Study reveals reintroducing military conscription could cost German economy up to EUR 70 billion

Reintroducing military conscription in Germany could have severe economic repercussions, with potential costs reaching up to EUR 70 billion, according to a study by the ifo Institute commissioned by the German Federal Ministry of Finance. The researc

By: helsinkitimes.fi

Jul 17 2024
0
0 Views

Study reveals reintroducing mi

Reintroducing military conscription in Germany could have severe economic repercussions, with potential costs reaching up to EUR 70 billion, according to a study by the ifo Institute commissioned by the German Federal Ministry of Finance. The research explored three scenarios to assess the macroeconomic impact of military conscription.

In the most comprehensive scenario, where conscription affects the entire age cohort (100%), Germany’s gross national income could decrease by 1.6%, equating to nearly EUR 70 billion.

If conscription were to follow the previous model, impacting approximately a quarter of the age cohort, the economic output could fall by 0.4%, or EUR 17 billion. A scenario where only 5% of an age cohort is conscripted would result in a 0.1% decline, or EUR 3 billion.

“Conscription as part of a mandatory social year would impose annual economic costs comparable to the combined funds allocated for the defense budget and the special fund for the German Armed Forces in 2024,” stated ifo military expert Marcel Schlepper.

The significant costs stem from young people delaying the accumulation of human capital and assets. Panu Poutvaara, Director of the Center for International Institutional Comparisons and Migration Research at ifo, suggests an alternative to conscription: increasing financial resources for the German Armed Forces to make military service more attractive. “Higher salaries for soldiers could be a more sensible solution,” Poutvaara explained.

Although this market-based approach would increase the national budget burden, it would cost almost half as much in terms of economic output compared to conscription: EUR 37 billion instead of EUR 70 billion (in the 100% scenario), EUR 9 billion instead of EUR 17 billion (in the 25% scenario), and EUR 2 billion instead of EUR 3 billion (in the 5% scenario). The study asserts that the military capabilities of the German Armed Forces would improve equally under both conscription and the market solution.

The study also highlighted the uneven distribution of conscription costs across society, primarily affecting the conscripts themselves. Military service forces individuals to alter their educational and career plans, leading to long-term negative economic consequences for their income and consumption. “If only a small proportion of an age cohort is conscripted, it raises significant fairness concerns due to the unequal burden distribution,” Poutvaara noted.

Conversely, a market solution with higher salaries would distribute the financial burden more evenly, as everyone would contribute to higher government spending. “In the case of conscription, those not conscripted incur minimal costs, which may explain its popularity among older age cohorts not directly affected,” added Schlepper.

The findings of this study are expected to play a crucial role in the ongoing debate about the future of military conscription in Germany, weighing the economic costs against national defense needs.