Gabriel G Tabarani
The global economy is no longer being steered only by interest rates, inflation data or growth forecasts. It is being dragged, increasingly and ominously, by the logic of war. An accelerating arms race is reshaping national priorities, hollowing out public budgets and quietly taxing future prosperity. As conflicts multiply and geopolitical tensions harden, governments are pouring money into weapons, while investors flee toward gold, the dollar, sovereign bonds and energy. The connection between the two is not incidental. It is causal. Every extra dollar spent on guns is a dollar not spent on schools, hospitals or clean energy — and a dollar that raises the risk premium on the entire global economy.
Global military spending reached about $2.7 trillion in 2024–2025, up nearly 9 percent from the previous year, the highest level since the Cold War. This is not a temporary spike. It is a structural shift. The war in Ukraine, tensions in the South China Sea and chronic instability in the Middle East have restored “hard power” to the center of international politics. But they have also normalized a dangerous illusion: that security can be bought indefinitely with ever-larger defense budgets.
It cannot.
Sustained military buildups crowd out investment in infrastructure, education, health care and innovation — the very foundations of long-term economic strength. They widen deficits, inflate public debt and quietly undermine credit ratings and borrowing conditions. The so-called “militarized economy” may generate short-term contracts and factory orders, but over time it weakens productivity and drains human capital. It is a growth killer masquerading as a security policy.
The United States alone now spends close to $1 trillion a year on defense, roughly 37 percent of the global total. China follows with about $314 billion, expanding its land, naval, space and nuclear forces. Russia, under sanctions and at war, devotes more than 7 percent of its gross domestic product to the military. These numbers do not just reflect strategic competition. They reveal a massive diversion of public resources into sectors that, economically speaking, produce little but risk.
And nuclear weapons are only the most visible symbol of this distortion. Behind them lies an entire ecosystem of spending: hypersonic missiles, drones, cyberwarfare systems, space weapons — all locking governments into decades of escalating costs. The cruel paradox is that these technologies, marketed as tools of deterrence, make conflict more thinkable, not less. By lowering the political and tactical barriers to using force, they raise the probability of miscalculation — and with it the risk premium that markets slap onto sovereign debt and multinational investment.
China’s military expansion makes this danger plain. Beijing is not merely building warheads; it is pouring resources into artificial intelligence, naval power, space systems and drone warfare. The result is not a stable new balance of power but a more fragile one, pushing the world toward a messy multipolar order in which deterrence is less predictable and accidents more likely. Investors understand this. Asian assets now carry a geopolitical discount, and supply chains are growing more brittle by the year.
Nowhere is the contradiction more grotesque than in the Middle East. The region devotes a higher share of its economy to the military than any other in the world. Saudi Arabia alone spends nearly $80 billion a year on defense. The United Arab Emirates is investing heavily in air defense, drones and cyberwarfare. Egypt is modernizing its forces. Algeria is ramping up spending amid regional tensions. Iraq is rebuilding its security apparatus after years of war. Israel maintains technological military dominance and a policy of nuclear ambiguity, while Iran and Turkey race ahead in missiles, drones and asymmetric warfare.
And yet this same region suffers from some of the world’s highest youth unemployment, chronic housing shortages, failing schools and overstretched hospitals. Every major weapons contract means a set of development projects that never happen: a transit line not built, a clinic not upgraded, a generation of students shortchanged. This is not an abstract moral complaint. It is a line item in national budgets — year after year.
The social costs are just as corrosive. When governments funnel resources into weapons instead of people, the middle class shrinks, inequality widens and social resentment deepens. Across much of the Arab world, higher military spending has coincided with subsidy cuts, regressive taxes and wage freezes. The result is a quiet erosion of the social contract and a simmering anger that no amount of military hardware can contain.
Markets are already reacting. The revival of heavy military budgets has driven up measures of geopolitical uncertainty, which historically correlate with slower investment and delayed corporate expansion. Capital hates ambiguity. As the risk of conflict rises, money retreats into safe assets — gold, dollars, bonds and energy — starving productive sectors of funding and reinforcing a cycle of stagnation.
South Asia offers a cautionary tale. India now spends about $86 billion a year on defense. Pakistan, despite a deep economic crisis, allocates roughly $9 billion. The imbalance does not matter. Both countries are locked into an arms race that drains scarce resources while schools, hospitals and infrastructure decay. It is a competition with no winners and enormous opportunity costs.
Is this trajectory inevitable? No. But reversing it will require political courage that is in short supply.
Globally, it means reopening serious dialogue among major powers and designing new arms-control frameworks that reflect a multipolar world. It means expanding the definition of security beyond tanks and missiles to include food security, water scarcity, digital resilience and climate stability. Regionally, especially in the Middle East, it means confidence-building measures that reduce the risk of miscalculation and deflate the logic of prestige-driven arms races.
The economic message is brutally simple: every dollar squandered on unnecessary militarization is a dollar not invested in clean energy, modern infrastructure, education, health care or technological innovation. Every escalation is an undeclared tax on growth, investment and social cohesion. Real security is not measured by the number of warheads in a silo but by a society’s ability to create jobs, deliver services and build a diversified economy that can survive shocks.
In the end, cannons may guard borders, but they do not build a future. The world — and the Arab world in particular — is standing at a historic crossroads. One path leads to deeper militarization, higher debt, weaker growth and more frequent crises. The other leads to a smarter, cheaper and more humane model of security. The second path is politically harder. It is also economically unavoidable.
If governments keep choosing more cannons over more classrooms, they should not be surprised when they inherit neither peace nor prosperity.
This article was originally published in Arabic on the Asswak Al-Arab website
