On the Insanity of Spending 5% of GDP on the Military

Arnd Jurgensen

Mil.ru, CC BY 4.0

President Eisenhower made two very famous speeches during his presidency: the “Iron Cross” speech early in his administration and his “Military Industrial Complex” speech before leaving office.( https://www.fcnl.org/updates/2024-01/cross-iron-63-years-later-eisenhowers-farewell-retrospect)   In both he warned against the threat that a permanent military establishment posed for American Democracy and highlighted the obvious.  “Every gun that is made, every warship launched, every rocket fired signifies in the final sense a theft from those who hunger and are not fed”.  He concluded: “We must guard against the acquisition of unwarranted influence whether sought or unsought by the military industrial complex.”

The government of Canada, along with its NATO allies, has apparently committed itself to increase its outlays for the military by a whopping 150% above the 2% of GDP that Canada realized for the first time in 2025. (https://www.pbo-dpb.ca/en/additional-analyses--analyses-complementaires/BLOG-2425-005-S--update-canada-military-expenditure-nato-2-spending-target--mise-jour-depenses-militaires-canada-objectif-depenses-2-otan)   This pledged increase came not in response to the threats to Canadian sovereignty repeatedly uttered by President Trump since taking office for the second time.  It came in response to Trumps insistence that this is the minimum contribution expected of all members of the NATO alliance.   Of the member states, only the government of Spain appears to have pushed back against this target.    The rest have recognized that the pattern of the US footing the bill for European security in the disproportionate manner that prevailed throughout the Cold War and since is no longer acceptable.    Europe and Canada must contribute their fair share of the resources necessary to defend their security rather than continue to free ride on the US commitment.  

That certainly seems reasonable but why 5% of GDP?  NATO currently spends roughly 5 times as much on its military as does its most important competitor, China, and 10 times as much as its most proximate threat, Russia.   What are the implications of this, and does it make sense?  

A good starting point is to think about this problem based on “threat perceptions” and what in the field of international relations is called the “security dilemma”.   The NATO alliance is inclined to spend this much because it perceives Russia and China as threats to their security.   The obvious flip side of that perception however, is rarely discussed in NATO countries: how is this level of military spending being perceived by those outside of the alliance, especially their declared adversaries?   This relates the “security dilemma”: competition over security, like poker, is a zero-sum game, a gain by one player is a loss to another.   As one state increases its security by accumulating arms, the security of its adversary’s declines, prompting more spending on arms by that state.   In other words, the quest for military security will predictably result in arms races.   The accumulation of arms by all sides will divert much needed resources away from social services, diplomacy, infrastructure investments etc., without producing any greater security for anyone (0 sum).   This is not merely a theory, but a reality that has a long history.   In the current situation it is already evident in China’s attempt to reach parity with Russia and the US in the number of nuclear weapons in their arsenal.   It is difficult to take complaints about China’s nuclear buildup, as problematic as it is, seriously when the US and NATO are spending trillions on their own nuclear modernization.

The figures cited above point to another, less talked about reality.   Given the disparity in military spending at a time when NATO is at the 2% of GDP level, the 150% increase is clearly not being driven by NATO’s adversaries.   It appears to be a pretty one-sided arms race and that should worry, not only our adversaries, but us.    Arms races are costly and can bankrupt states.   This should not be news to policy makers in NATO.  Indeed it was this realization that underlay the strategy NATO adopted in the closing decades of the Cold War: The USSR, in order to keep up with western military capacities (especially Regan’s Strategic Defense Initiative but also the US sponsored war in Afghanistan) was forced to divert more and more resources away from its civilian economy, resulting in the stagnation of its economy. That stagnation in turn produced discontent with the system among the citizens of the USSR, eventually leading to its collapse.

Policy makers in China appear to have studied the collapse of the USSR closely to avoid a similar fate.  China carefully avoided competing with the US in the military realm, spending on nuclear weapons only enough to develop a minimal deterrent of 200-300 weapons, not attempting to project power though the establishment of military bases beyond it’s immediate territory (and one in Djibouti adjacent to a much larger US base to help end piracy) and naval power limited to the waters of the east and south China seas.

This approach allowed China to focus on its economic development and thus to rise to the position of challenging the US as the most dynamic manufacturing power on the planet.   It has now put China into the position of doing to NATO what NATO did to the USSR: deliberately engage in an arms race that the US/NATO can’t afford, forcing them to lower standards of living, ignore infrastructure investments, neglect the need for an energy transition…all to pump more funds into their militaries.  

There is no sign that China has, or needs to adopt this strategy, however.   The US/NATO insist on doing it to themselves without any encouragement from their most serious competitor.   This should prompt some obvious questions:   will the products from countries spending 5% of their GDP on their militaries be able to compete on the global market with those from states not burdened with that level of taxation?   Will neglect of health care, education, infrastructure … required to reach that 5% goal make Canada more, or less cohesive as a nation?   Will it diminish or increase the desire of segments of the population of Alberta and Quebec for the breakup of the country?  

Canada might have good reason to fear for its security, given the “rupture” in international politics described by PM Carney at Davos.   The threats that justify those concerns don’t come from China or Russia, however.  It is now the US that most directly threatens Canadian sovereignty.   It is unclear how purchasing F35’s etc. from the US and maintaining “interoperability” with NATO will defend Canadian sovereignty from the threat posed by a fellow member of that alliance.   Indeed, it is entirely unclear whether there is a military solution to this problem at all, given the extreme asymmetry between the US and Canada.  Canada’s only real hope is in preparing its population for non-violent civilian resistance as a means of maintaining its sovereignty.  

For the US, the insistence of 5% of GDP as a minimum contribution to NATO is clearly not motivated by security concerns.  It is more industrial policy than security policy.   Most of the increased expenditures from NATO members will go toward purchasing US manufactured weapons systems, thus boosting US exports.  Both in Germany and Canada (and probably elsewhere) the governments assent to this level of spending is ironically also being sold to voters as a form of industrial policy.  It is being promoted as a means of reinvigorating moribund manufacturing sectors, generating good, high paying jobs.  There are two major problems with these claims, however.  First, similar expenditures on education, health care, environmental clean ups etc. will generate far more employment than military spending and have significant positive impacts on the quality of life. (https://www.radiofree.org/2025/09/02/federal-investment-in-military-less-effective-for-jobs-than-investments-in-education-or-healthcare/)  Second, it will create in each of these states (that don’t simply import more arms from the US) the equivalent of the “military industrial complex” that President Eisenhower warned about.   It will create arms manufacturers that depend on the states in question as their primary customer.   Their business models will depend on constant and expanding demand for their products which in turn will depend on the continued perception of threats whether real or imagined.  As these corporation become more profitable, their influence over governments will also rise, leading to more pressure for further militarization.

It is long overdue that citizens of the world and Canadians in particular, wake up and acknowledge that there are no military solutions to the most fundamental threats to our security.    Militaries are not the solution to our problems- they are the problem.    As the largest single contributor to global climate change, they exacerbate the wildfires, droughts and floods that have devastated parts of our country.   Canadian security depends on recognizing the actual threats to our security, the solution to which are investments in diplomacy, multilateralism, education, not arms.

Arnd Jurgensen is Chair of the Nuclear Weapons Working Group and international relations specialist at University of Toronto.