ARMSMAKING IS NOT like other businesses. It is impervious to macroeconomics and sheltered from fickle consumer tastes. Its prospects are determined by one factor—how militarily threatened its government customers are feeling. With wars blazing in Ukraine and Gaza, another on the brink between Israel and Lebanon, and more conflict looming as China eyes Taiwan, the perceived threat level as leaders of NATO countries gather for a summit in Washington on July 9th-11th is through the roof.
Last year NATO’s 32 members spent $1.3trn on defence, a record high after adjusting for inflation at least since the fall of the Soviet Union. America, by far the biggest spender, is budgeting $842bn this year. Historically more peacenik Europeans, spooked by Russian tanks on their doorstep, are undoing decades of stinginess that has resulted in accumulated underinvestment in equipment of about $600bn. This year NATO expects 18 members to meet the target of dedicating 2% of GDP to defence, up from three in 2014.
Source: Business - economist.com
