Great article. You mentioned that spending does not create growth and prosperity, which I have always believed. But after reading your article I'm forced to agree with you. My question is what actually fuels growth and prosperity?
Thank you! What fuels growth and prosperity is the accumulation of capital: tools, machines, infrastructure, and knowledge that make labor more productive. When we invest in capital goods instead of just spending aimlessly, we enable people to produce more with less effort over time. That rising productivity is what lifts living standards in the long run.
The free exchange of goods and services between willing buyers and sellers. By giving you my currency for your product, I am stating that your product is more valuable (to me) than my currency unit. You are simultaneously saying that my currency units are more valuable (to you) than your products.
What fuels growth and prosperity? Savings and capital formation, but Keynesian politicians think saving is bad and want consumers to spend, so they penalize saving and encourage spending.
Military spending—at least in the United States—has long been sold as national defense, but in practice, it’s become just another arm of bloated government redistribution. Once the sacred cow of bipartisan patriotism, the Pentagon’s budget has been quietly co-opted by political operatives to serve agendas that range from climate ideology to DEI theater, often bearing no relation to combat readiness or national survival.
The inclination to misuse public funds is not new, but the brazenness of it today—especially as it relates to the military-industrial complex—has become impossible to ignore. Every branch of the federal government now operates as a tributary of centralized fiscal indulgence. The military is no exception.
Let’s be clear: government spending is not inherently good or bad. But it is inherently unaccountable when separated from market forces. Price signals—those sacred messengers of scarcity and value—are replaced with votes, lobbying clout, and campaign contributions. The result? Inefficiency. Waste. Rent-seeking. And a citizenry increasingly footing the bill for a system that doesn’t serve them.
Most military spending is, to put it bluntly, fiscal dynamite. Bombs, in their most literal and figurative form, are destroyed upon use—ephemeral, expensive, and rarely regenerative. But not all military outlays are equal. A few—precious few—have produced second- and third-order effects that significantly improved the standard of living across society.
This is where the story gets interesting.
1. The Internet
Born out of Cold War paranoia, ARPANET was a Pentagon experiment to build a communication system that could survive a nuclear strike. It worked—maybe too well. That same infrastructure now underpins everything from telemedicine to e-commerce to the very social media platforms attacking the institutions that created them.
2. GPS
Initially developed to guide submarines and missiles with unerring precision, GPS was declassified and released to the public in the 1990s. It now powers your Uber ride, your crop harvester, your dating app, and your dog’s smart collar. In terms of downstream productivity, it’s one of the greatest ROI plays in history.
3. Drones
Once relegated to surveillance and surgical strikes, drones now monitor crops, deliver packages, film weddings, and rescue lost hikers. The military created the tech, the private sector scaled it, and consumers embedded it into everyday life.
4. Medical Innovation
Wartime necessity accelerates triage innovation. From modern prosthetics to battlefield trauma care, countless medical advancements trace their origins to the pressure cooker of combat zones. These are hard to quantify but easy to appreciate when you're the one on the stretcher.
5. Aviation & Aerospace
Military aircraft R&D gave us more than fighter jets. It gave us safer commercial airliners, satellite communication, accurate weather forecasting, and, ultimately, space exploration. NASA may wear the civilian uniform, but its DNA is military through and through.
6. Everyday Consumer Products
Radar gave us microwaves. WWII gear innovation gave us duct tape and super glue. Velcro came from the space program. Even digital cameras began as reconnaissance tools. The military’s weirdest side hustles often become consumer gold.
7. Computing and Cybersecurity
Military cryptography and mainframe computing laid the foundation for everything from modern finance to online health records. The arms race to protect and crack codes seeded the multi-trillion-dollar digital economy.
8. Semiconductors
The crown jewel of military-driven innovation. DARPA and the Pentagon didn’t just fund chips—they birthed Silicon Valley. Early integrated circuits were built for missiles, not MacBooks. But from that came smartphones, AI, precision agriculture, and the information economy. The Cold War’s arms race quietly laid the infrastructure for the **digital age**.
We’re not here to celebrate bombs. We’re here to track value creation, and most government spending—especially in the military—fails that test miserably. But in rare cases, military R&D has produced technologies so transformative that they elevated the global standard of living in ways no stimulus package or ESG policy ever could.
The challenge now? Stop funding performance art. Start funding second-order innovation. Spend less on optics and more on opportunities. And maybe, just maybe, remember that true national strength is measured not just by how hard we can hit—but by how well we can live.
I love the example of the Hungarian doctor Ignaz Semmelweis. Instead of being curious about his results, he was vilified, which tragically cost many lives.
Getting a bit philosophical for a moment, science is supposed to be an impartial search for the truth - always researching, always questioning, and constantly recognizing that what we believe today may very well be shown to be wrong in the future. That is science in a nutshell.
When I was growing up, I was told that the times of Galileo were over and that we now live in a more enlightened age. Unfortunately, I don't think that's entirely true. I see this in my little neck of the woods—the financial sector—where consensus is often valued more than seeking out new research. That's why I have such a deep respect for legendary investors. They may be wrong, but in the end, it is reality (not consensus) in terms of portfolio performance that serves as the final judge.
If we were dealing with sane people the NS pipe would be intact and gas would be flowing. But we aren't. ReArm isn't about defence or insurance its about attacking Russia because the dream of inflicting a defeat and splitting the country into 16 parts and pillaging the natural resources to 'save the EU ' from its financial plight is alive and kicking. Of course they will do what Trump wants, they will buy overpriced US weapons, they know they can't make them themselves in sufficient quantity.
The gamble is huge, depends on Russia not using its nukes and the US still providing back up whatever it says.
In their mad minds it either this or sinking into a pre-industrial morass. They seem willing to chance total destruction.
I'm not even sure they dream about defeating Russia. They might stir the air and still hope for internal troubles at one point but I'm not sure they might be that delusional to expect a military victory...
No, right now, what they need is a vilain to try to keep everyone in line as long as possible. And Russia is good enough for that. Especially since there is almost no Russian population inside Europe. So no risk of trouble.
Fundamentally, those industries you mentioned (chemical, steel, manufacturing) can and will translate to peacetime production, providing there's enough domestic demand, and as you very well know yourself, Europe has been suffering from chronic undeconsumption and has been trying to drive growth through export-led economy. With US tariffs in place, rearmament provides that short-term stimulation, but again, as you observed, it does nothing for the structural issues. Ironically, Europe is too poor to buy its own output, precisely because of net zero and resource restrictions related to the Ukrainian war.
The powers in EU don't want to improve their citizens lot! That's why defense spending is the go to! It increases GDP and enables profit without raising the living standards of the citizens. That's the plan! Why? Because poverty stricken lower classes are easier to control ! That's why!
Yes, I think you're right. There is a fondamental contradiction between Net Zero and ReArm policies. This is mostly political babbles so the people in charge maintain the apparence they are still running the show.
And it goes even further. Maybe "if the EU wants to rearm itself, it should". But how could it be possible when European politicians are planning to rearm against the main potential supplier of the very ressources and energy they need to do so ?...
Even in Ukraine, whatever will be left on the Western side of the new border, along with gaz transit, will be controlled by the US...
Good point. It’ll definitely be interesting to see how willing Russia will be to sell gas to the EU going forward. It reminds me of Putin’s “you’ve made your bed” remark after Ukraine chose not to renew the gas transit deal with Russia at the end of last year.
Probably just a trickle. Controlled and priced by both the US and Russia. Just enough to be able to buy weapons to the former without being a serious threat to the later. But still allowing European politicians to pretend whatever they want.
Good article, however one thing I'd say is an argument in favor of defense related spending is technology. A not insignificant amount of technology that our economy and daily life relies on today is a byproduct of things developed for military use first, from space based systems to the internet to aircraft to microwaves among many others... it was military (or military adjacent like NASA) spending and competition that got them off the ground.
I'd argue that military spending when provided a disciplining factor that demands results (such as war or geopolitical competition) is much better than the private sector at revolutionary technological advances. The private sector is more focused, and better at, exploiting the technology once the foundational work has been done.
Great article. You mentioned that spending does not create growth and prosperity, which I have always believed. But after reading your article I'm forced to agree with you. My question is what actually fuels growth and prosperity?
Thank you! What fuels growth and prosperity is the accumulation of capital: tools, machines, infrastructure, and knowledge that make labor more productive. When we invest in capital goods instead of just spending aimlessly, we enable people to produce more with less effort over time. That rising productivity is what lifts living standards in the long run.
Simple and straightforward, even an economic layman like me can understand. Thankyou.
The free exchange of goods and services between willing buyers and sellers. By giving you my currency for your product, I am stating that your product is more valuable (to me) than my currency unit. You are simultaneously saying that my currency units are more valuable (to you) than your products.
What fuels growth and prosperity? Savings and capital formation, but Keynesian politicians think saving is bad and want consumers to spend, so they penalize saving and encourage spending.
I guess the short answer is "infrastructures"
Military spending—at least in the United States—has long been sold as national defense, but in practice, it’s become just another arm of bloated government redistribution. Once the sacred cow of bipartisan patriotism, the Pentagon’s budget has been quietly co-opted by political operatives to serve agendas that range from climate ideology to DEI theater, often bearing no relation to combat readiness or national survival.
The inclination to misuse public funds is not new, but the brazenness of it today—especially as it relates to the military-industrial complex—has become impossible to ignore. Every branch of the federal government now operates as a tributary of centralized fiscal indulgence. The military is no exception.
Let’s be clear: government spending is not inherently good or bad. But it is inherently unaccountable when separated from market forces. Price signals—those sacred messengers of scarcity and value—are replaced with votes, lobbying clout, and campaign contributions. The result? Inefficiency. Waste. Rent-seeking. And a citizenry increasingly footing the bill for a system that doesn’t serve them.
Most military spending is, to put it bluntly, fiscal dynamite. Bombs, in their most literal and figurative form, are destroyed upon use—ephemeral, expensive, and rarely regenerative. But not all military outlays are equal. A few—precious few—have produced second- and third-order effects that significantly improved the standard of living across society.
This is where the story gets interesting.
1. The Internet
Born out of Cold War paranoia, ARPANET was a Pentagon experiment to build a communication system that could survive a nuclear strike. It worked—maybe too well. That same infrastructure now underpins everything from telemedicine to e-commerce to the very social media platforms attacking the institutions that created them.
2. GPS
Initially developed to guide submarines and missiles with unerring precision, GPS was declassified and released to the public in the 1990s. It now powers your Uber ride, your crop harvester, your dating app, and your dog’s smart collar. In terms of downstream productivity, it’s one of the greatest ROI plays in history.
3. Drones
Once relegated to surveillance and surgical strikes, drones now monitor crops, deliver packages, film weddings, and rescue lost hikers. The military created the tech, the private sector scaled it, and consumers embedded it into everyday life.
4. Medical Innovation
Wartime necessity accelerates triage innovation. From modern prosthetics to battlefield trauma care, countless medical advancements trace their origins to the pressure cooker of combat zones. These are hard to quantify but easy to appreciate when you're the one on the stretcher.
5. Aviation & Aerospace
Military aircraft R&D gave us more than fighter jets. It gave us safer commercial airliners, satellite communication, accurate weather forecasting, and, ultimately, space exploration. NASA may wear the civilian uniform, but its DNA is military through and through.
6. Everyday Consumer Products
Radar gave us microwaves. WWII gear innovation gave us duct tape and super glue. Velcro came from the space program. Even digital cameras began as reconnaissance tools. The military’s weirdest side hustles often become consumer gold.
7. Computing and Cybersecurity
Military cryptography and mainframe computing laid the foundation for everything from modern finance to online health records. The arms race to protect and crack codes seeded the multi-trillion-dollar digital economy.
8. Semiconductors
The crown jewel of military-driven innovation. DARPA and the Pentagon didn’t just fund chips—they birthed Silicon Valley. Early integrated circuits were built for missiles, not MacBooks. But from that came smartphones, AI, precision agriculture, and the information economy. The Cold War’s arms race quietly laid the infrastructure for the **digital age**.
We’re not here to celebrate bombs. We’re here to track value creation, and most government spending—especially in the military—fails that test miserably. But in rare cases, military R&D has produced technologies so transformative that they elevated the global standard of living in ways no stimulus package or ESG policy ever could.
The challenge now? Stop funding performance art. Start funding second-order innovation. Spend less on optics and more on opportunities. And maybe, just maybe, remember that true national strength is measured not just by how hard we can hit—but by how well we can live.
Great article!
I love the example of the Hungarian doctor Ignaz Semmelweis. Instead of being curious about his results, he was vilified, which tragically cost many lives.
Getting a bit philosophical for a moment, science is supposed to be an impartial search for the truth - always researching, always questioning, and constantly recognizing that what we believe today may very well be shown to be wrong in the future. That is science in a nutshell.
When I was growing up, I was told that the times of Galileo were over and that we now live in a more enlightened age. Unfortunately, I don't think that's entirely true. I see this in my little neck of the woods—the financial sector—where consensus is often valued more than seeking out new research. That's why I have such a deep respect for legendary investors. They may be wrong, but in the end, it is reality (not consensus) in terms of portfolio performance that serves as the final judge.
Thank you! Groupthink is definitely one hell of a drug.
If we were dealing with sane people the NS pipe would be intact and gas would be flowing. But we aren't. ReArm isn't about defence or insurance its about attacking Russia because the dream of inflicting a defeat and splitting the country into 16 parts and pillaging the natural resources to 'save the EU ' from its financial plight is alive and kicking. Of course they will do what Trump wants, they will buy overpriced US weapons, they know they can't make them themselves in sufficient quantity.
The gamble is huge, depends on Russia not using its nukes and the US still providing back up whatever it says.
In their mad minds it either this or sinking into a pre-industrial morass. They seem willing to chance total destruction.
I'm not even sure they dream about defeating Russia. They might stir the air and still hope for internal troubles at one point but I'm not sure they might be that delusional to expect a military victory...
No, right now, what they need is a vilain to try to keep everyone in line as long as possible. And Russia is good enough for that. Especially since there is almost no Russian population inside Europe. So no risk of trouble.
Yes, Russia is the perfect villain. It’s mind-boggling how many people seem to believe that Russia would benefit from invading Germany or France.
Fundamentally, those industries you mentioned (chemical, steel, manufacturing) can and will translate to peacetime production, providing there's enough domestic demand, and as you very well know yourself, Europe has been suffering from chronic undeconsumption and has been trying to drive growth through export-led economy. With US tariffs in place, rearmament provides that short-term stimulation, but again, as you observed, it does nothing for the structural issues. Ironically, Europe is too poor to buy its own output, precisely because of net zero and resource restrictions related to the Ukrainian war.
Great perspective. And churning out tanks and bombs won’t make Europe any richer in the long run.
The powers in EU don't want to improve their citizens lot! That's why defense spending is the go to! It increases GDP and enables profit without raising the living standards of the citizens. That's the plan! Why? Because poverty stricken lower classes are easier to control ! That's why!
Yes, I think you're right. There is a fondamental contradiction between Net Zero and ReArm policies. This is mostly political babbles so the people in charge maintain the apparence they are still running the show.
And it goes even further. Maybe "if the EU wants to rearm itself, it should". But how could it be possible when European politicians are planning to rearm against the main potential supplier of the very ressources and energy they need to do so ?...
Even in Ukraine, whatever will be left on the Western side of the new border, along with gaz transit, will be controlled by the US...
Good point. It’ll definitely be interesting to see how willing Russia will be to sell gas to the EU going forward. It reminds me of Putin’s “you’ve made your bed” remark after Ukraine chose not to renew the gas transit deal with Russia at the end of last year.
Probably just a trickle. Controlled and priced by both the US and Russia. Just enough to be able to buy weapons to the former without being a serious threat to the later. But still allowing European politicians to pretend whatever they want.
This sounds a little like Trump's proposal to bailout farmers with subsidies after destroying their export market with a trade war, just sayin......
I still remember the “Brot statt Böller“ (bread rather than fireworks) ad asking for donations at New Year's time…
How rearmament became a Green/left position is one of the great mysteries of our time.
Old Europe:
My dad was in WW ll and survived 22 missions in a B24 bombing Germany.
Now: they don't deserve anything, and they bite the hand which saved them. Eff-em.
Except a few - Italy, Poland, Hungary, etc.
An excellent summary of the incredibly obvious.
Thank you! 🫡
Good article, however one thing I'd say is an argument in favor of defense related spending is technology. A not insignificant amount of technology that our economy and daily life relies on today is a byproduct of things developed for military use first, from space based systems to the internet to aircraft to microwaves among many others... it was military (or military adjacent like NASA) spending and competition that got them off the ground.
I'd argue that military spending when provided a disciplining factor that demands results (such as war or geopolitical competition) is much better than the private sector at revolutionary technological advances. The private sector is more focused, and better at, exploiting the technology once the foundational work has been done.