Humanity and the GDP of the War Economy
Wars cost lives and money. At $2.2 trillion military spend is the 8th largest economy. In contrast total development aid is $204 billion. One of ten persons globally is living in abject poverty. Israeli troops are readying for ground offensive. The Cairo peace summit has failed. Humanity is whistling past graveyards.
By Shankkar Aiyar | The Third Eye | Published: 22nd October 2023 |
The Bible (Matthew 5:38-42) states, “You have heard that it was said, ‘Eye for eye, and tooth for tooth.’ But I tell you, do not resist an evil person. If anyone slaps you on the right cheek, turn to them the other cheek also.” Sage words didn’t prevent wars as men and monarchs pursued goals of gladiatorial cartography.
Wars cost lives. Wars also cost money. The vocabulary of modern warfare is punctuated with mentions of fighter jets and missiles. Consider the cost of operating fighter jets. The much discussed F35 — the US government plans to spend $1.7 trillion on 2,500 aircraft — costs an average of $75 million per piece and costs around $42,000 per flight hour. The F15, considered more efficient, costs roughly $29,000 per flight hour.
The Iron Dome forms the bulwark of Israel’s defence. It is estimated that Israel has around 10 Iron Dome batteries across its territory. Each battery hosts 60–80 missiles and each missile costs around $40,000. This week Boeing announced speedier delivery of 1,800 GPS guidance bomb kits — that convert unguided bombs into precision munitions — to Israel. Each kit is estimated to cost about $24,000.
Earlier this month, US President Joe Biden ordered a carrier group led by the $13-billion USS Gerald Ford to the Eastern Mediterranean. The positioning is aimed at deterring regional players from expanding the theatre of war. The carrier group is equipped with 75 fighter jets, radars and missile launchers. Each Tomahawk missile costs about $1.5 million and each Patriot missile around $4 million.
Costs translate into profits for War Inc. listed on Wall Street and elsewhere. This is illustrated by the movement of stock prices. In the past week, the US benchmark S&P500 slid to 4224 points but shares of Northrop Grumman were up 11.12 percent, Lockheed Martin up 6.3 percent and BAE Systems up 3-plus percent since the October 7 attacks.
The current market capitalisation of the top 10 corporations is $653 billion. The combined revenues of the top 10 players in aerospace and defence listed on the Fortune 500 list is $573 billion. The Defense Global Market Report 2023 put out by Business Research Company says the size of the defence market is expected to grow to $718 billion by 2027.
How are the costs funded? Much depends on geopolitics and domestic politics. Consider the war in Ukraine. Since the beginning of the war on February 24, 2022, the US government has committed “more than $40.4 billion in security assistance” — roughly the combined GDP of Malta and Yemen. This week, the White House issued a new missive “calling on Congress to provide additional national security resources” for aid to Israel and Ukraine.
How do terrorist groups access funding? The US and its allies believe Iran provides funds and technical assistance to its portfolio of proxies — Hamas, Hezbollah and the Houthis. How do the funds flow, given the many layers of sanctions?
US Senator Elizabeth Warren and over 100 lawmakers, in a letter to National Security Advisor Jake Sullivan, present a glimpse of the changing paradigm. They claim that between August 2021 and June 2023, Hamas and the Palestinian Islamic Jihad (PIJ) “raised over $130 million in crypto” and moved millions between each other, and that “PIJ sent over $12 million in crypto to Hezbollah”.
Events and hypotheses of ‘deterrence’ fuel the growth in allocations. Consider the GDP of the War Economy. It is believed that the end of the Cold War engendered a peace dividend. Yet military expenditure has gone up in the past three decades.
Data published by the Stockholm International Peace Research Institute reveal world military expenditure rose from around $1.2 trillion in 1992 to $2.24 trillion in 2022. When placed among the GDPs of nations, the War Economy, at two-plus trillion dollars, ranks eighth in the world behind France. Topping the list of spenders is the United States at $877 billion — roughly the GDP of Poland — followed by China at $292 billion and Russia at $86 billion.
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It is instructive to contrast the rise in military expenditure with the money spent to promote peace and reduce the underlying causes of conflict across the world. The World Bank estimates that over 700 million people or 9.3 percent of the world lives in abject poverty on less than $2.15 a day. For instance, seven out of every 10 people in Gaza survive on global aid. In 2022 the total official aid or development assistance provided by OECD nations was $204 billion.
It is difficult to predict if the conflict in the Middle East will expand into a wider conflagration. What is known is that the prosecution of justice post 9/11 — in Afghanistan and Iraq — cost the US over $8 trillion. A study by the Watson Institute for International Affairs estimates the death toll of combatants and civilians since 9/11 to be over 3.8 million. Taliban is ruling Afghanistan and Iraq is far from stable. The notion that war stimulates growth has been questioned by a Cato Institute study.
Outside Gaza Israeli soldiers await orders for a ground offensive. In Cairo diplomats are working the wires to prevent a conflagration. Much depends on how the axis of China evolves. The cost implications are stark as the world struggles with higher debt, rising cost of capital and lower growth.
They say the power of example is a greater force for good than the example of power. Yet humanity has chosen to whistle past graveyards and wage wars.
Shankkar Aiyar, political economy analyst, is author of ‘Accidental India’, ‘Aadhaar: A Biometric History of India’s 12-Digit Revolution’ and ‘The Gated Republic –India’s Public Policy Failures and Private Solutions’.
You can email him at shankkar.aiyar@gmail.com and follow him on Twitter @ShankkarAiyar. This column was first published here. His previous columns can be found here.