Posted: 4 months ago

Military Expenses and Economy – The Militarization Effect on Georgia and the World

What is the effect of military expenses on an economy? These is no clearly determined answer to this question.

However, economic experts have submitted several examples to illustrate that military expenses have a direct effect on economic development. Some specialists asserts that in the 1930s, growing military expenses saved the US economy from the Great Depression.

Almost the same could be said about Nazi Germany. Specialists assert that rapidly growing military expenses and the military industrial complex became a key locomotive of the contemporary German economy. To a certain extent, economic achievements made by US President Donald Trump are related to growing military expenses. An economic analysts of the Wall Street Journal assures the reader that increased military expenses made a contribution to the 2.9% upturn in the US economy in 2017. An analysis by the US Department of Trade reveals that the effect from military expenses in economic growth exceeded 0.31%.

New workplaces, the development of infrastructure and modern technologies – according to specialists, all these factors have direct relations with military expenses. However, a certain balance is required, as well as a proper distribution of financial resources. Otherwise, the Soviet Union’s experience will be repeated. The very arms race and hiking of military expenses contributed to the economic collapse in Soviet Union, the specialists assert.

According to indicators given by the Stockholm International Peace Research Institute (SIPRI), 2018 military expenses exceeded 1.822 trillion USD, and constituted 2.1% of global GDP.

The last reports by SIPRI indicate that in 2018, major military industrial concerns earned 398 billion USD. Forty-two companies of 100 major arms manufacturers are American. In total, American companies sold arms worth 226 billion USD, including Lockheed Martin, which ranks first with 44.9 billion USD. Russian companies have earned comparatively less money, but the figures are impressive regardless. Ten major arms manufacturers in Russia sold products worth 37.7 billion USD in 2018.

The US remains the greatest arms exporter, a with 36% share. Russia ranks second, with 21% of the export market. As compared to 2017, in 2018, Russia’s access to the market declined by about 6%. France ranks third, with a 6.8% ratio in the SIPRI rating.

In 2018, Saudi Arabia emerged as a major arms importer. Over the past 5 years, this country has increased arms procurement by 192%. Saudi Arabia buys 68% of new arms from the USA. Major arms importers are India (9.5%), Egypt (5.1%), Australia (4.6%), and Algeria (4.4%).

In 2019, the USA increased its defense expenditure to 716 billion USD. China ranks second, with 230 billion USD. Russia has cut defense expenditures to 46 billion USD, from 61 billion USD, as a result of economic sanctions. Specialists assert that the Russian economy cannot withstand a higher level of militarization. According to the 2019 indicators, Russia’s military expenses constitute 17% in the total budget, and 2.9% of GDP. In 2018, the figures were 19.3% and 3.4% respectively.

It is interesting that Armenia is recorded among the top 10 most militarized countries. According to the SIPRI report, in 2018, Armenia’s defense expenditures made up 4.8% in GDP. Azerbaijan increased defense expenditures by 4.6%, to 2 billion USD, but this figure is only 3.95% of GDP. As for Georgia, Georgia’s defense budget is only 870 million GEL, 2% of GDP.

As for Georgia’s military industrial complex, it is being developed anew. Delta, the state-owned military-research center, works as an economic locomotive.  On February 17-21, the IDEX-19, the 14th exhibition of military equipment and armaments, was held in Abu Dhabi. Potential clients were able to see and appraise various military equipment manufactured by DELTA.

At this stage, no major contracts are coming, but the country hopes the day will come when Georgia will be enlisted among the ranks of arms exporters.