"The world gained from a peace dividend after USSR’s decline— that calm is shrinking now...": Kenneth Rogoff
Kenneth Rogoff, former chief economist of the IMF, is Maurits C. Boas Chair of International Economics at Harvard University. Speaking to Srijana Mitra Das, he discusses the record rise in military expenditure worldwide:
Q. Recent reports find global defence spending now amounts to $2443 billion — which economic areas does this impact most?
A. While military spending does spin off some technology, by and large, it is not good for growth or consumption because it’s destructive. The United States and Europe are facing pressures today because of Ukraine, the Middle East and potentially Taiwan — but the defence budgets of the West are tuned to a different era. We had a peace dividend after the Berlin Wall fell in 1989 — now, things are going into reverse. This raises the pressure on debt and inflation.
No Western leader has prepared their people for greater military expenditure. Voters are talking about universal income, increased transfers, more social spending, etc., but realistically, I think defence spending will need to increase.
Q. America is the world’s biggest military spender — why can’t its defence expenditure be reduced?
A. US defence spending in President Joe Biden’s budget is 3.1% of GDP — that’s far lower than before. President Biden has reduced military spending relative to income — the number in dollars is up but that’s with considerable inflation. American military spending was 7% of GDP when the Berlin Wall fell.
