Europe can’t rearm its way to security

[LONDON] As Russia’s war on Ukraine rages on Europe’s eastern frontier, the continent’s leaders are finally willing to admit they have the power to revive their ailing economies. After decades of austerity, they are ready to spend again – but not to end poverty, accelerate decarbonisation, or reverse the collapse of essential public services. Instead, Europe’s fiscal firepower is being directed towards tanks, missiles and fighter jets.

Reorganising the economy around state-supported defence spending is known as military Keynesianism, though John Maynard Keynes – who rose to prominence by condemning the punitive post-World War I peace treaty that was imposed on Weimar Germany, which ultimately helped set the stage for Hitler’s rise and another war – would probably not have endorsed the term.

The reasoning behind the resurgence of military Keynesianism is not entirely without merit, as the pursuit of austerity policies has left many European economies punching below their weight. European productivity, which has grown at half the pace of the United States over the past decade, declined by 1 per cent in 2023. Real wages fell by 4.3 per cent in 2022 and 0.7 per cent in 2023, following a decade of stagnation. Meanwhile, investment is nowhere near where it needs to be to tackle the twin crises of inequality and climate breakdown.