The Big Business of War: An Analysis of Economic Drivers, Beneficiaries, and Societal Implications

This report provides a comprehensive analysis of the economic dimensions of warfare, moving beyond the traditional view of conflict as purely geopolitical. It defines the “war economy” as a pervasive, structural element of modern states, deeply integrated into national budgets and industrial bases. The report details the financial footprint of the defense industrial base, highlighting the dominance of traditional contractors and the significant emergence of military technology firms. It quantifies the vast sums involved in Pentagon contracts and global arms sales, underscoring the shift towards new warfare technologies. Beyond arms, the analysis reveals how diverse sectors, including private military and security services, illicit trades, and reconstruction initiatives, actively profit from conflict and instability. While acknowledging perceived short-term economic stimuli, the report critically evaluates the profound direct and indirect economic costs of war, emphasizing the “broken window fallacy” and immense opportunity costs that hinder broader societal development. Finally, the report dissects the mechanisms of influence employed by the military-industrial complex—lobbying, the “revolving door,” and think tank funding—and explores how these interests contribute to the perpetuation of conflict, raising significant ethical and societal implications. The findings suggest that the “business of war” is a self-sustaining ecosystem with powerful incentives to maintain its profitability, often at the expense of peace and human welfare.

1. Introduction: Defining the War Economy and its Scope

1.1. The Concept of a War Economy

A war economy fundamentally represents the comprehensive reorganization of a country’s production capacity and distribution systems during a period of armed conflict. Its primary objective is to prioritize defense needs, often requiring substantial adjustments to consumer production to accommodate military requirements.¹ Governments operating under a war economy face the critical task of meticulously allocating national resources to achieve military victory while simultaneously striving to meet vital domestic consumer demands.¹ In such an economic framework, tax revenues and borrowed funds are predominantly channeled towards defense and national security expenditures.¹

Historically, the implementation of war economies has been a defining feature of major conflicts. During World War II, for example, leading powers like the United States, Japan, and Germany underwent significant transformations in their industrial focus. The U.S. government, following the attack on Pearl Harbor, rapidly transitioned to a war economy, funding efforts through increased taxes and war bonds and establishing entities like the War Production Board to allocate critical resources and incentivize military production.¹ This period also saw profound societal shifts, such as women extensively participating in military production jobs, filling roles traditionally held by men.¹ While some economic perspectives suggest that the intense pressure to innovate and produce superior products at lower costs during wartime can accelerate industrial, technological, and medical advancements, leading to post-war economic strengthening, a counter-argument posits that military spending is inherently wasteful and ultimately impedes overall economic and domestic development.¹

The concept of a war economy has evolved beyond a temporary, reactive measure implemented solely during declared conflicts. For nations with substantial defense industries and a persistent global military presence, the “war economy” has transitioned into a continuous, structural component of their national economic policy. This shift implies that a significant portion of a nation’s economic output, employment, and technological development is intrinsically linked to defense spending, irrespective of active large-scale conflicts. This sustained prioritization of military budgets creates a powerful domestic constituency, encompassing industries, a specialized workforce, and geographically concentrated regions that benefit directly from defense contracts.² This economic reliance, in turn, can exert influence on foreign policy decisions, potentially favoring interventions or sustained military presences that justify the existing economic structure. This perpetuates a “business of war” that thrives even in periods of relative peace, becoming a self-reinforcing cycle.

1.2. Economic Warfare and Resource Control

Economic warfare, or economic war, constitutes a strategic approach employed by belligerent states with the explicit goal of weakening the economy of opposing nations.⁴ This strategy is primarily executed through various disruptive methods, including economic blockades, the deliberate destruction of enemy crops, blacklisting, preclusive purchasing, and the capture or control of critical economic resources and supply lines.⁴ This form of warfare is particularly potent in “total war” scenarios, where inflicting damage on an enemy’s economy directly impairs their capacity to sustain military operations.⁴

The measures employed in economic warfare are diverse and can include tariff discrimination, the imposition of sanctions, the suspension of financial aid, the freezing of capital assets, the prohibition of investment and other capital flows, expropriation, and even the debasement of a target’s currency through counterfeiting.⁴ The disruption of vital financial, trade, service, and transportation networks can have devastating long-term consequences, leading to the impoverishment of entire regions for generations.⁴

The increasing economic interdependence among nations, while often theorized as a deterrent to conflict due to shared commercial interests, simultaneously creates profound vulnerabilities that can be exploited through economic warfare. For instance, prior to recent conflicts, major global suppliers of essential commodities such as wheat (Russia and Ukraine) and fossil fuels (Russia) were deeply integrated into the global economy.⁵ While political economists have argued that countries engaged in trade are less likely to resort to war, this interconnectedness means that disruptions to global supply chains and commodity markets caused by conflict in one region can trigger far-reaching economic shocks across the globe.⁵ These ripple effects, impacting global inflation, increasing poverty, and disrupting established trade patterns, extend even to non-belligerent nations.⁵ This complex web of economic consequences indicates that the financial and societal costs of conflict are distributed globally, creating a broader set of economic winners and losers even among those not directly involved in combat.

2. The Defense Industrial Base: Major Players and Financial Footprint

2.1. Traditional Defense Contractors: Revenue Streams and Key Products

The U.S. arms industry stands as a primary beneficiary of global conflicts and increased military spending, demonstrating a substantial financial footprint. From 2020 to 2024, private firms collectively secured an astounding $2.4 trillion in contracts from the Pentagon, representing approximately 54% of the department’s discretionary spending of $4.4 trillion during that period.⁶ This proportion of the Pentagon’s budget allocated to private sector contracts has shown a consistent upward trajectory over the past 35 years, rising from 41% in the 1990s to 54% in the most recent period.⁶

A significant portion of these contracts is highly concentrated among a select few dominant players. The top five contractors—Lockheed Martin, RTX (formerly Raytheon), Boeing, General Dynamics, and Northrop Grumman—collectively received $771 billion in Pentagon contracts during 2020-2024.⁶ To contextualize this immense figure, this amount alone is more than double the total U.S. diplomacy, development, and humanitarian aid budget for the same period.⁶

Lockheed Martin, recognized as the world’s largest defense company and the U.S. government’s biggest contractor, derives a substantial 90% of its total revenue from defense activities.⁷ Its Aeronautics segment, which encompasses the F-35 Joint Strike Fighter, C-130J Hercules, F-16 Fighting Falcon, and F-22 Raptor, consistently serves as its largest revenue driver, representing over 40% of its total revenue.⁹ The Missiles and Fire Control segment, responsible for products like Trident, Hellfire, and Javelin, demonstrated the highest growth in 2024.⁶ A notable 26% of Lockheed Martin’s 2024 revenue originated solely from F-35 sales, with 73% of its total revenue stemming from the U.S. federal government.¹⁰ The company’s deep integration into the broader government apparatus is further evidenced by its contracts with various non-defense agencies, including NASA, the CIA, and the FBI.¹⁰

RTX Corporation (formerly Raytheon) is a major global aerospace and defense manufacturer, with 59% of its revenue directly linked to defense activities.⁷ RTX produces a wide array of critical defense products, including aircraft engines (such as the F-35 engine), advanced avionics, aerostructures, cybersecurity solutions, guided missiles (like Patriot and SM-6), and sophisticated air defense systems.⁶ The company’s historical contributions include the mass-manufacturing of magnetron tubes for World War II radar systems and the development of the first guidance system for intercepting missiles, underscoring its long-standing and pivotal role in military technology.¹¹

Northrop Grumman, a prominent player in the aerospace and arms industries, generates a significant 88% of its revenue from defense.⁷ Its key product portfolio includes new Intercontinental Ballistic Missiles (ICBMs) like the LGM-35A Sentinel, strategic bombers such as the B-21 Raider, advanced military radar systems, sensors, and a diverse range of space systems, including Satcom communications satellites and the Cygnus uncrewed spacecraft.⁶ In 2024, approximately 87% of Northrop Grumman’s revenue originated from the U.S. federal government, highlighting its strong reliance on domestic defense spending.¹³

Boeing, while globally recognized for its commercial airplanes, possesses a substantial defense business, which accounted for 44% of its total revenue in 2022.⁷ Its Boeing Defense, Space & Security (BDS) division is responsible for manufacturing a range of military aircraft (e.g., F-15, F-18), helicopters (such as the Chinook), and various space systems.⁶ Notably, in fiscal year 2024, the BDS segment emerged as Boeing’s largest revenue generator, surpassing its commercial airplanes division.¹⁶

General Dynamics, with 72% of its revenue derived from defense, is a prime contractor for critical naval assets, including ballistic missile submarines (Columbia class) and destroyers (DDG 51 Arleigh Burke Class).⁶ The company also manufactures tanks, such as the M-1A2, and various bombs and guided munitions.⁶

BAE Systems, a British multinational, stands as the largest defense contractor in Europe and the seventh largest globally based on 2021 revenues, with an impressive 97% of its total revenue stemming from defense activities.⁷ The company is a key participant in several major international defense projects, including the Lockheed Martin F-35 Lightning II, the Eurofighter Typhoon, and various advanced submarine programs.¹⁷

The data presented underscores an extremely high concentration of market power within a very small number of defense contractors. The prevalence of non-competitive bidding, which accounts for approximately 90% of all weapons procurement, further solidifies the entrenched positions of these firms.¹⁸ This market structure deviates significantly from a competitive free market, resembling a powerful oligopoly heavily reliant on government procurement. This concentration of power creates substantial barriers to entry for new competitors and can lead to inflated costs for taxpayers. As a result, weapons systems purchased by national governments are sometimes inordinately expensive and of questionable value to the country’s security due to the lack of competition and politicized budgeting processes.³ This situation also means these few firms wield immense influence over government policy, as their financial viability is often perceived as inextricably linked to national security. This reinforces the concept of an “iron triangle,” where military-industrial firms, legislators, and government officials form mutually beneficial relationships, potentially leading to decisions that serve bureaucratic and corporate interests rather than optimal national security needs.³

Table 1: Top Global Defense Contractors by Defense Revenue (2022)

Rank	Country	Company name	Revenue from defense (US$ billions)	Total revenue (US$ billions)	% of total revenue from defense
1	United States	Lockheed Martin	59.390	65.984	90
2	United States	RTX Corporation	39.570	67.074	59
3	United Kingdom	BAE Systems	33.250	33.700	97
4	United States	Northrop Grumman	32.300	36.602	88
5	United States	Boeing	29.300	66.608	44
6	United States	General Dynamics	28.320	39.407	72
7	China	Norinco	22.060	82.537	27
8	China	Aviation Industry Corporation of China	20.620	82.499	25
9	China	China Aerospace Science and Industry Corporation	19.560	44.458	44
10	Russia	Rostec	16.810	30.295	55
11	China	China Electronics Technology Group Corporation	15.080	55.837	27
12	United States	L3Harris	12.630	17.062	74
13	Italy	Leonardo	12.470	15.025	83
14	EU	Airbus	12.090	61.805	20
15	China	China Aerospace Science and Technology Corporation	11.770	37.364	32
16	China	China State Shipbuilding Corporation	10.440	51.443	20
17	France	Thales Group	9.420	18.479	51
18	United States	Huntington Ingalls Industries	8.750	10.676	82
19	United States	Leidos	8.240	14.287	58
20	United States	Amentum	6.560	8.750	75
21	China	China South Industries Group	6.460	42.507	15
22	United States	Booz Allen Hamilton	5.900	9.259	64
23	France	Dassault Aviation	5.070	7.288	70
24	Israel	Elbit Systems	4.960	5.512	90
25	United Kingdom	Rolls-Royce Holdings	4.930	15.647	32
26	United States	CACI	4.820	6.703	72
27	United States	Honeywell	4.630	35.466	13
28	Germany	Rheinmetall	4.550	6.742	67
29	France	Naval Group	4.530	4.578	99
30	United States	Peraton	4.410	7.000	63
31	United States	General Electric	4.410	76.555	5.8
32	EU	MBDA	4.380	4.428	99
33	United States	KBR	4.270	6.564	65
34	France	Safran	4.200	20.021	21
35	Israel	Israel Aerospace Industries	4.100	4.973	82
36	Russia	United Shipbuilding Corporation	3.950	5.011	79
37	United States	Sandia National Laboratories	3.920	4.409	89
38	United States	Science Applications International Corporation	3.780	7.704	49
39	Sweden	Saab AB	3.700	4.154	89
40	United Kingdom	Babcock International Group	3.680	5.473	67
41	India	Hindustan Aeronautics	3.460	3.643	95
42	Israel	Rafael Advanced Defense Systems	3.380	3.450	98
43	Japan	Mitsubishi Heavy Industries	3.250	32.000	10
44	EU	KNDS	3.200	3.366	95
45	United States	Textron	2.910	12.869	23
46	Italy	Fincantieri	2.820	7.825	36
47	France	French Alternative Energies and Atomic Energy Commission (CEA)	2.790	6.135	45
48	South Korea	Hanwha Aerospace	2.780	5.561	50
49	United States	Bechtel	2.740	..	..
50	Taiwan	National Chung-Shan Institute of Science and Technology	2.590	2.859	91

Source: ⁷

Table 2: Revenue Breakdown of Key US Defense Contractors by Segment (2024)

Company Name	Segment Name	Revenue (US$ billions)	% of Total Revenue
Lockheed Martin	Aeronautics	28.62	40.28
	Rotary and Mission Systems	17.26	24.30
	Missiles And Fire Control	12.68	17.85
	Space	12.48	17.57
RTX Corporation	Collins Aerospace Systems	N/A	N/A
	Pratt and Whitney	N/A	N/A
	Raytheon (Government-facing businesses from RIS & RMD, ISR from Collins)	N/A	N/A
Northrop Grumman	Aeronautics Systems	12.03	27.52
	Space Systems	11.73	26.83
	Mission Systems	11.40	26.07
	Defense Systems	8.56	19.58
Boeing	Boeing Defense Space Security Segment	23.92	35.84
	Commercial Airplanes Segment	22.86	34.26
	Global Services	19.95	29.90

Source: ⁹

Note: Detailed segment revenue percentages for RTX Corporation were not explicitly provided in the source material for 2024, only the new organizational structure.

2.2. The Rise of Military Technology Firms

A significant and relatively recent transformation within the arms industry has been the substantial increase in new contracts awarded to technology firms specializing in military applications of artificial intelligence (AI), drone swarms, uncrewed ships and armored vehicles, and other cutting-edge technologies.⁶ This trend represents the most notable shift in the arms industry over the past five years.⁶

Companies traditionally operating outside the core defense sector are now securing multi-billion-dollar contracts, fundamentally reshaping the landscape of military procurement. SpaceX, for instance, receives substantial funding for launching the majority of U.S. military satellites and for providing military-grade versions of its Starlink communication system.⁶ Its Starship system is also under consideration for future military space race initiatives, potentially generating billions in new revenue.⁶

Palantir holds significant contracts with the U.S. Army for an AI-driven data platform and the Project Maven targeting system, as well as a large multi-year contract for advanced commercial software integration with the U.S. Special Operations Command.⁶

Anduril has secured awards for counter-Unmanned Aerial Vehicle (UAV) systems, its Roadrunner UAV interceptor system, and Ghost Shark autonomous underwater vehicles as part of the AUKUS project.⁶ The company is also a contender for developing the next generation of Army goggles (Integrated Visual Augmentation System – IVAS) and is competing to produce “collaborative combat aircraft”.⁶ Another notable player, AeroVironment, has emerged as a leader in drone technology, with its small- and medium-sized aircraft proving invaluable in the conflict in Ukraine, significantly raising its profile among military buyers.⁸

Beyond these specialized military tech firms, major “Big Tech” companies such as Microsoft, Amazon, Google, Oracle, and IBM are also securing substantial Pentagon funding. A prime example is their collective $10 billion contract for the Pentagon’s cloud computing program.⁶ This emerging military technology sector is gaining considerable political advantage, particularly within the Trump administration, largely due to close connections and embedded roles within government.⁶ Figures like Elon Musk and J.D. Vance have reportedly developed unprecedented influence over federal regulations and expenditures, with Musk’s role as the de facto head of the Department of Government Efficiency providing his companies with potential benefits from budget shifts.⁶

This trend signifies a fundamental blurring of the lines between purely commercial technological development and military applications. Innovations initially developed for civilian markets, such as advanced AI algorithms, cloud infrastructure, and robotics, are being rapidly adapted and integrated into military systems. This accelerates the pace of military technological advancement beyond what traditional defense contractors alone might achieve, driven by the faster innovation cycles characteristic of the commercial tech sector. This phenomenon raises profound ethical questions regarding the responsibilities of civilian tech companies concerning the use of their technology in conflict. If their financial models become increasingly dependent on military contracts, it creates a potential for them to become “active war profiteers” by developing an incentive to prolong or even instigate conflicts.¹⁹ Furthermore, the rapid development of autonomous weapons systems by these firms presents new moral challenges concerning accountability for actions taken by machines and the potential for a more automated, less human-controlled battlefield, which could fundamentally alter the nature of warfare.²⁰

2.3. Global Arms Sales and Military Aid

Beyond direct Pentagon contracts, foreign arms transfers represent an additional and substantial revenue stream for weapons contractors. These transfers encompass both direct sales paid for by recipient nations and military aid funded by U.S. taxpayers.⁶ This dual mechanism ensures a continuous flow of funds to the defense industry, regardless of the direct involvement of the U.S. military in a conflict.

In 2024, the U.S. announced a record volume of major arms deals, totaling an impressive $145 billion.⁶ This figure includes tens of billions of dollars directed to Ukraine and Israel, alongside a significant surge in sales to European countries.⁶ Since the onset of Russia’s invasion in 2022, the U.S. has provided over $66 billion in military aid to Ukraine, with the vast majority of these funds allocated for weapons manufactured by U.S. companies.⁶ Similarly, military aid to Israel exceeded $18 billion in the first year following October 2023, with additional commitments for at least $30 billion in future weapons sales.⁶ Offers of U.S. weapons to European allies, largely spurred by concerns about Russia’s actions, surpassed $170 billion in 2023 and 2024 alone.⁶

The United States has consistently been the dominant global arms exporter. In the 2020-2024 period, it held a commanding 43% share of global arms exports, marking a 21% increase from the preceding five-year period.²¹ U.S. arms exports to Europe, in particular, saw a significant rise from 13% to 35% of total U.S. exports during this time, reflecting heightened security concerns on the continent.²¹ Ukraine, as a direct consequence of the ongoing conflict, became the world’s largest importer of major arms in 2020-2024, with its imports increasing by nearly 100-fold (a staggering +9627%) compared to 2015-2019.²¹

A critical ethical and geopolitical concern arises from the fact that a substantial portion of U.S. arms transfers is directed towards undemocratic regimes or nations actively involved in conflict. Since 2019, U.S. arms have been present in one or more parties in 28 conflicts, and 31 U.S. arms clients were categorized as “not free” by Freedom House.⁶ This extensive reach of U.S. arms transfers, spanning 107 countries from 2020 to 2024, inherently increases the risk of the U.S. becoming entangled in conflicts on the side of its arms recipients, either through direct military involvement or through continued arms transfers that prolong or escalate ongoing wars.⁶

This pattern reveals a direct economic incentive for arms manufacturers and, by extension, the exporting government, to maintain a global environment where demand for military hardware remains consistently high. By continuously supplying weapons to various parties, the arms industry inadvertently fuels existing conflicts or contributes to regional arms races, which then, in turn, generates further demand for their products. This creates a self-reinforcing, and potentially self-perpetuating, cycle of conflict and profit. This feedback loop suggests that the “business of war” is not merely a reactive response to existing conflicts but can, in itself, become a proactive driver of geopolitical instability. The widespread distribution of arms increases the risk of direct or indirect entanglement in conflicts through its arms recipients. This raises serious questions about the long-term impact of the global arms trade on international peace and stability, and whether profit motives for defense contractors might, at times, override diplomatic efforts to de-escalate conflicts or promote peaceful resolutions.

3. Beyond Arms: Diverse Sectors Profiting from Conflict

3.1. Private Military and Security Services (PMSS)

The Private Military and Security Service (PMSS) market plays a crucial and rapidly expanding role in global security, providing essential services in conflict zones, high-risk environments, and for corporate entities worldwide.²² This sector has experienced significant growth over the past two decades, evolving in response to geopolitical shifts, rising security threats, and the increasing privatization of military services.²²

The market was valued at approximately $186 billion in 2024 and is projected to reach around $290 billion by 2033, reflecting a Compound Annual Growth Rate (CAGR) of 5.0-5.3% from 2025 to 2032/2033.²² This significant expansion is driven by a confluence of factors, including rising geopolitical tensions, increased demand for personal safety, evolving security threats, and, crucially, governments’ increasing tendency to outsource security needs.²² This outsourcing is often rationalized by perceived advantages in efficiency, specialized capabilities, and cost-effectiveness, while also offering operational flexibility and scalability without maintaining permanent force structures.²³

PMSS offerings have evolved significantly from basic security provision to comprehensive military support operations. These now encompass a diverse range of services, including armed security, logistics support, training services, intelligence analysis, operational support, cybersecurity, counterterrorism, and force protection.²² The “Government and Institutional” segment currently exerts the greatest market impact, reflecting substantial investments in defense and public safety needs.²² This trend represents a fundamental shift in the conduct of warfare and national security. Functions traditionally considered core responsibilities of the state’s uniformed military are increasingly delegated to private companies. While this offers governments perceived benefits like efficiency and flexibility, it also allows them to bypass certain personnel limitations, public scrutiny, or legal constraints associated with direct military deployments. This extensive privatization raises critical questions about accountability, oversight, and adherence to international humanitarian law. When private entities are involved in combat, intelligence gathering, or security operations, the lines of command, legal jurisdiction, and responsibility can become significantly blurred. This complexity can hinder efforts to hold actors accountable for misconduct, human rights violations, or strategic failures, potentially undermining the rule of law in conflict zones. It also further expands the “business of war” by creating a lucrative market for services that were once exclusively state-provided, thereby deepening the economic stake in conflict.

3.2. Illicit Trades and Resource Extraction

War and periods of instability create significant opportunities for illegal arms dealers and those who profit from illicit trade in various commodities, including drugs, diamonds, timber, and other rare goods.¹⁹ Historically, black markets for scarce goods thrived during and after major conflicts like World War II, where enormous profits were made from items such as cigarettes, chocolate, and coffee.¹⁹

The mineral extraction industry has consistently profited enormously from violent political upheaval throughout history. Examples range from Pizarro’s pursuit of gold in Peru in the 16th century to modern conflicts driven by the control over oil fields, such as the invasions of Kuwait in 1990 and Iraq in 2003.¹⁹ These historical precedents demonstrate a long-standing pattern of economic gain tied to conflict over valuable resources.

In contemporary conflicts, the economic drivers are often decentralized and self-sustaining. For instance, in Sudan, the gold trade has been scaled up and consolidated by conflict actors, including armed groups like the Rapid Support Forces (RSF).²⁴ These groups directly facilitate and control gold supply chains, leveraging gold’s importance as a financial commodity to fund military campaigns, acquire weapons, and secure political allegiances.²⁴ Similarly, the collapse of central governments and state fragmentation, as observed in Libya, can allow migration networks to flourish, with armed groups profiting substantially from migrant smuggling and human trafficking.²⁴ These are economic ecosystems where financial flows, markets, and geopolitical rivalries intertwine, actively entrenching and prolonging conflict.²⁴ Economic sanctions, often a tool to disrupt these activities, frequently fall short because they fail to effectively target these decentralized networks that sustain the conflict economy.²⁴

The consistent prevalence of illicit trades and resource extraction during conflicts highlights that war is not merely a destructive force but also creates a perverse economic opportunity for non-state actors, armed groups, and criminal enterprises. The breakdown of formal state authority, the rule of law, and legitimate economic structures creates a vacuum that these illicit economies readily fill. These activities provide alternative, often highly lucrative, funding mechanisms for warring factions, allowing them to sustain their military campaigns independently of traditional state revenues or international aid.²⁴ This suggests a deeper, more insidious problem: conflict can become a self-sustaining system, fueled by profits from illegal activities. Efforts to curb these trades through conventional means like sanctions often fail because they do not address the decentralized, adaptive networks that underpin these conflict economies.²⁴ This perpetuates instability, making peacebuilding efforts significantly more challenging, as powerful groups gain a direct financial interest in the continuation of war.¹⁹ The “business of war” in this context extends far beyond the legitimate defense industry, encompassing a shadowy, lucrative underworld that thrives on chaos and actively undermines state capacity and long-term stability.

3.3. Reconstruction and Support Services

Companies participating in reconstruction initiatives following conflicts are also significant profiteers, representing another substantial facet of the “business of war”.¹⁹ The widespread devastation wrought by armed conflict—including destroyed infrastructure, housing, and essential services—creates an immense demand for rebuilding, presenting highly lucrative opportunities for private firms.

Beyond direct combat and post-conflict rebuilding, military operations themselves necessitate extensive and ongoing support services. These include comprehensive logistics, healthcare provision, information technology, and construction services.² For instance, military installations within the United States contribute billions of dollars annually to state economies through their operations, providing a wide array of jobs, housing, healthcare, childcare, and on-base education to military personnel and their families.²

The Department of Defense (DoD) budget includes substantial allocations for Operation and Maintenance (O&M), Military Personnel (MILPERS), and Military Construction (MILCON).²⁵ These categories fund a broad spectrum of services, ranging from routine maintenance of aircraft, ground vehicles, and ships, to the extensive Military Health System (TRICARE), major infrastructure improvements, and environmental cleanup projects.²⁵ Defense contracts for supplies and various services are a significant economic driver in many states, supporting hundreds of thousands of jobs and generating billions in gross state product and personal income.²

This pattern establishes a cyclical economic model where conflict, by its very nature, directly generates future economic opportunities for the same or related industries. The destruction caused by warfare creates immediate demand for reconstruction, which is then fulfilled by private contractors. This means that the “business of war” encompasses profiting from both the act of destruction and the subsequent act of rebuilding, creating a continuous demand cycle. This cyclical dynamic can create a perverse incentive for some actors within the “business of war” to favor conflict or maintain conditions conducive to it, as it guarantees a continuous stream of lucrative contracts for both military operations and post-conflict recovery.

4. Economic Impacts of War: Costs, Benefits, and Opportunity Costs

4.1. Direct and Indirect Economic Costs of Conflict

The economic impact of war extends far beyond the immediate financial outlays for military operations, encompassing a wide array of direct and indirect costs that can cripple economies and societies for generations. Direct costs include the physical destruction of infrastructure, homes, and productive assets, while indirect costs are often more pervasive and long-lasting.²⁶ These include a decline in the working population due to casualties and displacement, rampant inflation, severe shortages of essential goods, pervasive uncertainty that stifles investment, a dramatic rise in national debt, and widespread disruption to normal economic activity.²⁶

Recent global events underscore these costs. The 2022 Russian invasion of Ukraine, for example, led to a significant surge in global oil and gas prices, exacerbating inflationary pressures worldwide.²⁶ This conflict also compounded pre-existing adverse global economic trends, including rising inflation, extreme poverty, increasing food insecurity, deglobalization, and worsening environmental degradation.⁵ Prior to the conflict, Russia and Ukraine together accounted for a quarter of global wheat exports, and Russia remains a major supplier of fossil fuels, particularly to Europe. Disruptions to these critical supplies directly drive up prices globally.⁵

Measuring the full economic burden of war is a daunting task, as many intangible costs are difficult to quantify accurately. These include institutional degradation, the erosion of social trust, and the eruption of psycho-social trauma, all of which can profoundly affect economies over time.²⁷ Even otherwise measurable factors, such as prices, employment, and trade, may not be recorded accurately during times of conflict, making a systematic assessment challenging.²⁷ Consequently, economic impact assessments often reflect only a subset of the broad and persistent misery engendered by large-scale human violence.²⁷ For instance, estimates for regions like Donetsk and Luhansk oblasts indicate a 7.3% to 24.8% equivalent lifetime income loss due to conflict, or 27.7% to 38.1% income loss over a decade.²⁷

4.2. Perceived Economic Benefits and the “Broken Window Fallacy”

From certain limited perspectives, war can appear to offer economic benefits by creating demand, employment, innovation, and profits for businesses, particularly when the conflict occurs in other countries.²⁶ Historically, the United States experienced periods of boosted domestic demand and manufacturing success during World War II, the Korean War, and the Vietnam War.²⁶ These conflicts spurred technological advancements, such as the development of radar and jet engines, which later found peaceful applications.²⁶ Additionally, major wars have sometimes led to significant social changes, such as the increased entry of women into the labor force after World War I, which contributed to changing cultural attitudes and the gaining of voting rights.²⁶

However, when discussing the “economic benefits” of war, it is crucial to acknowledge the “broken window fallacy.” This economic principle illustrates that while spending money on rebuilding what has been destroyed, or producing armaments, creates demand and employment, it simultaneously represents a huge opportunity cost.²⁶ The resources, labor, and capital diverted to military spending or post-conflict reconstruction could have been used for more productive, long-term investments, such as improving education, healthcare, or civilian infrastructure.²⁶ For example, the opportunity cost of the Iraq War was estimated at $860 billion by the end of 2009, funds that could have been invested in domestic programs.²⁶ This fallacy highlights that the perceived economic activity generated by war is often a misallocation of resources, as it replaces other, potentially more beneficial, forms of economic activity.

4.3. The Opportunity Cost of Military Spending

The concept of opportunity cost is central to understanding the true economic burden of warfare. It refers to the value of the next best alternative that must be foregone when a choice is made. In the context of military spending, this means that every dollar, every hour of labor, and every unit of raw material allocated to defense could have been invested in other sectors of the economy, such as education, healthcare, renewable energy, or infrastructure development.²⁶

Large-scale arms acquisitions and military buildups consume considerable economic resources.³ If two countries engage in an arms race, spending vast sums simply to neutralize each other’s military efforts, these expenditures might be considered wasted from a broader economic perspective, as they do not generate productive output for society.³ While some argue that military spending can provide benefits through technological spin-offs, job creation, and infrastructure development, others contend that it displaces more productive forms of investment.³ For countries that must import arms, the negative economic effects of an arms race are more pronounced, with arms imports often contributing significantly to debt in the developing world.³ Even for arms-producing countries, excessive military expenditure is likely to eventually have negative economic consequences. The severe economic difficulties faced by the Soviet Union, for instance, were undoubtedly exacerbated by the very high proportion of its gross domestic product dedicated to the arms race.³

Conversely, a reduction in military budgets can free up substantial resources for non-defense investments. Since the fall of the Berlin Wall in 1989, the United States has been able to reduce its military budget by 3% of GDP, an amount that could cover all of its current government spending on non-defense consumption and investment.⁵ This illustrates the immense potential for reallocating funds from military expenditures to areas that could foster long-term economic growth, improve public welfare, and address pressing societal challenges.

5. The Military-Industrial Complex: Influence and Perpetuation of Conflict

5.1. Mechanisms of Influence: Lobbying, Revolving Door, Think Tanks

The military-industrial complex (MIC) is a powerful network of individuals and institutions involved in the production of weapons and military technologies, which actively attempts to marshal political support for continued or increased military spending by the national government.³ This complex operates through several key mechanisms to exert its influence over Congress and the Executive Branch.

One primary mechanism is extensive lobbying and campaign contributions. The arms industry spends millions on campaign contributions, primarily targeting congressional candidates, with a notable preference for incumbents.⁶ A significant portion of these contributions is directed towards members of the armed services committees and defense appropriations subcommittees in both the House and Senate, as these individuals play a crucial role in shaping the Pentagon budget.⁶ As of 2024, the arms industry employs 950 lobbyists, an increase of 220 since 2020, who actively advocate for increased funding for specific weapons systems and higher overall Pentagon spending.⁶

Another potent mechanism is the “revolving door” phenomenon. Senior government officials often transition to lucrative positions within arms companies or venture capital firms investing in military technology after leaving public service.⁶ This creates a dynamic where officials may avoid scrutinizing major weapons companies too closely, anticipating future employment opportunities. For instance, between 2019 and 2023, at least 50 former Pentagon officials joined military-related venture capital or private equity firms, leveraging their connections in Washington to profit from new weapons sales.⁶ This trend is particularly pronounced in the emerging military tech sector, where the financial incentives can be even greater than in traditional arms firms.⁶

The funding of think tanks serves as another channel of influence. Military contractors contribute substantial sums to think tanks, which, in turn, sometimes advocate for policy positions favorable to these companies’ financial interests.⁶ While the exact nature of this influence can be complex, the financial support creates a clear advantage for firms like Northrop Grumman and Lockheed Martin in shaping defense narratives and policy recommendations.⁶ A 2025 study found that the top 100 military contractors contributed over $34.7 million to the top 50 U.S. think tanks between 2019 and 2023, with significant contributions from major players to influential organizations.⁶

Finally, the presence of individuals with ties to the arms industry on government advisory panels further extends this influence. For example, the majority of members on the Congressional Strategic Posture Commission, which recommended a significant buildup of U.S. nuclear forces, had connections to the arms industry, with its co-chair having previously lobbied for a key nuclear weapons contractor.⁶ Similarly, another congressionally mandated commission, also composed predominantly of members with arms sector ties, suggested an indefinite 3-5% real increase in the Pentagon’s budget.⁶ These recommendations often align with and reinforce the interests of the MIC. This network of mutually beneficial relationships among government officials, legislators, and military-industrial firms is often referred to as an “iron triangle,” where the goals and interests of these actors broadly coincide, leading them to support each other’s activities.³

5.2. Active vs. Passive Profiteering and Moral Hazard

Within the context of the “big business of war,” it is crucial to distinguish between different types of profiteering. Passive war profiteers are individuals or entities who make profits from war without actively influencing its duration or the way it is waged.¹⁹ Their gains are a byproduct of existing conflict. In contrast,

active war profiteers are in a position to, and do, influence the initiation or prolongation of a war to increase their own profits.¹⁹ This distinction highlights a critical ethical dimension: the deliberate manipulation of conflict for financial gain.

The notion that private motivation plays a significant role in prolonging conflict is supported by various historical and contemporary cases, including Sudan, Sierra Leone, and Liberia.¹⁹ Many observers also believe that powerful private interests were a driving force behind the 2003 Iraq War.¹⁹ Whether intentionally or unintentionally, entities that stand to gain from continued conflict can contribute to its instigation and protraction.¹⁹ In situations where a powerful group has a vested financial interest in the continuation of war, conflicts become significantly more difficult to de-escalate or settle.¹⁹

This dynamic implicitly introduces the concept of moral hazard. While the term itself may not be explicitly used in some discussions, the behavior described aligns perfectly with it. Moral hazard arises when individuals or entities take on more risk or behave in ways that are detrimental to others because they are shielded from the full negative consequences of their actions, or, in this case, stand to gain from those detrimental actions. When active war profiteers are in a position to start and prolong a war to increase their profits, it exemplifies a moral hazard where the pursuit of personal gain directly leads to the perpetuation of conflict.¹⁹ Making unreasonable profits from war is widely considered unethical and is deeply unpopular among the general population.¹⁹ Leaders or entities who appear to flaunt personal gains from conflict risk discrediting the very cause for which they claim to be fighting.¹⁹

5.3. Societal Implications and the Arms Race

The influence of the military-industrial complex extends beyond economic and political spheres, permeating the fabric of society and shaping national priorities. As President Eisenhower cautioned, the unchecked power and influence of the MIC could lead to situations that are not in the nation’s best interest and could even undermine fundamental national values.¹⁸ Critics argue that the MIC socializes risk by relying on taxpayer funds while privatizing profits, and grants companies undue influence over a nation’s domestic and international policy.¹⁸ This creates a giant division in the economy dedicated to the production of lethal weapons, where money is channeled to favored defense contractors with minimal competitive bidding.¹⁸

A significant societal implication is the phenomenon of the arms race, defined as a pattern of competitive acquisition of military capability between two or more countries.³ While often used loosely, it fundamentally reflects an adversarial relationship and a competitive military buildup.³ Arms races are frequently viewed as negative occurrences from both economic and security standpoints. Large-scale arms acquisitions demand considerable economic resources, and if two countries spend vast sums merely to cancel out each other’s efforts, the expenditure can be seen as wasteful.³

The question of whether arms races directly contribute to the outbreak of war remains a subject of considerable debate. An arms race can undoubtedly heighten fear and hostility among the involved countries, making conflict more likely.³ Some empirical studies do indeed find a correlation between arms races and an increased likelihood of war.³ Economically, while some argue for benefits like technological spin-offs and job creation, the prevailing view is that military spending displaces more productive forms of investment.³ For arms-importing nations, this leads to significant debt, and even for arms-producing countries, excessive military expenditure can ultimately have negative economic consequences, as exemplified by the Soviet Union’s economic struggles exacerbated by its high defense spending.³ The pressure for large military budgets, exerted by the MIC, can also deplete a country’s non-military industrial base by attracting skilled workers to high-paying defense employment.³

6. Conclusion and Recommendations

The analysis presented in this report underscores that “The Big Business of War” is not a peripheral phenomenon but a deeply embedded and complex economic ecosystem with profound global implications. Modern warfare is inextricably linked to vast financial flows, powerful industrial interests, and intricate networks of beneficiaries that extend far beyond traditional arms manufacturing. The concept of a war economy has evolved from a temporary wartime measure into a structural component of national economies, creating a persistent demand for military expenditure.

The defense industrial base, dominated by a concentrated oligopoly of traditional contractors and increasingly influenced by emerging military technology firms, commands trillions in government contracts and global arms sales. This concentration of power, coupled with non-competitive bidding practices and a “revolving door” between government and industry, can lead to inflated costs and undue influence over policy decisions. Furthermore, the rapid integration of commercial technology into military applications blurs ethical lines, raising questions about corporate responsibility and the potential for active profiteering, particularly with the advent of autonomous weapons systems.

Beyond the direct arms trade, diverse sectors actively profit from conflict. The burgeoning private military and security services market reflects a growing privatization of state functions, which, while offering flexibility, complicates accountability. Moreover, conflict zones become fertile ground for illicit trades and resource extraction, creating self-sustaining criminal economies that prolong instability and undermine peacebuilding efforts. Even reconstruction and support services, while necessary, form part of a cyclical economic model where destruction itself generates future lucrative opportunities.

The economic impacts of war are overwhelmingly negative, characterized by physical destruction, human suffering, inflation, and the diversion of resources. While perceived short-term benefits like job creation exist, these are overshadowed by the immense opportunity costs—resources that could otherwise be invested in education, healthcare, and sustainable development. The “broken window fallacy” aptly illustrates that the economic activity generated by war is often a misallocation rather than a net gain.

The military-industrial complex, through its sophisticated mechanisms of lobbying, the “revolving door,” and influence over think tanks and advisory panels, plays a significant role in perpetuating this economic reality. The distinction between passive and active profiteering highlights how private interests can actively contribute to the instigation and prolongation of conflicts, creating a moral hazard where profit motives may supersede efforts towards peace. The societal implications include the potential for national priorities to be skewed towards military spending, potentially at the expense of civilian industrial bases and overall societal well-being, and the risk that arms races heighten global tensions and increase the likelihood of conflict.

Given these findings, it is imperative that policymakers, civil society, and the public engage in stronger scrutiny of weapons contractors and the broader “business of war.” Recommendations include:

• Enhancing Transparency and Oversight: Implement stricter auditing and public reporting requirements for defense contracts, including classified programs and foreign military sales, to increase accountability and reduce opportunities for excessive profiteering.
• Reforming Procurement Processes: Promote greater competition in defense contracting to drive down costs and ensure that taxpayer money is spent efficiently on systems that genuinely serve national security needs.
• Addressing the “Revolving Door”: Establish more stringent ethics guidelines and cooling-off periods for former government officials transitioning to defense industry roles to mitigate potential conflicts of interest and undue influence.
• Promoting Economic Diversification: Invest strategically in non-defense sectors to reduce national and regional economic reliance on military spending, thereby fostering more sustainable and productive economic growth.
• Strengthening International Arms Control: Advocate for robust international frameworks to control arms transfers, particularly to undemocratic regimes and conflict zones, to mitigate the geopolitical feedback loop that fuels and prolongs conflicts.
• Prioritizing Peacebuilding and Development: Reallocate a greater proportion of resources towards diplomacy, development aid, and conflict prevention initiatives, recognizing their long-term economic and human benefits compared to the immense costs of war and reconstruction.

Ultimately, understanding the intricate economic drivers and beneficiaries of conflict is crucial for fostering a more peaceful and prosperous global future. The pursuit of profit in the context of war demands rigorous ethical consideration and robust policy interventions to ensure that economic incentives do not inadvertently perpetuate violence and instability.

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