NATO
A NATO Defense Bank Can’t Solve Allies’ Fundamental Fiscal Problems
Western leaders have found a new way to avoid making difficult choices.
Credit: Artur Widak/NurPhoto via Getty Images
Led by Canada’s Prime Minister Mark Carney, there is a growing push for a NATO bank that would enable greater military expenditures. Recent reporting suggests that the British government, which had dismissed the idea a few months earlier, is seriously reconsidering the idea. Should such a bank be established, however, it would worsen national debt burdens while functioning as a giveaway to weapons manufacturers and financial institutions.
Increased defense spending is presented as an unavoidable imperative that should not undermine other expenditures. In a piece published in the Financial Times in June of this year, Carney and his Luxembourgish counterpart Luc Frieden argued that “a new NATO bank” is necessary since pledges to increase defense budgets “will require more than €850bn in additional annual spending across the alliance in Europe and Canada, which cannot come at the expense of other investment priorities at home.”
In reality, a new financial institution can’t allow military spending to somehow not “come at the expense” of other domestic priorities. At best, it would merely delay a necessary reckoning between competing priorities.
A NATO defense bank would have three primary beneficiaries: political leaders who could present themselves as strong on defense; arms manufacturers whose profit margins would skyrocket; and financial institutions that would provide the credit and make a killing on the interest. Despite its branding as an international financial body that seeks to improve intergovernmental cooperation on defense, the NATO bank, at its core, would be merely a mechanism to mobilize capital from private banks. In effect, some of the world’s biggest financial institutions would be able to lend money to military contractors and national governments while debts could nominally be kept off national ledgers. But such rearrangements would not address the underlying fiscal implications.
The proposed Defense, Security and Resilience Bank (DSRB) would, nonetheless, increase overall national debt burdens. If growing military budgets are indispensable, itself a debatable claim, then governments should raise taxes to pay for them. The problem is that electorates have contradictory demands, wanting more spending on the armed forces and public services whi …