War is expensive; peace might be priceless

Global military spending hit a record $2.7 trillion in 2024, up 9.4% YoY, the sharpest annual jump since the Cold War ended. The last 2-3 years have seen overall global spending spike by ~8% CAGR, double of the ~4% growth over 2017-2021. At the top of the spending ladder are five familiar giants: the United States, China, Russia, Germany, and India.

Together, they account for 60% of all global defense spending, $1.6 trillion, according to fresh 2024 data from the Stockholm International Peace Research Institute (SIPRI). One major reason for the surge? The Russia–Ukraine war, now in its third year.

Source: Statista

So, which country is spending the most on war? The US leads with $997 billion in 2024, Russia’s budget has nearly doubled since 2015, while Germany's has more than doubled.

Source: SIPRI

Now, zooming into military spending as a share of GDP: Ukraine tops the list with 36.5%, followed by Russia at 7.1%. The US, despite its massive budget, clocks in at just 3.4%.

Source: SIPRI

What are the key drivers of this surge?

Geopolitical instability

The most obvious reason - rising geopolitical conflicts are driving defense budgets upward across regions. For instance, Russia boosted its military spending by 38% in 2024 to $149 billion to sustain operations in Ukraine. Israel’s defense outlay surged 65%, reaching $37 billion amid conflict with Hamas.

In Asia, Indo-Pacific tensions, especially around China and Taiwan, are triggering an arms buildup, with China projected to spend $267 billion in 2025 to maintain strategic dominance.

NATO’s spending push

In 2014, NATO members pledged to spend 2% of GDP on defense by 2024. A decade later, 18 of 32 members hit the target, up from 11 in 2023. Average spending reached 2.2% of GDP, totaling $1.5 trillion, 55% of global military expenditure. Per capita defense spending rose to $1528, and over the past decade, NATO’s original members increased budgets by an average of 107%, with Lithuania leading at +272%.

Reshoring military production

Countries are reshoring military production to boost security and cut foreign reliance. The US is channeling investments into domestic R&D and manufacturing via the Military Production Act to shore up supply chains. Likewise, India’s “Make in India” push backs a $75 billion defense budget in 2025, focused on indigenous procurement, innovation, and next-gen systems.

AI meets military

Military budgets are shifting toward AI, cyber, space, and autonomous systems. With spending on defense AI and cyber alone projected to hit $23.1 billion by 2030 (growing at 13% CAGR), nations are racing to future-proof their forces through cutting-edge tech.

Ripple effects of increased military spending

Crowding-out effect

Increased remilitarisation, especially via higher military spending, can reduce domestic spending on health, education, and infrastructure. This "crowding-out" effect happens as defense budgets compete with other government priorities. A 2018 study by Fan, Liu, and Coyte found that a 1% rise in military spending leads to a 0.62% drop in health spending, with even deeper cuts in poorer countries.

A classic example is North Korea. The country spends 25–33% of its GDP on defense, yet 45.5% of its population remains undernourished, and basic public services are in disrepair. It's a nuclear power struggling to meet basic needs.

Rising public debt

To finance rising defense expenditures, governments are increasingly turning to public borrowing. According to the World Economic Forum’s latest Chief Economists Outlook, 86% of surveyed economists expect most military expansion to be funded through increased borrowing.

Hidden climate costs

Military expansion doesn’t just affect budgets—it also poses a serious but often overlooked threat to climate goals. The IPCC’s Sixth Assessment Report lays out how the world can limit global warming to 1.5–2°C, but it barely accounts for military emissions—a major blind spot in climate planning. New research shows that wars like the War on Terror (2001–2011) and the Russia–Ukraine conflict (2022–) have significantly worsened emissions. For every 1% rise in military spending (as a share of GDP), there’s an increase of 0.04 kg of CO₂ per dollar spent.

That seemingly small figure actually explains 27% of the total rise in global CO₂ emission intensity from 1995 to 2023.

Ramifications we might not be counting…

As global defense budgets hit record highs, it’s not just about how much countries spend, it’s about what that spending displaces.

Every extra dollar going to tanks, missiles, and military upgrades is a dollar not going to green energy, climate resilience, education, or social safety nets. That’s the core trade-off ,and the ramifications go far beyond national security. Militaries alone contribute around 5.5% of global carbon emissions. So while defense is necessary, making it sustainable is just as critical. Integrating clean energy and low-emission tech into armed forces can significantly reduce their environmental impact.

But the smartest investment? Preventing conflict before it starts. The UN estimates that every $1 spent on peacebuilding can save up to $16 in future costs. Regional alliances like ASEAN or the African Union offer models for cooperation that reduce duplication, boost coordination, and promote smarter, more cost-effective security strategies, without fueling endless arms races.

Final thoughts

Rising military spending reflects growing global tensions but also presents a crossroads: continue fueling costly arms races or pivot toward smarter, greener, and more cooperative security strategies.

Investing in peacebuilding and sustainable defense isn’t just ethical - it’s economically wise, reducing future risks and costs. The path forward demands balancing power with responsibility for a safer, more stable world.