In that transition monsters are born
For eleven consecutive years, the world has chosen to spend more on the instruments of war, arriving in 2025 at nearly three trillion dollars — a 41 percent rise over the decade. Driven by the fracturing of post-Cold War security arrangements, the strategic rivalry between great powers, and the seductive logic of military Keynesianism, nations from Washington to Beijing are rearming with a sense of permanent urgency. The treaties that once gave this acceleration some outer boundary have quietly expired, leaving the field open. History reminds us that arms races need not end in catastrophe, but they have rarely unfolded in a world so lacking in shared rules.
- Global defense spending has crossed the threshold of $3 trillion, with no institutional brake left to slow it — the New START treaty is gone, the NPT review collapsed without agreement, and the vacuum is being filled by national calculation alone.
- The United States is pushing for a Pentagon budget of $1.5 trillion while simultaneously pressuring NATO allies to spend 3.5% of GDP on defense, turning alliance solidarity into a transactional ultimatum.
- Europe is responding at speed, set to add roughly $80 billion in military spending in 2026 alone, while China sustains a disciplined 7% annual increase despite domestic economic headwinds.
- The nature of the arms race itself has mutated — companies like Palantir now sell AI-driven operating systems and digital battlefield infrastructure, reshaping what 'defense spending' even means in the twenty-first century.
- Analysts draw cautious comfort from Cold War precedent, where high spending produced deterrence rather than direct war in Europe — but warn that eroding norms and accelerating technology make this moment meaningfully different.
In 2025, the world spent nearly three trillion dollars on defense — 2.5 percent of global economic output — capping eleven straight years of rising military expenditure that has pushed total spending 41 percent higher than a decade ago. The Stockholm International Peace Research Institute, which tracks these figures closely, sees no reversal on the horizon.
The forces driving the acceleration are interlocking. Russia's war in Ukraine and the deepening rivalry between Washington and Beijing have made insecurity feel permanent. Artificial intelligence and autonomous systems have opened new military frontiers and sparked races to avoid obsolescence. And in an era of sluggish growth, military spending has become a tool for industrial reinvigoration — a logic embraced by governments as different as Germany, France, Russia, and the United States. What has changed most dramatically, however, is the absence of constraint: the New START nuclear treaty expired in February with no successor, and the latest NPT review ended without agreement, leaving nations free to accelerate without formal limits.
Within NATO, the pressure is deliberate and pointed. The Trump administration has asked Congress to approve a Pentagon budget of $1.5 trillion, while Defense Secretary Pete Hegseth warned allies at the Shangri-La Dialogue that failing to spend 3.5 percent of GDP on defense would alter the terms of America's partnership with them. The message landed. The EU is forecast to raise military outlays by roughly $80 billion in 2026 alone, reaching 2.5 percent of EU GDP. China, meanwhile, maintains a steady annual increase of around seven percent, methodically narrowing the gap with American military capacity.
The rearmament has also changed shape. Traditional weapons manufacturers now share the stage with companies like Palantir, which sells AI-based operating systems and digital infrastructure rather than arms — and whose co-founder has argued openly that Silicon Valley should embed itself in national security. The revenues of the world's 100 largest defense companies have doubled in real terms since 2002, reaching $680 billion.
Scholars note that arms races do not inevitably produce war — the Cold War produced deterrence in Europe, not direct confrontation. But they also note that the current moment differs: institutions are eroding, technology is accelerating, and the multipolar transition underway historically breeds the kind of insecurity that makes restraint harder to sustain. Spending is expected to keep rising through 2026 and 2027, driven by forces that show little sign of relenting.
The world's military budgets have entered a new phase of sustained acceleration. In 2025, nations spent nearly three trillion dollars on defense—equivalent to 2.5 percent of global economic output. This figure represents the culmination of eleven consecutive years of rising military expenditure, a period that began in 2014 and has seen total spending climb by 41 percent over the decade. The Stockholm International Peace Research Institute, which tracks these figures with meticulous care, documents a trend that shows no signs of reversing.
The drivers are multiple and reinforcing. Geopolitical tensions—particularly Russia's aggression in Ukraine and the strategic competition between the United States and China—have created a sense of permanent insecurity among nations. Technological revolution, especially the rapid advancement of artificial intelligence and autonomous systems, has opened new military possibilities and sparked races to avoid obsolescence. Economic calculation plays a role too: in an era of sluggish growth and political uncertainty, military spending has become a tool for stimulating industry and employment. And perhaps most significantly, the international architecture that once constrained arms races has largely collapsed. The New START treaty limiting nuclear arsenals between Washington and Moscow expired in February with no replacement in sight. The most recent review of the Nuclear Non-Proliferation Treaty ended without agreement. In this vacuum, nations feel free to accelerate.
Within NATO, the pressure is acute and deliberate. The Trump administration has asked Congress to approve a Pentagon budget of 1.5 trillion dollars—a jump from the current one trillion—though lawmakers are resisting such a dramatic increase. European allies face their own demands. U.S. Defense Secretary Pete Hegseth delivered a pointed message at the Shangri-La Dialogue in Singapore in late May: nations that refuse to meet the administration's spending targets of 3.5 percent of GDP will face a fundamental shift in how America conducts business with them. The message has resonated. The European Union is forecast to increase military spending by roughly 80 billion dollars in 2026 alone, pushing defense outlays to 2.5 percent of EU GDP. China, meanwhile, maintains a steady annual increase of around seven percent, a disciplined effort to narrow the gap with American military capacity despite economic headwinds at home.
The rearmament extends far beyond traditional weapons. A new class of defense contractor has emerged, with companies like Palantir exemplifying the shift. Palantir does not manufacture arms; instead, it provides artificial intelligence-based operating systems and digital infrastructure that have become essential to modern warfare. The company's co-founder, Alex Karp, has long argued that Silicon Valley should deepen its involvement in national security rather than focus narrowly on consumer products. The 100 largest defense companies globally have seen revenues double in constant dollars between 2002 and 2025, reaching 680 billion dollars.
Michele Testoni, an associate professor at the IE School of International Relations, frames the underlying anxiety: the world is transitioning toward a multipolar configuration, and in such transitions, insecurity breeds. Vicente Palacio, director of foreign policy at the Fundación Alternativas, adds another dimension—military spending has become a vehicle for economic reindustrialization across countries as diverse as Germany, Russia, France, and the United States.
Historically, arms races do not inevitably produce conflict. During the Cold War, NATO maintained extraordinarily high military spending levels, yet the result was deterrence rather than direct confrontation in Europe. Proxy wars occurred elsewhere, but the alliance's primary theater remained at peace. That precedent offers some reassurance. Yet the current environment differs in important ways. The erosion of international institutions and norms, combined with rapid technological change and genuine geopolitical competition, creates conditions that many observers find deeply unsettling. The spending will likely continue to accelerate through 2026 and 2027, driven by forces that show no sign of abating.
Notable Quotes
The world is moving toward a multipolar configuration. Asymmetric, but multipolar. And in that transition monsters are born.— Michele Testoni, associate professor at IE School of International Relations
Those days are over. Allies who refuse to step up and carry their own weight for our collective defense will face a clear shift in how we do business.— U.S. Defense Secretary Pete Hegseth, at the Shangri-La Dialogue in Singapore
The Hearth Conversation Another angle on the story
Why does military spending keep rising even when economies are struggling?
Because in uncertain times, nations see military investment as both insurance and stimulus. It's a way to signal strength to rivals while also funding domestic industry and jobs. When traditional growth slows, defense becomes attractive to policymakers.
But doesn't everyone end up worse off? If every country spends more, aren't they all just running faster to stay in place?
That's the classic arms race trap. Yes, collectively it's wasteful. But individually, each nation fears that if it doesn't keep pace, it falls behind. And the absence of treaties that used to constrain this—like the nuclear arms limits that just expired—means there's nothing to break the cycle.
What's changed about the defense industry itself?
It's no longer just about weapons. Companies like Palantir are selling the digital nervous system that makes modern militaries work. That's arguably more important than any single weapon. And these new firms have cultural influence too—they're reshaping how Silicon Valley thinks about national security.
Is this heading toward conflict?
Not necessarily. The Cold War showed that high military spending can produce deterrence rather than war. But that required clear rules and communication. Today's multipolar world is messier, less predictable. The same spending that prevented conflict then could accelerate it now.
So what stops it?
That's the question no one has answered yet. Without new international agreements—and there's no appetite for them—the momentum just continues. Each year's budget becomes the floor for the next.