Daniel sent us this one — he's been thinking about defense spending, specifically NATO's two-percent-of-GDP target and what it's actually for. He wonders whether it's designed to prevent free-riding by countries like Ireland, who contribute very little while benefiting from the collective security umbrella. Then he asks about the range of spending in countries with constant security challenges, Israel being the obvious example, and whether there's a generally accepted ceiling beyond which defense spending becomes unsustainable for a society, even if it buys you more security. It's a three-part question and the third part is the one I find genuinely underexplored.
The third part is where the interesting tension lives, because the first two have fairly straightforward answers, but that sustainability ceiling question — that's where economists and strategists start arguing with each other and nobody really has a settled number. Let me start with the NATO target, though, because the free-riding framing is exactly right but the history is more specific than most people realize.
Walk me through it.
The two-percent guideline was formally agreed in 2014 at the Wales summit, but it wasn't a response to Ireland. It was a response to Russia's annexation of Crimea and the realization that European NATO members had been systematically underinvesting since the end of the Cold War. In 2014, only three members hit two percent — the United States, the UK, and Greece. The US was spending around three point five percent, the UK around two point two, and Greece was at two point three mostly because of its long-standing tensions with Turkey, not because of NATO obligations. Everyone else was below.
The target wasn't created to punish the small fry — it was aimed at Germany, Italy, Spain, the big economies that had let their militaries atrophy.
Germany was at one point two percent in 2014. Canada was at one percent. The target was a political commitment, not a treaty obligation, and it came with a deadline of 2024. Fast forward to 2024, and the number of members hitting two percent jumped to twenty-three out of thirty-two. In 2025 it was twenty-four. Poland is now the alliance leader at four point one two percent of GDP, which is higher than the United States at three point three eight percent.
Poland at four point one percent. That's a country that looked at its geography and made a decision.
Poland shares a border with Kaliningrad and Belarus, and it watched what happened in Ukraine. They're not spending four percent as a favor to Washington. They're spending it because they believe the threat is existential. Their 2025 budget was around thirty-five billion dollars, and they've been buying hardware at a pace that's remarkable — hundreds of Abrams tanks, HIMARS systems, F-35s, K2 tanks from South Korea. They're building what might become the largest land army in Europe within this decade.
The two-percent target worked, at least in the sense that it concentrated minds after 2022. But you said the free-riding framing is essentially correct — so let's talk about the countries that still aren't hitting it.
There are eight NATO members still below two percent as of 2025. Spain at one point two eight, Italy at one point four nine, Belgium at one point three, Portugal at one point five five, Croatia, Luxembourg, Slovenia, and Canada at one point three seven. But the country that gets singled out most often in this conversation isn't even in NATO.
Ireland has a long-standing policy of military neutrality and it is not a NATO member. Its defense spending in 2024 was roughly zero point two one percent of GDP. Let me say that again — zero point two one percent. That's about one point two billion euros, for a country with a GDP of over five hundred billion euros. Ireland's entire defense forces number around seven thousand five hundred personnel, with a naval service of six operational vessels and an air corps with no fighter jets.
The Irish air force is a couple of Pilatus trainers and some helicopters. They rely on the UK's Royal Air Force for air policing under a bilateral agreement. That's not a secret arrangement — it's been publicly acknowledged for years — but it does create an awkward dynamic.
The awkward dynamic is exactly what the prompt is getting at. Ireland benefits from the collective security architecture of the West, particularly through its proximity to the UK and its membership in the EU, but it contributes almost nothing militarily. The argument from Irish policymakers has historically been that neutrality is a core part of national identity, that the country faces no direct military threat, and that its contributions to international security come through peacekeeping and diplomacy. Ireland has been one of the most active states in UN peacekeeping, and it punches above its weight in diplomatic forums.
Though I'd add — and this is where it gets complicated — that Ireland's neutrality has been selectively applied. The country has permitted US military overflights and stopovers at Shannon Airport for decades. During the Iraq War, Shannon was a transit point for American troops. The Irish government argued this was humanitarian and consistent with UN resolutions, but it's a stretch. The neutrality is real but it's not absolute, and the free-riding critique has teeth.
The critique has gotten louder since 2022. There was a report from Ireland's own Commission on the Defence Forces in 2022 that called the current state of Irish defense "a serious weakness" and recommended increasing spending to one point five percent of GDP — still well below the NATO target, but a sevenfold increase from current levels. The government has committed to moving toward that, but the pace is glacial. The 2025 budget allocated about one point five billion euros, which is an increase but still puts them well below even half a percent.
To answer the first part of the prompt directly: yes, the NATO target is designed to address free-riding, but Ireland isn't technically part of that equation because they're outside the alliance. The free-riding they're engaged in is a broader Western security arrangement, not a NATO-specific one. The target was aimed primarily at large European economies that were underinvesting, and it's been remarkably effective at changing behavior since the Ukraine invasion.
Let me add one more data point on that. In 2014, NATO's European members plus Canada collectively spent about two hundred and fifty billion dollars on defense. In 2024, that figure was approximately four hundred and thirty billion. That's a seventy percent increase in a decade. The two-percent target, combined with a genuine security shock, has reshaped European defense budgets more dramatically than anything since the end of the Cold War.
Alright, so that's the NATO side. The second part of the prompt asks about countries with constant security challenges and what their spending ranges look like. Israel is the natural example. What's the actual number?
Israel's defense spending in 2024 was roughly five point three percent of GDP, and that was before the full budgetary impact of the war that began in October 2023. In 2025, it's projected at around six point five to seven percent, depending on which estimates you use and how you account for supplemental war budgets. The long-term average since the 1970s has been between five and eight percent, with spikes during major conflicts. During the Yom Kippur War in 1973, it hit around thirty percent for that year.
Thirty percent in a single year. That's a country redirecting a third of its entire economic output to survival.
It's worth noting that Israel's defense spending includes things that don't show up in the headline budget figure. Mandatory military service means the labor cost of the IDF is artificially low — eighteen and nineteen-year-old conscripts are paid a few hundred shekels a month. The true economic cost, if you accounted for the opportunity cost of conscription and reserve duty, would be higher. Some economists estimate the real burden is closer to eight or nine percent when you factor in lost productivity.
Israel is at five to seven percent in peacetime, spiking higher during conflicts. What's the comparison set? Who else lives in that range?
The global leaders in defense spending as a share of GDP are mostly countries with active conflicts or existential threat perceptions. Ukraine is the extreme case right now — in 2024, its defense spending was approximately thirty-seven percent of GDP, though that's a wartime economy with massive external support, so the number is somewhat artificial. Saudi Arabia has historically been around seven to eight percent, though it's been declining as a share of GDP as oil revenues fluctuate. Oman is around five point five percent. Algeria is around five percent. Russia's official figure is around six percent in 2024, though that includes a lot of off-budget security spending and the real number may be higher.
On the lower end of the "constant security challenge" spectrum?
South Korea spends about two point eight percent of GDP, which is high for a developed economy not currently at war, but they face a very specific and well-understood threat. Singapore is around three percent. India is around two percent. Pakistan is around two point five percent. These are countries that maintain elevated spending relative to their regions but aren't in the five-plus club.
The range for "elevated but sustainable" seems to be roughly two to four percent, with the five-to-eight club reserved for countries that face what they perceive as imminent or existential threats. And then you have the wartime outliers above thirty percent, which are obviously temporary.
That's a fair summary. But now we get to the third part of the prompt — the sustainability ceiling — and this is where the consensus breaks down.
Because there's no economic law that says "above X percent, society collapses." It depends entirely on what you're trading off.
The classic framework for thinking about this is the guns-versus-butter tradeoff — every dollar spent on defense is a dollar not spent on healthcare, education, infrastructure, or tax cuts. But that framing is too simple, because defense spending can have positive economic externalities. Military research and development has produced GPS, the internet, jet engines, semiconductor advances. Defense spending can also function as industrial policy — look at what the US defense budget does for the aerospace sector.
Though the R and D spillover argument gets weaker as military and civilian technology diverge. The internet came out of DARPA in the 1960s. Modern military R and D is increasingly specialized — stealth coatings, directed-energy weapons, cyber capabilities — and the civilian applications are less direct.
The more important variable is what the spending crowds out. The economic literature on this is surprisingly inconclusive. There's a well-known study by the IMF from 2019 that found defense spending above three point five percent of GDP tends to correlate with lower long-term growth rates, but the causal mechanism isn't clear — it might be that countries with high defense spending are also countries with other growth-suppressing conditions, like conflict or political instability.
The correlation might be driven by the security environment, not the spending itself. Israel has grown remarkably well for decades while spending five to eight percent on defense.
Israel is the counterexample that breaks a lot of models. But it's also a special case in ways that limit its generalizability. The Israeli high-tech sector is deeply intertwined with military technology and intelligence units — Unit 8200 alumni have founded a disproportionate number of cybersecurity and software companies. The defense spending effectively functions as a highly targeted industrial and human-capital policy. That's not replicable for most countries.
What about the Soviet Union? That's the canonical case of defense spending eating the economy from the inside.
The Soviet Union is the cautionary tale. By the 1980s, Soviet defense spending was estimated at fifteen to twenty percent of GDP, possibly higher. That level of expenditure, sustained over decades, starved the civilian economy of investment, created chronic shortages of consumer goods, and locked in technological backwardness outside the military sector. When Gorbachev tried to reform, the system was too brittle. The Soviet collapse wasn't caused solely by defense spending, but the overhang was a major contributing factor.
Fifteen to twenty percent, sustained over decades. That's the range where you're not just trading off butter for guns — you're trading off future growth, civilian innovation, and eventually political stability. The Soviet example suggests the ceiling is somewhere well below that, but probably above Israel's five to eight percent, since Israel has sustained that level without the same kind of systemic decay.
I think the better way to think about it isn't a single number but a set of conditions. The sustainability of a given defense spending level depends on three things. First, the baseline wealth of the country — five percent of a fifty-thousand-dollar-per-capita GDP leaves a lot more room for everything else than five percent of a five-thousand-dollar-per-capita GDP. Second, the degree to which defense spending generates positive spillovers — Israel's tech sector versus, say, North Korea's military-first policy, which produces nothing of civilian value. Third, the political sustainability — whether the population accepts the tradeoff as necessary.
That third point is underrated. Political sustainability isn't just about whether people grumble about taxes. It's about whether the defense burden is distributed fairly. If a country has a professional military and funds it through broad-based taxation, the burden is diffuse. If it has conscription that falls disproportionately on certain regions or classes, or if defense spending is financed through debt that future generations will pay, the political calculus changes.
There's a fourth condition I'd add: whether the threat is real or manufactured. Defense spending becomes politically unsustainable when the public stops believing the threat narrative. The US was able to sustain elevated spending through the Cold War because the Soviet threat was broadly credible. After 1991, the peace dividend was politically irresistible — defense spending fell from around six percent of GDP in the mid-1980s to around three percent by 2000.
Let's put some historical numbers on this. The US during the Cold War averaged around five to seven percent of GDP on defense, with peaks during Korea and Vietnam above ten percent. The UK averaged around four to five percent through the 1950s and 1960s. France was similar. These were wealthy countries that sustained those levels for decades without obvious economic collapse.
They were also growing rapidly during that period. GDP growth was three to four percent annually in the postwar decades, which meant the defense burden was being carried by an expanding economic base. If you tried to sustain seven percent defense spending with one percent GDP growth, the squeeze on everything else would be much more painful. That's the situation many countries face now — slower growth, aging populations, rising healthcare and pension costs, and increasing demands for defense spending. The fiscal arithmetic is difficult.
The sustainable ceiling isn't a fixed percentage — it's a function of growth rates, demographics, threat perception, and political consent. But if you pinned me down and asked for a number that most economists and strategists would agree is the zone where alarm bells start ringing, what would it be?
Based on the literature I've seen, the consensus danger zone starts around six to eight percent for a developed economy in peacetime. Above that, you're making tradeoffs that are visible and painful — you're cutting healthcare, you're underinvesting in infrastructure, you're running larger deficits or raising taxes to levels that create political backlash. For a developing economy, the danger zone is lower — maybe four to five percent — because the opportunity cost of not investing in education and infrastructure is higher.
For a country at war, all bets are off. Ukraine at thirty-seven percent is not sustainable, but it's not meant to be — it's a survival expenditure until the war ends or external support fills the gap.
Wartime spending is a different analytical category. The question is always about the peacetime steady state — what level can you maintain indefinitely without degrading the society you're trying to defend?
There's an irony here that I want to pull out. The countries that spend the most on defense as a share of GDP tend to be the ones that can least afford it. The poorest and most unstable states often have the highest defense burdens relative to their economies, because their threats are more acute and their economic bases are smaller. It's a perverse dynamic — the countries that most need to invest in development are the ones diverting the largest shares of their resources to security.
That's the security-poverty trap, and it's well-documented in the development literature. If you look at the SIPRI data, the top ten countries by military spending as a share of GDP almost always include a mix of oil-rich Gulf states, countries in active conflict, and very poor states with weak institutions. South Sudan, Eritrea, and North Korea all appear in the top ranks in various years. These are not countries that can afford to spend ten or fifteen percent of GDP on their militaries, but they do it anyway because the alternative — losing control of territory or facing internal collapse — is perceived as worse.
Let's bring this back to the prompt's framing for a moment. The question implies a spectrum — from free-riders like Ireland at zero point two percent, through the NATO standard at two percent, to Israel and similar states at five to eight percent, and then presumably some upper bound beyond which the cost is too great. What I'm hearing from you is that the upper bound is real but context-dependent, and that the more interesting question is what determines where a given country falls on that spectrum.
The answer is mostly threat perception, filtered through domestic politics. Ireland can spend zero point two percent because it does not perceive a military threat. It's an island behind another island, surrounded by friendly states, with no territorial disputes and no hostile neighbors. The UK and the broader NATO umbrella provide de facto security. The political consensus in Ireland has been that this arrangement is acceptable, and until very recently, there was little external pressure to change it.
Though that pressure is increasing. There's been a noticeable shift in tone from European partners since 2022. The Irish government's own commission recommended a dramatic increase, and there's a growing recognition that the free-riding arrangement is becoming politically unsustainable — not because Ireland faces a new threat, but because the countries providing the security umbrella are increasingly unwilling to subsidize it without reciprocity.
That's the dynamic that makes the NATO target politically potent even for non-members. The two-percent benchmark has become a kind of international norm — a signal that you're a responsible stakeholder in the security order. Countries that fall far short of it face diplomatic costs, even if they're not formally obligated to meet it.
The diplomatic shaming mechanism. "You're not pulling your weight" is a surprisingly effective argument in international forums, especially when it's backed by tangible security contributions from others.
It works because it's true. The US spends roughly eight hundred and fifty billion dollars a year on defense. That's about forty percent of global military spending. The US Navy guarantees freedom of navigation in the world's sea lanes, which benefits every trading nation whether they contribute or not. The US nuclear umbrella extends deterrence to allies in Europe and Asia. These are public goods in the economic sense — non-excludable and non-rivalrous — and public goods are chronically underprovided because everyone has an incentive to free-ride.
Which is exactly the collective action problem NATO was designed to solve, and the two-percent target is the enforcement mechanism. Imperfect, but better than the alternative.
It's worth noting that the two-percent target is still below what most countries spent during the Cold War. The NATO average in the 1980s was around three to four percent. The two-percent figure was chosen in 2014 as a politically achievable floor, not an optimal level. Defense analysts have been arguing for years that the real requirement is probably closer to three percent for most NATO members, given the deterioration of the security environment.
That's a conversation that's happening more openly now. The new NATO Secretary General, Mark Rutte, has been signaling that the next target may be higher — possibly three percent by 2030. And several members are already there or approaching it. Poland at four point one, Estonia at three point four, Latvia at three point one, Greece at three percent.
The Baltic states are an interesting case. Estonia, Latvia, and Lithuania all spend above two point five percent, and they're tiny economies. Estonia's total defense budget is about one point three billion euros, but as a share of GDP it's over three percent. They're spending proportionally more than Germany, which has an economy roughly three hundred times larger. The Baltics have no illusions about their security situation — they share borders with Russia and Belarus, and they know they'd be on the front line of any conflict.
That's the geography argument in its purest form. Poland and the Baltics spend more because they're closer to the threat. Western European countries spend less because they have strategic depth and can afford to underinvest, at least in the short term. The question is whether that arrangement holds over the long term, especially as the US signals that it expects more burden-sharing.
The US signaling has been consistent across administrations, by the way. Trump was more aggressive about it, but Obama and Biden both pushed for increased European defense spending. The difference is one of tone and credibility — when Trump suggested he might not honor Article Five for countries that weren't paying their share, it concentrated minds in a way that polite diplomatic requests never did.
Fear is a powerful motivator.
It's the most powerful motivator in international politics. And that brings us back to the sustainability question in a different way. What happens if the US really does reduce its security commitments to Europe? The European members of NATO would need to increase their collective defense spending by hundreds of billions of dollars annually to fill the gap. Some estimates suggest the EU would need to spend an additional three hundred to four hundred billion dollars per year to replace US capabilities — strategic airlift, intelligence and reconnaissance, command and control, nuclear deterrence.
Three hundred to four hundred billion a year is roughly a two percent of GDP increase across the EU. That would push most members from around two percent to around four percent. Suddenly you're in the range where the sustainability question becomes very real.
That's the scenario that European defense planners are quietly gaming out. Not because they think it's likely in the next year or two, but because the strategic uncertainty around US policy has introduced a new variable that didn't exist during the Cold War. European NATO members could rely on the US commitment being essentially unconditional for seventy years. That assumption is now being questioned, and the questioning itself changes the calculus.
If I'm a European defense minister, I'm looking at a future where I might need to spend four percent of GDP on defense, not two percent. And I'm asking myself: can my political system sustain that? Can my economy absorb it? What do I cut?
Those are exactly the questions being asked in defense ministries across Europe right now. And the answers are uncomfortable. Four percent defense spending would mean, for most European countries, either significant tax increases or significant cuts to social programs. The European social model — generous welfare states, public healthcare, substantial pension systems — was built on the assumption of low defense spending during the post-Cold War peace dividend. Reversing that assumption is politically explosive.
This is where the guns-versus-butter tradeoff stops being an abstract economic concept and becomes a live political fight. You can't add three hundred billion euros in defense spending to European budgets without someone's butter getting cut.
The political sustainability question bites hardest in countries where the threat doesn't feel immediate. Poland can sustain four percent because the Polish public sees Russian tanks as a real and present danger. But can Spain sustain four percent? The threat perception in those countries is much lower, and the political consensus for defense spending is correspondingly weaker.
We might see a divergence within Europe — a "frontline Europe" spending four to five percent and a "rear Europe" struggling to maintain two percent, with growing political friction between the two groups.
That's already happening. The Nordic countries, the Baltics, Poland, and Romania are in one camp. Germany is trying to move into that camp but faces enormous political and bureaucratic inertia. France is rhetorically committed but fiscally constrained. The Mediterranean countries are largely in the rear camp, and they're not in a hurry to move.
Let me pull on one more thread before we start wrapping up. The prompt asks whether there's a generally accepted maximal range. We've established that there isn't a single number, but let me ask you this: is there a point at which defense spending becomes self-defeating? Where the economic damage it causes actually reduces security more than the military capability it provides?
That's the Paul Kennedy argument from "The Rise and Fall of the Great Powers" — the idea of imperial overstretch, where a great power's military commitments outrun its economic base and the whole thing becomes unsustainable. Kennedy was writing in 1987 and his primary example was the United States relative to its rising economic competitors. But the mechanism is general: if defense spending suppresses growth enough, over time the economic base shrinks relative to competitors, and the country's relative military power declines even as its absolute spending rises.
The Soviet Union, again.
The Soviet Union is the textbook case. But you can see versions of this dynamic in other historical examples. Imperial Spain in the sixteenth and seventeenth centuries — military spending driven by endless European wars eventually bankrupted the state multiple times, despite the enormous silver flows from the Americas. The Ottoman Empire's military expenditures increasingly outstripped its economic base in the eighteenth and nineteenth centuries. Britain's global naval dominance became unsustainable as its relative economic position declined in the early twentieth century.
The self-defeating threshold isn't a fixed percentage either — it's the point at which defense spending's drag on growth causes your economic base to shrink relative to your strategic competitors, which eventually reduces your military power despite your best efforts.
That threshold is almost impossible to identify in advance. It's only visible in retrospect. Policymakers in real time are making judgments under uncertainty, balancing short-term security imperatives against long-term economic health, and they usually get the balance wrong.
Because the short-term threat is visible and the long-term economic drag is diffuse. A defense minister who says "we need to spend less on defense to preserve our long-term economic competitiveness" is not going to have a long career.
That's the fundamental asymmetry. The costs of underspending on defense are concentrated and catastrophic — you lose a war, you lose territory, people die. The costs of overspending are diffuse and gradual — slightly lower growth, slightly higher debt, slightly less investment in civilian sectors. In any bureaucratic or political process, the concentrated catastrophic risk wins.
Which is why countries in high-threat environments almost always overspend relative to some theoretical optimum. Israel almost certainly spends more than it strictly needs to for its current security situation, but the cost of being wrong is existential, so the margin of error is built in.
That's rational. The question is how large a margin of error is rational, and that's where reasonable people disagree. Israel's defense establishment has internal debates about this constantly — the tension between the IDF's resource requests and the Finance Ministry's sustainability concerns is a permanent feature of Israeli politics.
To synthesize the answer to the prompt's three questions: NATO's two-percent target is designed to address free-riding within the alliance, though the worst free-riders in the broader Western system are actually non-members like Ireland. Defense spending in high-threat countries ranges from about two point eight percent for South Korea to five to eight percent for Israel to the mid-teens for countries in active conflict. And there's no single accepted ceiling for sustainability, but the danger zone for developed economies starts around six to eight percent in peacetime, with the real constraint being political consensus and economic growth rates rather than any fixed percentage.
That's a clean summary. I'd add one forward-looking thought: the sustainability question is going to become more urgent, not less. The strategic environment is deteriorating, the US security commitment is less certain than at any point since the 1940s, and the fiscal capacity of most developed economies is constrained by aging populations and high debt levels. We're heading into a period where the guns-versus-butter tradeoff is going to be a live political issue in almost every democracy.
The countries that navigate it successfully will be the ones that find ways to make defense spending productive — to capture the spillover benefits in technology and human capital that turn a pure cost into a partial investment. Israel's model isn't perfectly replicable, but the principle is: if you have to spend a lot on defense, make sure some of it flows back into the civilian economy.
Or find ways to share the burden more efficiently. The NATO alliance structure, for all its free-riding problems, is still a vastly more efficient way to produce security than every country trying to do everything itself. Specialization and burden-sharing work in defense just like they work in trade. The challenge is maintaining the political cohesion that makes the sharing possible.
That's probably where we should leave it — with the observation that the technical question of defense spending percentages is downstream from the political question of whether the countries that need to share the burden can agree on what's fair.
Now: Hilbert's daily fun fact.
Hilbert: In 1924, a British botanical expedition in Nepal discovered that the Meconopsis poppy — the Himalayan blue poppy — only germinates at altitudes above three thousand meters and requires a specific soil fungus found exclusively in yak dung to survive. The expedition's lead botanist, Frank Kingdon-Ward, described the relationship as "the flower that domesticated the yak without the yak ever noticing.
That's a flower that figured out indentured servitude before most governments did.
This has been My Weird Prompts. I'm Herman Poppleberry.
I'm Corn. You can find every episode at myweirdprompts dot com, or wherever fine podcasts are distributed. If you enjoyed this, leave us a review — it helps.
Until next time.
