Consequences of the Military Buildup
Economists are criticizing the German and EU focus on the arms industry as economically disadvantageous, pointing out that, in the long run, it can contribute to the country’s decline.
BERLIN/PARIS (own report) – A government’s focus on the arms industry has serious economic disadvantages and can eventually contribute to the country’s decline. This is confirmed by French economist Claude Serfati in an interview with german-foreign-policy.com. Serfati, who is employed at the Institut de recherches economiques et sociales (IRES) in Paris, points out that it is easy to understand that military spending generates less growth and fewer jobs than investment in civilian infrastructure or health care. Whereas the latter would bring benefits for the production of supplementary products or strengthen the work force, weapons have no productive potential at all. Serfati points out that France has been losing ground economically, in spite of – or due to – its traditional focus on weaponry and military technology. The notion that Paris could “in the long run” compensate for its economic lagging behind Germany and remain a “great power” thanks to its military has been proven a fallacy. Berlin is currently pursuing a similar plan in its attempt to overcome its economic crisis.
In Crisis
Germany’s economic crisis persists. The automotive industry is unable to extricate itself from its desolate situation. Currently, the conflict evolving over the unprecedented case of the government of the Netherlands taking control of the Chinese Nexperia chip manufacturer, threatens to seriously reduce the supply of semiconductors to the industry, thereby further exacerbating the existing crisis.[1] The chemical industry is also wrestling with serious problems, which are currently being further exacerbated by the tariff deal reached between the EU and the United States. Due to the deal, US chemicals may now enter the EU duty-free, where they are competing with German chemicals, which are under pressure due to the higher costs of natural gas and energy in Germany.[2] The German government hopes to at least reach a 1.3 percent growth next year, based primarily on the billions in infrastructure expenditures, which should give the economy a small boost. However, experts are not counting on this having long-term effects, given that these investments will be for maintenance rather than for expansion with new elements. The only sector currently experiencing growth is the defense industry, in which Berlin is specifically investing billions.[3]
“Risks with Lower Returns”
Economists have repeatedly warned that military spending is significantly less growth effective, in comparison to expenditures in other sectors. In June, for example, a study conducted at the University in Mannheim concluded that the so-called fiscal multiplicators for investments in the armed forces is at 0.5, meaning that for every euro invested in the military 50 cents are generated.[4] The authors conclude that significantly higher returns could be generated with government investments not only in new infrastructure, but also in child care, or education. One of the authors noted: “from the economic standpoint, the planned militarization of Germany’s economy is a risky gamble that generates low macroeconomic returns.” Last week, an evaluation of various studies on the yields from defense investments also concluded that the fiscal multiplicators of other investment sectors are significantly more favorable than those of the arms industry. Investments in the military were in the “range from 0.4 to 1.5,” while investments in new infrastructure “reach between 1.8 to 2.5.”[5]
Economically Unhelpful
The French economist Claude Serfati, at the Institut de recherches economiques et sociales (IRES) in Paris, arrived at the same conclusion. Serfati demonstrates not only that growth derived from military expenditures is less than that deriving from civilian investments.[6] He also demonstrates that government spending on the military generates much fewer private investments than government spending for ecology, health, or social welfare. In addition, a comparison of statistics from Germany, Italy, and Spain shows that investments in the environment, education and health create many more jobs than investments in the military. In an interview with german-foreign-policy.com, Serfati points to the fact that it is already obvious that “the defense budget does not contribute to wealth.” “A tank, a missile, a combat aircraft does not become reintegrated into the macroeconomic reproduction, such as, for example, a piece of equipment or a machine, used to produce products.”[7] In purely economic terms, even salaries are more useful than weapons, because “they will be used for consumption or for the reproduction of labor.”
A Propaganda Allegation
Serfati points out that the contribution weaponry has on technological progress is often overestimated. For example, the development of the internet had been financed by the Pentagon to enhance communication within the US military. However, soon civilian research institutes and universities stepped in to develop it further and “took the initiative.” The allegation of the “military technology plays a decisive role” completely ignores the way “innovation continued to progress,” it is “an allegation of propaganda.”[8]
False Hopes
Serfati told german-foreign-policy.com that in general the focus on armaments and military technology does not benefit countries, but rather in the long run, is even very detrimental. For example, France had placed strong emphasis on armament and military technology, already back in the era of Charles de Gaulle.[9] Paris had long held hopes that it could use “its relative advantage in defense,” as the strongest power in Europe alongside Great Britain, “to offset its industrial weakness in relationship to Germany.” However, it did not succeed. This shows that, “it is impossible to remain a great power in the long-term perspective, based solely on one’s military strength.” Germany is currently attempting to do just that – compensate for its industrial weakness through a massive militarization and simultaneously, climb to the rank of a great power.
Please read here our interview with Claude Serfati.
[1] See also Der Kampf um Nexperia.
[2] See also An economic power in decline.
[3] See also Where such madness leads.
[4] Rüstung ohne Rendite: Warum der wirtschaftliche Effekt ausbleibt. uni-mannheim.de 30.06.2025.
[5] Stephan Lorz: Rüstungsausgaben als Technologiebooster der Wirtschaft. boersen-zeitung.de 14.10.2025.
[6] Claude Serfati: Union européenne : Des dividendes de la guerre… mais pour qui ? Chronique internationale de l’IRES. No. 190. Juin 2025.
[7], [8], [9] See also « Des ponctions sur les richesses ».
