The peace dividend goes into reverse

For most of the past three decades, Europe treated its armed forces like a subscription it kept meaning to cancel. When the Berlin Wall fell, defense budgets across NATO drifted downward as a share of output, and the savings were quietly rerouted to pensions, roads and tax cuts. Economists called the windfall the peace dividend; governments spent it gladly, and largely stopped talking about tanks.

That era is closing. Russia's seizure of Crimea in 2014 unsettled the assumption of permanent European calm; the full-scale invasion of Ukraine in 2022 ended it. NATO members, who for years had promised to spend a set share of GDP on defense and then mostly ignored the pledge, are now raising the target and, more novelly, trying to meet it.

The lines tell a tidy story. The United States carried the heaviest burden throughout, and still drifted lower after the Cold War before turning back up. Germany rode the dividend furthest, letting its spending sink well below the old alliance benchmark for the better part of a generation. Poland, wary of its neighborhood, moved earlier and harder, and now sits near the top of the table.

Ukraine is the outlier that swallows the chart. A country spending a modest, European-normal share before 2014, it now pours a wartime fraction of its economy into simple survival, a level with few peers in modern Europe. Russia's own burden has climbed steadily, though its official figures deserve the usual asterisk.

A peace dividend, it turns out, is just a loan against the assumption that peace holds.

None of this is cheap, and the arithmetic is unforgiving. Every extra point of GDP spent on defense is a point that cannot buy hospitals or fund tax cuts; the dividend a generation banked now runs in reverse. The question in NATO's capitals is no longer whether to rearm, but how long voters will keep paying for it.