A country's economic strength is a poor predictor of its ability to sustain military conflict, according to a new analysis published by Bruegel in November 2026. The report argues that the gap between GDP figures and actual fighting capacity reveals a critical blind spot in how the United States and Europe assess their military readiness. Despite committing trillions to defense spending, Western nations can't rely on aggregate economic measures to win or deter drawn-out wars, the authors warn.
The numbers expose stark contradictions between economic scale and battlefield performance. Non-US NATO members command a combined GDP of $26 trillion compared to Russia's $2 trillion, the report notes, citing the 2026 US National Defense Strategy. Yet when measured at purchasing power parity—which reflects what currencies can actually buy—Russian military spending nearly matches that of the European Union and United Kingdom combined. Russia's economy is more than ten times Ukraine's size, but four and a half years after an invasion Moscow thought would end in three days, Ukraine continues fighting. Iran's economy represents barely one percent of America's, yet since US and Israeli attacks in February 2026, Tehran has burned through half to two-thirds of US missile defense interceptors, which will require at least five years to rebuild, while disrupting global energy markets and driving up American inflation.
The report identifies four building blocks that determine whether economic power translates into sustained combat capability: generating resources, converting those resources into military capabilities, denying resources to adversaries, and maintaining political power. According to the authors, Ukraine lost roughly a quarter of its effective workforce during Russia's 2022 invasion, yet wage flexibility, remote work, and hiring more women and older workers limited the decline in job-matching efficiency to about 15 percent. The study points to "absorptive capacity" as a key multiplier—Ukraine converts allied aid into fighting power, while $145 billion spent rebuilding Afghanistan over 20 years didn't prevent the government's collapse. Recent conflicts have also reversed traditional defense research models: after decades of reduced post-Cold War spending, civilian technology is now being pulled into military use rather than the reverse.
The report's analysis highlights how production choices shape outcomes in prolonged conflicts. The US and Germany have invested heavily in sophisticated, expensive equipment that takes years or decades to produce, while Ukraine and Iran—forced by manpower shortages, financial constraints, and decades of isolation—have mobilized production rapidly. These scarcities can become advantages: large American and German corporations with histories of government contracts for capital-intensive, specialized military equipment resist market entry by new firms when cheap drones are suddenly needed, the report explains. Meanwhile, economic warfare through sanctions, blockades, and strategic strikes on oil refineries and shipping lanes can deny adversaries their capacity to convert economic strength into military advantage. US Senate hearings revealed that more than 40 percent of 2,500 components in Russian weapons used in Ukraine came from just four American suppliers.
The report concludes that as the US and Europe pour trillions into military capabilities, they must measure what that spending actually delivers—using purchasing power parity to compare resources and tracing how funding becomes production, deployable capabilities, and battlefield effects. That work requires economists and military specialists to build a common framework together. The bottom line: winning long wars isn't about having the biggest economy—it's about converting economic power into sustained fighting capacity faster and more efficiently than your opponent.