Guns, Butter and Borrowed Money: The Hidden Bill of a World Rearming

Title: The World Is Preparing for a War It Cannot Afford
Writer: Jawad Saleem
Published in: Daily Times
Date of publication: 16 October 2026

Guns, Butter and Borrowed Money: The Hidden Bill of a World Rearming

Economics students learn an old idea early: the “guns versus butter” trade-off. A country has limited resources. Every rupee or dollar spent on weapons (“guns”) is one not spent on food, schools, hospitals or roads (“butter”). For decades after the Cold War, much of the world tilted towards butter. That balance is now shifting fast. Governments that cannot fully fund healthcare, pensions or infrastructure are still announcing large new military commitments, often with borrowed money. The question is no longer only whether the world needs more security, but whether it can pay for it.

1. The Size of the Bill

According to the Stockholm International Peace Research Institute (SIPRI), the leading independent tracker of military budgets, global military spending reached $2.89 trillion in 2025, rising for the eleventh year in a row. The increase was uneven:

• Europe raised spending by 14 per cent.

• Asia and Oceania raised it by 8.1 per cent.

Bigger commitments lie ahead. In June 2025, members of NATO, the Western military alliance, agreed to spend 5 per cent of GDP every year on defence and wider security by 2035, with at least 3.5 per cent on core defence. To see what this means, consider an economy worth $2 trillion: 5 per cent of its output would amount to $100 billion every year.

2. Not Only Weapons: The Cost of “Strategic Independence”

Military budgets are only part of the new spending. Governments are also paying to reduce their reliance on others in sensitive sectors:

• Semiconductors, the chips that power everything from phones to missiles

• Energy reserves and critical minerals

• Domestic manufacturing of goods once imported

• Cyber infrastructure

• Alternative trade routes that avoid rival powers

Countries that once preached free trade now subsidise their own industries. The goal is understandable, but all these projects compete for the same public money, skilled workers, factories and investment capital. The world is trying to buy security on several fronts at once.

3. A World Already Deep in Debt

This rearmament comes at a difficult moment for public finances. The International Monetary Fund (IMF), in its April 2026 Fiscal Monitor, estimated global public debt at just under 94 per cent of world GDP in 2025, projected to reach 100 per cent by 2029. In simple terms, governments together will soon owe as much as the entire world produces in a year. At the same time, interest costs are rising, so each new loan is more expensive than before.

History shows how military buildups affect these numbers. The IMF’s April 2026 World Economic Outlook found that, compared with countries not rearming:

• Defence buildups widened budget deficits by about 2.6 percentage points of GDP.

• Public debt rose by nearly 7 percentage points within three years.

• During wartime buildups, debt rose by about 14 percentage points.

Spending on security, in other words, tends to show up quickly as higher debt.

4. Different Powers, Same Pressure

Each major actor is pursuing its own version of security:

• The United States seeks military superiority and is rebuilding strategic industries.

• Europe wants defence autonomy without giving up its generous social model of welfare and public services.

• China pursues military reach together with technological self-sufficiency.

For a country like Pakistan, the pressure is sharper. Debt service already absorbs a very large share of federal resources, the economy depends on imported energy and external financing, and regional security concerns limit how far defence spending can be cut. Such countries face the trade-off between guns and butter with very little room to manoeuvre.

5. The Case For, and Its Limits

Higher defence spending has real arguments in its favour. Deterrence, the ability to discourage an attack by making it too costly, can prevent wars that would be far more destructive. Defence industries create jobs, and military research has produced many civilian technologies.

These benefits, however, are neither automatic nor evenly spread:

• Domestic arms production supports local jobs, but imported weapons create import bills that may have to be financed by borrowing.

• Weapons production uses capital, engineers and energy that could otherwise support civilian growth.

• Building duplicate supply chains, such as parallel semiconductor industries, requires huge investment and loses the economies of scale, the cost savings that come from producing in large volumes.

Defence spending creates economic activity, but that does not make it the best economic return available.

6. Who Ends Up Paying

The costs spread well beyond defence ministries. Businesses face compliance costs and politically driven sourcing rules. Consumers pay higher prices. Taxpayers bear higher borrowing and interest costs.

There is also the danger of an arms race, a cycle in which one state’s buildup prompts its rival to respond, leaving both more armed but no more secure. Meanwhile, heavy borrowing by large economies competes for global capital with companies and with emerging economies, pushing up financing costs and putting pressure on weaker currencies. The countries least responsible for great-power rivalry may end up bearing a large share of its cost.

7. Security Without Bankruptcy

The central distinction is simple. Defending a country is a basic duty of government. Reorganising an entire economy around an expected war is a different matter, and it can become an economic trap. A state’s fiscal capacity, its ability to raise and manage money, is itself a strategic asset, and a nation that weakens it in the name of security may end up less secure.

A more balanced approach would:

• Separate essential military capabilities from politically attractive purchases.

• Judge every major military investment against realistic threats, the ability to finance it and its long-term running costs.

• Encourage allies to buy jointly and make their systems work together, rather than duplicating expensive equipment.

• Diversify supply chains only where dependence creates real risk, such as medicines, energy equipment and key technology, not simply because foreign reliance is unpopular.

• Invest in diplomacy, predictable trade and conflict prevention, which also pay economic dividends, while keeping deterrence credible.

Military strength and national strength are not the same thing. The world is preparing for the possibility of war; it also needs to calculate the cost of preparing forever.

Exam Essentials

1. Key Facts and Figures

• Global military spending: $2.89 trillion in 2025, the eleventh consecutive annual rise (SIPRI)

• Europe: up 14 per cent; Asia and Oceania: up 8.1 per cent

• NATO (June 2025): 5 per cent of GDP on defence and security by 2035, including 3.5 per cent on core defence

• Global public debt: just under 94 per cent of GDP (2025), projected 100 per cent by 2029 (IMF Fiscal Monitor, April 2026)

• Defence buildups (IMF WEO, April 2026): deficits wider by 2.6 points of GDP; debt up nearly 7 points in three years; up about 14 points in wartime buildups

2. Key Terms

• Guns versus butter: the trade-off between military and civilian spending

• Deterrence: discouraging attack by making its costs unacceptable

• Arms race: competitive military buildup between rival states

• Fiscal capacity: a state’s ability to raise revenue and manage debt

• Public debt to GDP ratio: government debt as a share of national output

• Economic decoupling: reducing economic dependence on rival countries

• Economies of scale: cost savings from producing in large volumes

• Interoperability: the ability of allied forces and systems to work together

3. Related Subjects

• International Relations: security dilemma, arms races, great-power rivalry

• Economics: public finance, debt, opportunity cost

• Pakistan Affairs: defence spending, debt servicing, economic security

• Global Institutions: IMF, NATO, SIPRI

• Current Affairs: global rearmament, US-China competition, European defence

4. Useful Arguments

• Security bought with unsustainable debt weakens long-term national strength.

• Every rise in military spending carries an opportunity cost in development.

• Arms races increase weapons without increasing security.

• Joint procurement among allies reduces duplication and cost.

• Supply-chain diversification should target real vulnerabilities, not political symbolism.

• Developing countries pay a hidden price for great-power rivalry through higher borrowing costs.

5. Probable Questions

1. “National security is not only military strength but also economic resilience.” Discuss.

2. Examine the economic consequences of rising global military expenditure for developing countries such as Pakistan.

3. How does the security dilemma drive arms races, and how can states escape it?

6. One Quotable Line

“A state that borrows to arm itself may win the race for weapons and lose the race for solvency.”

Also Read: https://pakimtehan.com/blog/article-of-the-day-css-pms-/a-new-way-out-of-the-world-s-sovereign-debt-trap

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