organizations and having a high number of terrorist incidents, have rather comparatively lower military expenditure as percentage of their GDP, in comparison to other countries.