WAR SPENDING: is Keynes back?

🛠️ Why War Spending Might Be the Most Productive Thing We Do This Decade

Apr 11, 2025

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You want peace. You want growth. You want your kids to live in a world with hospitals, schools, and clean air.
But governments are pouring billions into tanks, drones, and missiles. It feels wrong. It feels dangerous.
Yet… it might be the only thing keeping the economy—and peace—alive. That spending could be the very reason your job, your home, your freedom still exist tomorrow.

I used to believe war budgets were a waste.
Then I looked at the data.
It changed everything.
Now I think defense might be the last true Keynesian stimulus left.

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IS WAR PRODUCTIVE? Yes—When You Build Bombs and Don't Bomb

In early 2022, I still believed defense spending was a black hole.

Money burned for nothing. No productivity. No return. Just destruction.

A lot of people thought like me.

But here’s what most people (me included) was missing: Defense budgets are a classic Keynesian stimulus—and a peacekeeping strategy in disguise.

🔁 The Dominant Narrative

"Defense spending is wasteful.
It doesn’t create value.
It’s non-productive.
We should spend on hospitals, schools, and green energy instead."

You’ve heard it. I’ve said it.

It’s compelling. It sounds moral.

But it’s dangerously incomplete.

Because when we don’t spend on defense, we end up spending far more—to rebuild what was destroyed.

The guy who said it was the end of history was… wrong! History is going on, there are still plenty of trolls, bullies and criminals running countries and wars keep ravaging the planet: cold wars, hot wars, trade wars, hybrid wars,…

War did not end, it got specialized.

🧠 The Argument

War spending is not about wanting war.

It’s about keeping the economy moving when private demand stalls.

It’s about deterring conflict before it breaks out.

And it’s one of the few levers left to trigger industrial growth when climate policy stalls and tech lags behind.

⚙️ 1. Defense Spending Is Keynesian Economics

Keynes said it best:

If government pays people to dig ditches and refill them, the economy grows.

Actually, Keynes didn’t say spending had to be moral. He said it had to multiply. And guess what? Defense multiplies.

Keynesian economics, in its simplest form, says this: In a downturn, governments must spend—to jumpstart demand, create jobs, and prevent economic collapse.

Why? Because when businesses and consumers stop spending, the economy freezes.

Governments can’t wait for the market to self-correct.

They must act—fast, big, and decisively.

John Maynard Keynes didn’t care what you spent on.

That’s the core idea: Spending creates income. Income creates demand. Demand creates growth.

What Is Military Keynesianism?

Military Keynesianism is a subset of this strategy.

It’s the idea that defense spending—especially in peacetime—can serve as a powerful economic stimulus.

It doesn’t rely on consumer behavior.

It doesn’t need to turn a profit.

It moves money directly from treasury to factory to paycheck.

Why defense?

Because no other sector mobilizes capital, labor, and innovation as fast and at such a scale.

When Has It Worked?

📍 USA, 1940s–50s

World War II wasn’t just a military victory.

It was an economic reset.

The U.S. exited the Great Depression not with public works—but with a wartime economy that reached 40% of GDP.

That spending built:

The industrial Midwest
Silicon Valley (via radar, rockets, and electronics)
The aerospace and logistics industries still powering today’s global trade

Then came the Cold War.

The U.S. kept spending—on nuclear, space, and surveillance tech.

This wasn’t just national security.

It was national innovation.

📍 South Korea, 1970s–80s

Military procurement drove the development of Korea’s heavy industry, electronics, and shipbuilding.

That laid the groundwork for Samsung, Hyundai, and Korea’s rise.

📍 Israel, continuously

Military-driven R&D and national service programs feed talent directly into the startup sector.

Israel is now a global innovation hub, powered by the engine of a defense-first economy.

But these aren’t just old stories.

Military multipliers are still among the highest of any fiscal spending.

In a landmark study, Ramey (2011) shows defense shocks generate strong GDP gains—especially in downturns.

When so many experts have been for 3 years predicting that the Russian Economy would be collapsing anytime soon, reality exhibited resilience, with a modest 1.2% contraction in 2022, followed by growth rates of 3.6% in 2023 and a projected 3.9% in 2024 (CEPA, 2025).

That resilience can be explained by the huge defense and security spending which is set to surpass 8% of GDP, constituting 40% of total federal expenditure (Carnegieendowment, 2024), a clear case of Keynesian stimulus.

🏭 2. Peace Requires a Productive Backbone

“If you want peace, prepare for war.” – Not a cliché. A warning.

Let’s be blunt.

Europe under-invested in defense for decades.

We called it a peace dividend.
What we got was a security deficit. And a Russian war!

In 2023, Russia spent 6.7% of GDP on defense (Politico, 2023).

Europe lagged. The gap opened. Now the continent is racing to re-arm—fast.

Goldman Sachs (2024) estimates defense spending will grow by €80B/year across the eurozone. Germany alone will spend €69 billion by 2030 (Institut Delors, 2023).

Europe’s choice is clear: spend billions now building missiles and sensors in peace— or spend trillions later rebuilding cities and economies destroyed by war.

But, in fact, that’s not just rearmament.

It can be industrial strategy. Some may even call it military keynesianism:

It injects public money directly into high-tech industry, manufacturing, logistics, and innovation.
It creates good jobs: skilled engineers, AI specialists, advanced material scientists.
It fuels innovation spillovers: GPS, internet, space tech, drones, energy efficiency—originated in military R&D.

We’ll soon take a look at the Rearm Europe initiative the European Commission recently announced. One of the next posts.

🔐 3. The ROI of Avoiding Invasion

Let’s do the math.

Europe under-invested in defense.

Ukraine is now spending 37% of its GDP on war.

Its cities are rubble. Its economy, shattered. Its population hurting and dying.

Meanwhile, Carnegie (2024) notes Russia’s economy is growing—because it transitioned fast to a war economy.

That’s terrifying.

But it also proves the point:

The countries building weapons are growing.
The countries fighting wars are collapsing.

🧨 Shareable Insight

The most productive thing a country can do right now?
Build weapons—but weapons so strong and advanced that this will dissuade bullies and trolls so that those weapons never get used.

🤔 The Counterpoint

“Why spend billions on war machines when we need schools and hospitals?”

That’s a fair question.

And the answer isn’t either/or.

It’s first/then.

First, build a credible deterrent.
Then, fund the society that deterrence protects.

Because if war reaches your hospitals, you’ll have to rebuild them anyway—with blood and loans.

And if your supply chains collapse under missiles, your economy won’t recover through clean energy alone.

“But Isn’t This Glorifying War?”

No.

This isn’t about war.
It’s about economic resilience.

You don’t build weapons to bomb.
You build so you never have to bomb.

But Is It Really Productive?

Critics say military spending is unproductive because it doesn’t generate consumer value. That’s true. It doesn’t. It’s meant to kill and destroy.

But that’s a narrow view.

Defense spending has historically led to:

The internet (DARPA)
GPS (military navigation)
Microwaves (radar tech)
Jet engines, cybersecurity, and even touchscreens

In other words:

We owe much of our civilian technology to military Keynesianism.

And yes, fiscal multipliers for military spending are some of the highest ever recorded (Ramey, 2011).

🛠 What This Means for You

📊 If you’re a policymaker:

Defense spending isn’t a budget hole.

It’s a foundation for economic continuity.

💼 If you run a business:

Watch where the defense money flows.

That’s where your next industrial opportunity lies.

💸 If you’re an investor:

Defense tech is no longer taboo.

It’s the next rail, steel, or semiconductor wave.

🧭 If you're a citizen:

Don’t confuse spending on defense with choosing war.

It’s the opposite.

You’re investing in avoiding war.

🧨 Closing Punch: Peace Is Built in Factories

You don’t have to like war.
You just have to understand what happens when you're not prepared for it.

History doesn’t reward the most peaceful.
It rewards the most prepared.

Nations that build credible deterrence—militarily and economically—avoid conflict.
Not because they want war. But because they make war too expensive for their enemies.

That's why defense spending matters.
Not to fight—but to not have to.

Peace is built in guns factories—not just parliaments.

💬 What do you think?

I just explained my opinion on this.
But I might be wrong.
What’s yours? 🤔💥

👉 Should we really treat defense spending like an economic strategy?
👉 Or are we sleepwalking into a military-industrial trap? 🛑💸