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Dollars and Sense: Military Spending During an Economic Downturn

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Posted: September 30th, 2016

The relationship between military spending and GDP growth in peacetime seems an easy equation. When a country’s economy is healthy and growing, it can splurge on fancy new equipment and a larger standing army. When growth has slumped and government revenues decline, that country should tighten its belt and focus only on the most critical expenditures. For most, this basic math holds true.

However, for some, the equation is flipped. Rather than follow a more or less parallel path, the lines of GDP growth and military expenditures veer off in opposite directions. This seemingly inverse relationship might be expected of a country at war, fighting an existential threat, yet the same phenomenon can be seen in nations that are not locked in a clear struggle for survival.

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