A new framework for global security financing

The intensification of rivalries between the major powers brought about a turning point increased defense spending in a priority that few states dare to question. This growing feeling of insecurity was the trigger World military spendingwhich increased by 37% between 2015 and 2024, reaching $2.7 trillion, a sum almost equal to Africa’s entire GDP.

NATO accounted for more than 50% of this spendingand most of its members invested more in defense at the expense of other public spending. Development aid was affected in Canada, the United Kingdom and Germany. Low public support for such programs makes them politically expendable, while security concerns and the pursuit of a defense industry boom drive military spending.

However, the increase in military budgets Global security has not improved. On the contrary: military investments increase instability, destroy ecosystems, fuel the arms race and increase the risk of conflict. It can also indirectly crowd out public investment in a gun-butter trade-off. The funding gap for Sustainable Development Goals Non-climate spending would have easily ceased in 2024 if defense spending increases had been redirected to this purpose. And since sectoral investments in health, education and energy infrastructure have higher “fiscal multipliers” than military spending, these investments are likely would have boosted GDP more than can be expected from defense spending.

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Public investment in human capital and infrastructure strengthens resilience and increases the likelihood that societies will resolve their disputes without violence or displacement. The biggest security risks for most countries are not territorial; These include threats such as pandemics, climate change and cyberterrorism. An exchange of defense aid may be politically rational, but it amounts to robbing Peter (a multidimensional understanding of security based on resilience) to pay Paul (a narrow, militarized understanding).

It is unlikely that the Gaps in development financing The funds resulting from this exchange are financed from private sources. Fragile countries tend to rely more heavily on grants and loans with very favorable terms, and social sectors generally do not generate the returns that private investors seek. As a result, countries like Haiti and Sudan have long struggled to attract foreign direct investment, and infrastructure projects in larger, less risky emerging markets are attractive to investors. private investors.

Now pension funds, insurers and banks are rushing to seize the opportunities created by increased public sector investment in defense, some of which is led by new multilateral organizations such as the Defense, Security and Resilience Bank. Stimulating these capital flows raises questions The future of global ESG investment frameworks (Environmental, Social and Governance), which traditionally consider the defense industry to be at higher risk due to uncertainties regarding its business ethics, the use of its products, its governance and its impact on the environment.

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Security financing does not have to be a zero-sum game. An improved defense financing framework could help us address the complexity of today’s collective security challenges.
A more effective approach would be based on three pillars. First I would adopt a multidimensional perspective of security. In June, NATO members agreed to allocate 5% of their GDP to defense by 2035, with 3.5% of GDP going to core defense and 1.5% to security-related spending to “protect our critical infrastructure, defend our networks, ensure our civilian readiness and resilience, advance innovation and strengthen our defense industrial base.” Currently at least 1.5% are concentrating more on civil defense than on a holistic understanding of security.

We’ve already seen creative accounting practices to minimize the higher target’s tax burden, as in the case of Italy’s efforts to install a 13.5 billion euro ($15.8 billion) suspension bridge. In addition, direct contributions to Ukraine’s defense will count towards the 5 percent target, which will serve as a model for financing future military operations in other parts of the world.

It is a promising sign that some NATO members are exploring whether development spending in security-related areas such as international peacekeeping missions, early warning systems for climate crises and resilient supply chains for vital medicines and vaccines could count towards the 1.5 percent target. While incorporating these budget items into NATO’s accounting framework could protect it from cuts, it could also jeopardize the integrity of standardized defense accounting if the boundaries of “security-relevant” become blurred. Furthermore, it increases the likelihood of “securitization” of aid and politicization of participation in ways that endanger lives.

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A more suitable approach is therefore: Measure the full range of national contributions to global security and assess their value in terms of defense and military deterrence, as well as economic growth and resilience. As the 2030 deadline for achieving the SDGs approaches, a multidimensional perspective on security could be a good starting point for discussing the successor framework.

The second pillar is a modern frame Security financing, which includes: more transparent estimates defense investment needs. In the case of NATO, these are confidential, although transparent national estimates of minimum defense investment needs are critical to prevent waste and ensure spending deters legitimate threats without increasing the likelihood of conflict.

Setting targets for military spending as a percentage of GDP assumes that countries should spend on defense everything they can afford instead of focusing on what they (or their allies) really need to contain real threats. This crude burden-sharing formula inevitably militarizes economies, turning weapons proliferation and global conflict into industrial and commercial advantages. Input spending targets create incentives for quick disbursements, which can jeopardize resource optimization procurement processes.

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The publication of aggregated estimates of actual defense needs should be possible without endangering national security. This would ensure accountability for defense spending and enable multidimensional security investments that address both military and non-military threats.

The third pillar includes stronger fiscal protections for key spending priorities. Global defense spending now outpaces foreign aid by 13 to 1, a trend that has already had far-reaching effects, from diplomatic layoffs to the collapse of global health investments. The opportunity cost of these huge defense investments may well lie in global cooperation itself.

However, some countries are looking for a better solution. “We build weapons when We should build social infrastructure“Warned South African President Cyril Ramaphosa at this year’s United Nations General Assembly, echoing concerns raised by Brazil, Kazakhstan and Nepal (among others). For her part, Mexican President Claudia Sheinbaum has suggested this, recognizing the symbiotic relationship between diplomacy, defense and development G20 members devote 1% of their military spending to sustainable development.

International cooperation is at a turning point, with the Global North becoming much more committed to defense financing than to defending development. A 21st century approach to financing security threats should ensure this Defense and development go in the same direction.

*Nilima Gulrajani is a senior researcher at ODI Global, where she leads the Donors in a Post-Aid World program, and is an associate at Trinity College, University of Toronto.

Project Syndicate, 2025.
www.project-syndicate.org