News Summary

• The idea that defence spending and investment automatically boost economic activity and growth is far from being a solid pillar of economic theory.
• One study found that the impact of military spending in Canada was either slightly positive or even negative.
• The negative aspects of defence spending include possible “capital leakage, fiscal overspending, and the risk of diverting resources from more productive sectors of the economy.” The debate — ongoing for over 50 years — persists in the economic literature under what is referred to as the ‘guns or butter dilemma’