War Economy: More Tanks, Less Security?
Defence budgets are exploding, but GDP can’t tell us if we’re safer – or just poorer and more fragile.
Hi everyone,
this is the fourth post in this mini-series based on my new book Transition Science in the Economy. Today we look at the return of the war economy – a world where defence budgets explode, but (or because) people don’t feel safer.
In this edition we’ll explore:
how the war economy quietly squeezes the middle class,
why GDP can’t see real security or vulnerability, and
what a “security strategy” would look like if it actually protected people, not just hardware.
If you only looked at military budgets,
you’d think we are entering a golden age of security.
Defence spending is rising.
NATO targets are back in fashion.
New industrial plans are announced every week.
And yet, when you talk to people, they don’t feel safer.
They feel more anxious, more over-taxed, more unsure about the future.
Welcome to the return of the war economy –
one of the five transitions in Transition Science in the Economy.
The war economy is not just about war. It’s about how we organise everything around permanent risk.
When we hear “war economy”, we think of full mobilisation:
factories making tanks, rationing, governments directing production.
That’s the extreme version.
But there is also a quieter form:
An economy where permanent geopolitical tension
shapes budgets, innovation and industrial strategy,
even in peacetime.
You see it when:
defence becomes the main growth area in industry,
“security” justifies almost any spending,
dual-use technologies blur the line between civilian and military innovation.
In this environment, the middle class becomes a financial shock absorber:
higher taxes,
higher debt,
lower social investment,
more economic uncertainty.
What I measure when I say “War Economy”
In the AWTY Transition Index, the War Economy score tries to capture how countries are positioned in this new reality.
The data come from major international sources on defence spending, arms trade, conflict and alliances (SIPRI, NATO, World Bank, UN and others), using transparent, publicly documented series whenever possible.
Think of four blocks.
Defence effort and structure
How much does the country spend on defence as a share of GDP?
Is the money going to salaries,
or to equipment, R&D and capabilities?
Industrial and technological base
Does the country have a defence industrial base,
or is it fully dependent on imports?How much of its innovation system is oriented towards dual-use technologies?
Exposure to conflict and instability
Is the country in a conflict zone,
a front-line state,
or relatively insulated?How exposed is it to disruptions and attacks?
Alliance structure and burden-sharing
Is it part of strong alliances,
or more isolated?Does it free-ride on others,
or carry disproportionate burdens?
Put together,
these indicators yield a War Economy score for 180+ countries between 1990 and 2024.
But numbers alone don’t tell you if people are actually safer.
For that, we need to talk about GDP.
Why GDP is blind to war-time risks
GDP is great at adding.
It sums up:
all the tanks,
all the missiles,
all the reconstruction,
all the emergency overtime,
and calls it “growth”.
From the perspective of GDP:
1 billion euros spent on schools
and 1 billion on bombs
look equally “positive”.
But in a war economy this is a problem.
Here are four reasons why GDP is not enough.
1️⃣ GDP doesn’t know what we are building.
It counts the value of output,
not the direction of that output.
Spending on hospitals and spending on rebuilding what a war destroyed both look like progress.
2️⃣ GDP doesn’t see who pays.
A rise in defence spending can be financed by:
progressive taxes,
regressive consumption taxes,
cuts in social services,
or higher public debt.
GDP doesn’t tell you if the middle class is paying through higher taxes, worse services or more private debt.
3️⃣ GDP ignores vulnerability and resilience.
Two countries can have similar GDP levels, but very different risk profiles:
one with diversified energy,
strong civil protection,
robust institutions;another with high debt,
fragile infrastructure,
and deep social fractures.
GDP can’t capture this difference.
4️⃣ GDP is a flow, not a compass.
War and war preparation can boost GDP in the short term.
But they can also:
destroy trust,
crowd out education and health,
lock economies into arms races that are hard to escape.
GDP doesn’t tell you if you are heading towards a more resilient future or a more fragile arms race.
That’s why Transition Science in the Economy argues for additional metrics –
like the AWTY Transition Index –
to complement GDP when we think about progress.
How the war economy squeezes the middle class
When I cross the War Economy score with fiscal and social indicators, three mechanisms show up again and again.
1. Crowding out social investment
Defence spending usually doesn’t come from nowhere.
When budgets are tight,
every extra euro for military purposes competes with:
health,
education,
housing,
climate adaptation,
digital infrastructure.
If you’re a middle-class household,
you may not see “the budget”.
You see:
longer waiting times in hospitals,
underfunded schools,
poor public transport,
delayed climate protections.
The war economy doesn’t just buy weapons.
It reallocates political attention away from the services that sustain everyday security.
2. A new wave of industrial policy – with narrow beneficiaries
Defence and security often drive big industrial strategies.
Done well,
these can create good jobs,
advance technology,
and strengthen resilience.
Done badly,
they become:
subsidies for a few large firms,
with limited local spillovers,
and weak accountability.
In that scenario, middle-class taxpayers fund generous contracts, while seeing little improvement in their own prospects.
They pay for security
that feels abstract.
3. Psychological insecurity and economic caution
The war economy is not just about money.
It’s about perceived risk.
If people believe the world is getting more dangerous, they adjust their behaviour:
delaying big purchases,
saving more defensively,
avoiding long-term commitments.
This caution can slow growth,
increase the burden of debt,
and raise the sense of a permanent emergency.
For the middle class, the message becomes:
“Work, pay, adapt –
but don’t expect stability.”
Small vs big countries in the war economy
The war economy transition hits small and big countries differently.
Big powers
can invest heavily in their own industries,
project power abroad,
and partly control the rules.But they also risk building military–industrial complexes that are hard to restrain politically.
Small and medium countries
often have to choose:spend more to satisfy allies,
or free-ride and risk marginalisation.
They may lack their own industrial base and end up importing security while exporting money and political autonomy.
In both cases,
if decisions are made without transparent debate,
the middle class is left with the invoice but not the influence.
How to build security without burning the middle class
In Transition Science in the Economy, I don’t argue against defence spending.
In a world of real threats, some level of military capability is necessary.
The level necessary to deter possible invaders from attacking.
More than that level is a waste. Less than that is useless (therefore, a waste).
The problem lies in determining where is that “point of deterrence”.
The question is:
How do we build security
without quietly dismantling
the foundations of middle-class life?
The data and country examples point to a few principles.
1️⃣ Set social floors before defence ceilings.
Countries need minimum guarantees
for health, education and basic protection
before they race to hit arbitrary defence targets.
Otherwise, you build tanks on top of quicksand.
2️⃣ Use defence to accelerate dual-use innovation, not just hardware.
If you spend billions, make sure some of that money builds capabilities that also serve civilians:
resilient energy systems,
secure digital infrastructure,
logistics and medical capacity.
3️⃣ Make the burden visible and progressive.
Who pays for the war economy shouldn’t be a mystery.
Tax systems and budget processes must make clear:
which groups are paying more,
which sectors benefit,
what the trade-offs are.
Opacity is a breeding ground for resentment and conspiracy.
4️⃣ Measure security beyond GDP.
This is where the AWTY framework tries to contribute.
By combining War Economy scores
with Green, Digital, New Globalization and Housing scores,
we can see whether countries are:
building balanced resilience,
or loading all their chips
onto military solutions
while leaving other vulnerabilities open.
That’s what transition literacy is about:
Seeing how each euro of spending repositions your country across multiple transitions – not just in this year’s GDP.
Where this fits in the five-transition map
The return of the war economy is the fourth transition in the book:
Green Transition
Digital Transition
New Globalization
War Economy
Housing Crisis Transition
Each one reshapes who wins, who loses, and how secure the middle class feels.
Together, they decide whether countries climb to a new level of resilience or fall into new development traps.
Transition Science in the Economy uses data from 180+ countries (1990–2024) to map these patterns and offer a way to talk about progress beyond GDP alone.
📘 Transition Science in the Economy:
How Five Global Shifts Are Collapsing the Middle Class and Rewriting Prosperity and Power
→ Amazon
Next in this series we’ll look at the Housing Crisis Transition –
the most intimate and visible of the five.
Because in the end, a war economy that boosts GDP but leaves people more fragile, more indebted and more anxious is not building security.
It’s just changing who counts the weapons and who pays the bill.