The Defense Ministry is a black hole for billions? As weapons production can raise Ukraine's economy
In simple words, what will be the Ministry of Defense: a black hole where billions of budget funds dissolve, or "Energy" to grow the economy in general and industry in particular? Even before the full -scale war, Ukraine increased state spending on defense every year, which, however, did not accelerate the growth of the economy. Where did people's money go and why there is no multiplier effect - and we will try to understand.
Ukrainian society is broadly sense and expert community, in particular, "feeds" on several myths, among which the key: during the war the economy cannot develop and is doomed to a permanent crisis. A few years ago, English economist Mark Harrison conducted a very interesting study about the state of the global economy during World War II. As it turned out, the war and fall of GDP are not synonymous.
It is often the case - the war helps to carry out the necessary reforms and even extract the national economy from the abyss of Great Depression. In such countries, war is often a catalyst for economic growth, mainly due to defense orders. Naturally, if in the future, after hostilities, the government does not find a new key that opens up the growth door on an alternative platform, another stagnation is waiting for the economy.
But this is the art of public administration, when the highest political management selects different models to ensure the positive dynamics of development. The US was most obtained from the war: their GDP increased from $ 800 billion to $ 1. 474 trillion from 1938 (researcher data).
The United Kingdom "bounced" worse: GDP increased from $ 284 billion to $ 331 billion The product has decreased from $ 359 billion to $ 343 billion, or $ 16 billion, while we are well aware of those catastrophic human and material losses that it has suffered during the war. , the United States has increased quite confidently: from 7 to 16% (in 1990 prices), a decline of 1. 67% was only by the end of the war, when the defense order began to weaken gradually. and an increase in 18. 7% in 1944. 4.
34% (UK). The United States and the United Kingdom for the period 1938-1945-by +0. 44%, +9. 26%, +2. 34%, respectively. In 2013, the currency equivalent of the gross product of Ukraine reached a record value of $ 183 billion, and then decreased rapidly to $ 91 billion in 2015 (at the average annual hryvnia rate). In 2017, this figure has increased to $ 113 billion. I take the 2014-2017 interval, because this period can be called the most turbulent in terms of military activity in the Donbass.
As for military expenditures: the share of military expenditures for GDP in the USSR increased from 2. 1% in 1932 to 32. 8% in 1942. By 1947, this figure decreased to 11. 7%. The Union's military expenditures for defense were compatible (compared to the share of GDP) with American and inferior to English, not to mention German (these expenses in some years exceeded GDP-for example, 138% in 1944).
Thus, the current statements of some experts that it is not necessary to "sharpen" the production of weapons, to victory, they do not correspond to the reality: an abnormal increase in the cost of war, as the experience of fascist Germany shows, testifies to the proximity of defeat, not victory. There are many "parents" among the causes of the permanent collapses of our economy, but the complete lack of correlation between the increase in defense order and GDP should be recognized.
This happens for a very simple reason: the state defense budget we have only in the minimum proportions in favor of domestic companies of the MIC for the purchase of new weapons (this situation was before a full -scale war, as things go hard - it is difficult to say - the statistics are closed). Ukroboronprom factories were in a systemic crisis: with cold shops in winter and chronic non -payment of wages.
They barely kept afloat due to the personnel of the pre -retirement and retirement age, but have already begun to face a shortage of highly skilled workers. Let's say thank you to people who "reformed" Ukroboronprom in 2019-2021.
Why did we have no correlation between defense costs and GDP growth? The Russian Federation directed a significant part of their budget costs for the construction of new ships, submarines, missiles, air defense systems and radar fights, cars, armored vehicles, aircraft, satellites. Hence the multiplier effect, when one ruble spent in the MIC sector leads to a multiple increase in GDP growth. Ukraine also purchased armored persons in the United Kingdom for credit.
And warships ordered the war in Turkey. Since 2014, no new plane has been put into operation and our cadets have been forced to fly on scrap, with a risk to life. With shipbuilding plants, we have completely switched to import. A recent war in Nagorno-Karabas showed that Azerbaijan, by investing since the mid-1990s, about $ 29 billion for the purchase of new military equipment and allocating $ 2-2.
5 billion to the defensive sector for a year, achieved a quality military advantage over Armenia and won the war. lost territories. Moreover, not only at the expense of drones, but mostly with the help of coordinated actions of company tactical groups of special purpose forces, which in the connection with artillery and armored compounds through flanking and occupying dominant heights were knocked out by Armenian BTG out of seemingly inaccessible positions.
At the same time, the costs of defense in Azerbaijan were at the level of 4. 5-5% of GDP at the stage of creation of a new format of the Army in 2010-2015 and 3. 5-3. 9% at the stage of "expectation" and "war testing" in the period 2016- 2019, with 5. 4% of GDP in 2020 against the background of active fighting on the release of occupied areas of the so-called "NKR Safety Belt".
With regard to the inflow of investments in the fighting countries, if you analyze the rating of the World Bank by the dynamics of FDI, a number of countries with military conflicts or threat of their conflicts have got to the top. For example, approximately the same amount of foreign investment as Ukraine attracted Mozambick, a country where the rebels "new immi" captured the port of Mosimbay and kept it for several years 60 km from the key gas fields of the country.
Next to us was little Lebanon, Ethiopia, where the next war with the separatists began, this time with the province of the tiger. Like Ukraine, these countries attracted 2-4 billion FDI. About the same amount of investment attracted the sub -Iran and much more - Israel and South Korea. This proves once again that the investor is important to enter a particular economy and proportion of profit/risks in favor of the first factor.
As the Nobel Laureate Dan Shechtman said in his lectures, the army is the center of the innovation transfer in Israel and a key player that is in demand for them. The development of MIC stimulates not only science but also the education system, medicine.