Will defence spending help Europe's ailing economy?

Leaders in Britain and the European Union are promoting the promise of economic benefits from increased military spending, but there is a trade-off, writes Patricia Cohen from Bolton, England

- Patricia Cohen

At MBDA's missile launcher plant in Bolton, England, Britain's minister for the armed forces, Luke Pollard, stood with his hand outstretched as a test engineer sprinkled tiny microelectronic specks onto his palm as if they were fairy dust.

Those are the “brains of the missiles,” a technician explained, the sophisticated components that will enable the weapon to find and lock on its target.

Mr Pollard was in Bolton recently to promote a new £118-million ($158.4 million) contract with MBDA, a European weapons manufacturer, to build six new surface-to-air missile launchers.

"Defence is the engine for growth," said Mr Pollard, who noted that there is a defence-related manufacturer in each of Britain's 650 parliamentary constituencies.

It's not just Britain. Governments across Europe, compelled by Russia's continuing aggression in Ukraine, are hoping hundreds of billions of dollars in increased military spending will lift their lacklustre economies. The post-Cold War peace dividend has shifted into reverse: There will be less money for schools and pensions, but more money for tanks and missiles.

Yet whether bigger defence budgets will create meaningful, long-term economic growth rather than primarily pump up the stocks of weapons manufacturers is not clear. The success of any defence dividend could turn on what the increased money is spent on and where it comes from — tax increases, borrowing or cuts in education.

That has not dampened hopes. Prime Minister Keir Starmer of Britain vowed to seize what he called the “defence dividend,” a “once in a generation” investment that can create new jobs and “huge growth in industrial capacities.”