PHOTO: ISTOCK / SHAUNL; NIRUNYA JUNTOOMMA
Governments across the world adopted stimulus packages in 2020 to address the COVID-19 pandemic, with those in advanced economies outstripping those in the rest of the world. The resulting high budget deficits must be brought in line with available resources as pre-pandemic growth resumes. In doing so, governments will need to reassess their overall tax and spending policies. A key question is how major government spending categories will likely evolve over the next several years and where additional spending needs will rise or ease.
Military spending absorbed on average about 6½ percent of government budgets across the world in 2019, according to data from the Stockholm International Peace Research Institute, the most comprehensive and comparable source of data on military spending. Since the end of the Cold War in 1990, defense outlays have declined both as a share of government spending and of the economy’s total output (GDP). This has made room for other forms of public spending, such as on education, health, and infrastructure. But will military spending remain at historically low levels? In this article, we take a closer look at military spending over a long period and offer tentative implications for government budgets.
Worldwide military spending has declined by nearly half, from 3.6 percent of GDP during the Cold War period to 1.9 percent of GDP in the years following the global financial crisis.
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Clements, B., S. Gupta, and S. Khamidova. 2021. “Is Military Spending Converging to a Low Level across Countries?” Economic Modelling 94 (January): 433–41.