NATO, 2% to Defense, 20% to Equipment: Cumulative Nature of Military Spending and the Role of the Economic Performance

Military spending is a widely discussed topic, especially in the current geopolitical landscape. Expenditures on "equipment" play a pivotal role in total defense spending.. However, the nature of the equipment expenditures is cumulative. Thus, when trying to estimate the capability of a state we should consider a longer period, not just one year. The aim of this article is, therefore, to offer (i) an exploratory analysis of the cumulative equipment expenditures of NATO countries between 2014-2023 and (ii) to verify - by using OLS multivariate regression - the extent to which the GDP per capita primarily drives these expenditures (adjusted per soldier), the share of defense spending from the GDP, or by the fraction of defense spending that goes specifically to equipment. The results show that the GDP per capita is by far the most powerful predictor.

Keywords: Economy; GDP; NATO; Military Expenditures; Equipment.