21:37 12 June 2025
Some economists warn era of militarization will increase inflationary pressures
Economists warn that rising defense spending may boost inflation and force central banks to keep interest rates high. While institutions like the ECB and Bank of England echo these concerns, some argue they’re overstated. First, many advanced economies still operate below full capacity, so military demand could raise output without driving prices.
In Poland, capacity use is high but below previous inflationary peaks, allowing some fiscal stimulus without inflation risk. Second, rising government demand can boost not just production but productivity. Research by Ethan Ilzetzki shows defense orders can increase long-term production capacity. Firms under pressure modernize and innovate. Thus, military spending may stimulate growth without overheating the economy—suggesting inflation fears may be exaggerated.
(pb.pl)
