Environmental protection and military expenses: risk aversions unfold

An interesting blogpost by Bruegel fellow Georg Zachmann, whom I had the chance to interview in a previous article, highlights that:

  1. Military expenditure and environmental protection expenditure have striking similarities: both are essentially insurance policies and both have been supposed to be able to drive economic growth.
  2. Wealth does not seem to be the driving force for expanding/reducing the share of military spending.
  3. By way of contrast, the share of spending on environmental protection in GDP appears clearly linked to the wealth of European countries.
  4. Even if there is no consensus on whether military expenditure actually drives growth, it will be difficult to establish whether decarbonisation might be able to generate the frequently discussed “green growth”.

This study seems to suggest that environmental protection and military protection are two side of the same coin, a broad concept of national defense. It is logical to be firstly prepared against short term risks, like military ones, and then -once achieved a satisfactory grade of security in military terms- moving further investment to protect ourself against medium and long term risks (like environmental ones)”. In a nutshell, “as rich countries should grow more slowly they feature a lower discount rate. Hence, they value distant risks more than poorer, faster growing countries”.

It is interesting to see how environmental catastrophes are becoming more and more a serious concern in Europe and notwithstanding the failures or recent climate change conferences, from Copenhagen 2009 to Durban 2011, there is evidence that, when countries grow in GDP per capita military stability is considered as an independent variable, the risk aversion of these countries changes in favour of long term investments including protection of their natural resources and sustainable development.

It would be interesting to apply the same study to fast developing countries, namely in South-East Asia, where military stability still endangers structural economic investments on a large scale.

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