By Jorg LEIJTEN
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Additional defense spending will not lead to economic growth in the Netherlands. Most of the money invested in the sector in the coming years will go towards new equipment that must be sourced from abroad. Thus, this spending does not remain in the Netherlands, according to a study by the Central Planning Bureau (CPB). Furthermore, the additional employment created by recruiting new defense personnel will, due to the tight labor market, come at the expense of other jobs that also need to be filled.
At the NATO summit in June, it was agreed that countries would spend at least 5 percent of their Gross Domestic Product (GDP) on defense by 2035: this comprises 3.5 percent in direct investments in the sector and 1.5 percent in spending on ‘broad resilience’ such as ICT infrastructure and roads.
To meet the new standard, the Netherlands will need to spend an additional 16 to 19 billion euros on defense in the coming years. However, the CPB’s research now indicates that the Dutch economy will not benefit much from this.
The researchers emphasize in the study that this is also not the primary goal of the investments. “The effects on economic growth should not be decisive in choices regarding defense spending. The goal of increasing defense spending is to enhance our resilience and security. That is ultimately also an important prerequisite for a well-functioning economy.”
Of the extra billions spent, an estimated 61 percent will go towards items purchased abroad, such as weapon systems and aircraft. For the maintenance of equipment, 29 percent of the additional spending goes abroad. For personnel, that percentage is zero: additional staff are recruited in the Netherlands.
But the economy doesn’t benefit from this either. “In the current tight labor market, this will primarily result in more displacement of other economic activities in the Netherlands,” write the CPB researchers. Conversely, it is even possible that additional investments in defense lead to economic contraction. Because the expenditures are financed through, for example, cuts to other ministries or tax increases, it is conceivable that negative economic effects arise in that regard.
Original article: nrc.nl
