The economic value of peace

Europe after the war: Who pays the bill?

The peace dividend is not a simple equation in which the war ends, defence spending is cut, and a pile of spare cash suddenly appears. Europe’s post-war balance sheet will be considerably more complicated. It will include defence, the reconstruction of Ukraine, trade, energy, transport, investment, infrastructure security and the cost of capital. In other words, the war may end, but the bills will not end with it.

Defence will remain the first item on the list. Europe is unlikely to return to a world where security can once again be treated as a problem that has been solved. The experience of war will mean maintaining higher military spending, replenishing stockpiles and investing in the defence industry. There will be no return to the days when security could be treated like a cheap subscription: something you paid for almost without thinking about it. The peace dividend will therefore not mean the end of defence spending. It will mean a change in what that spending is for – less emergency expenditure driven by an active conflict, and more planned, long-term investment in security.

The second, and potentially enormous, item is Ukraine. The end of the war would not bring an end to spending. It would mark the beginning of a vast reconstruction effort. Roads, bridges, railways, power infrastructure, homes, schools, hospitals, factories and digital networks would all have to be rebuilt. The scale of the task is already enormous. But economically, reconstruction should not be seen simply as a cost. It could also trigger a powerful wave of investment, generating demand for European machinery, construction materials, energy technologies, engineering services, transport and financing. Ukraine could therefore become more than a recipient of aid. It could become part of a much larger European investment market. Reconstruction could connect European capital with Ukrainian needs and, over time, increase the productive capacity of the entire region. That does not mean, of course, that war is a good way to stimulate an economy. Rebuilding something that has been destroyed is far less economically efficient than building it in the first place. GDP may rise during reconstruction, but that does not automatically mean people are becoming richer. Before wealth can be created, the assets that already existed have to be restored.

Trade is another important part of the equation. Peace reduces the risk of disruptions to transport, trade and supply chains. For European businesses, that means being able to plan production and investment under more normal conditions. Companies no longer have to build five alternative supply chains simply because they have no idea which one will survive the next crisis. Diversification makes sense, but taken to an extreme it starts to resemble the economic equivalent of: „Let’s buy everything, just in case.”

Energy matters just as much. The war has demonstrated that energy security comes with a very real economic price tag. Expensive energy hurts industry, transport and households, while volatile prices make long-term investment decisions more difficult. A more stable geopolitical environment could reduce part of the risk premium and make it easier to invest over the long term in power generation, transmission networks, energy storage and new sources of energy. This does not mean Europe will return to the cheap energy of the past. What Europe may be able to buy instead is something arguably more valuable: predictability.

Transport and infrastructure tell a similar story. Rebuilding Ukraine and integrating its economy more closely with Europe would require better rail, road, logistics and energy links. That could strengthen the role of Central and Eastern Europe as a major trade corridor and create opportunities for companies in logistics, construction, industry and services.

But the most interesting part of the equation may be investment. Peace can reduce uncertainty. Lower uncertainty usually means better conditions for capital. An investor who no longer has to price in a significant risk of war may accept a lower risk premium. That can reduce financing costs and make more projects economically viable. And investment is what can turn peace from a one-off relief into long-term productivity growth.

This is why Europe’s peace dividend should not be understood simply as money that was not spent on war. That definition is too narrow. Its real value may lie in the ability to redirect capital, labour and entrepreneurial energy away from crisis management and towards development.

Instead of constantly paying the price of risk, Europe can start paying for infrastructure, technology, energy, trade and production. That makes one distinction particularly important: the difference between the cost of peace and the cost of war.

Peace will not be free. Rebuilding Ukraine will require enormous sums. European defence will continue to demand substantial spending. Economic integration will require investment.

The difference is that these expenditures can begin creating future value instead of merely limiting future losses. And that leads to a slightly paradoxical conclusion: the greatest peace dividend may not be what we stop buying, but what we can start building again.

Economically, peace is not a „50% off defence spending” promotion. It is a change in the question. Instead of asking, „How much more do we have to spend to limit the damage?”, Europe can start asking, „How much can we invest to build something new?”

Europe may therefore gain something more valuable than a post-war cash surplus: the ability to plan its economy years, decades, perhaps even generations ahead. For a continent that has spent recent years mostly reacting to one crisis after another, that would be a pretty respectable dividend.

Poland's peace dividend or simply a premium for peace of mind?

For Poland, the peace dividend is likely to look very different from the European average. The reason is simple: Poland is not merely a European economy exposed to the consequences of the war. It has become one of the countries most directly affected by the new security architecture of the continent. Its location, its role on NATO’s eastern flank and its proximity to Ukraine mean that even after the fighting stops, security will remain a central economic consideration.

Poland is therefore unlikely to benefit from peace through a dramatic reduction in defence spending. The country has spent years rebuilding its military capabilities, expanding its armed forces and developing infrastructure designed for a much more dangerous security environment. Much of that investment will remain necessary even after a ceasefire or peace agreement.

The more interesting question is what happens to everything around that security spending. If the geopolitical risk attached to Poland declines, the country could become significantly more attractive to investors. This would not be because Poland suddenly becomes a different economy, but because the same economic fundamentals would be viewed through a different risk lens.

For years, Poland has offered investors a combination that is difficult to ignore: access to the EU single market, a large domestic economy, a substantial industrial base, relatively competitive labour costs and a growing network of transport connections. The main question has increasingly been whether the geopolitical risk associated with locating production on NATO’s eastern flank outweighs those advantages.

A more stable security environment could change that calculation. For some investors, the difference could be decisive. Projects that previously required an additional geopolitical risk premium might become easier to finance. Companies considering new European production capacity could see Poland not as a frontier economy exposed to the consequences of the war, but as one of the continent’s most strategically located industrial markets.

That could matter particularly for manufacturing and logistics. The war has already changed the geography of European supply chains. Poland has benefited from the relocation and expansion of some production, but a lasting peace could take this process further. Companies that want to serve both Western European markets and the reconstruction of Ukraine will have an obvious reason to look at Poland.

This is where Ukraine could become particularly important. Poland has something that cannot easily be replicated elsewhere: physical proximity combined with established commercial, transport and institutional links with Ukraine. If reconstruction develops into one of the largest investment programmes in Europe, Poland could become one of its principal gateways.

The opportunity, however, should not be exaggerated. Being next door to a major reconstruction project does not guarantee that Polish companies will win the contracts. International construction groups, manufacturers, financial institutions and technology companies will all compete for the same business. Poland’s advantage will therefore depend on whether it can turn geography into economic capacity – whether its companies have the capital, technology, workforce and scale needed to compete internationally.

There is another potential benefit that is easier to overlook: the changing economic importance of Poland within Europe. For years, the centre of gravity of European economic integration was largely understood in terms of the relationship between Western Europe and the traditional industrial economies of the continent. The war has shifted attention eastward. Ukraine’s eventual reconstruction and deeper integration with the European economy could permanently change the map.

Poland could find itself closer to the centre of that new map. That would create opportunities well beyond the reconstruction itself. A larger role in regional logistics, manufacturing, energy infrastructure and cross-border trade could strengthen Poland’s position as an economic hub between the EU and its eastern neighbourhood.

But there is a danger on the other side of the equation. A peace agreement would not necessarily restore the security environment that existed before the war. Poland may therefore face a peculiar situation in which geopolitical risk falls enough to encourage investment, but remains high enough to require unusually large defence expenditure.

In other words, Poland could end up with the best of both worlds economically only if it manages to convert its new security spending into productive capacity. This is where defence policy and industrial policy increasingly overlap. Investment in military production, advanced manufacturing, electronics, cybersecurity, aerospace and other strategic industries does not necessarily have to remain a pure fiscal burden. If properly structured, some of it can strengthen Poland’s industrial base, technological capabilities and export potential.

The same logic applies to infrastructure. Roads, railways, logistics centres and energy connections built or upgraded for strategic reasons can also improve the economy’s ability to trade and attract investment. That does not make every defence project economically beneficial. It simply means that the distinction between „security spending” and „economic investment” may become less clear in Poland than it was before the war.

There is also a budgetary question. Even if some extraordinary war-related costs eventually decline, Poland will still face competing demands for public money: defence, infrastructure, energy transformation, healthcare, social spending and investment. The end of the war will not suddenly create a large fiscal surplus waiting to be redistributed.

The real opportunity is therefore not necessarily to spend less, but to get more economic value from the money that Poland has to spend anyway. This is why „peace dividend” may not be the best description of Poland’s situation. „Premium for peace of mind” may be closer to the truth. Poland’s potential gain could come less from cutting expenditure than from removing a layer of uncertainty that has been hanging over investment decisions, capital costs and long-term economic planning.

And there is a final paradox. Poland may benefit economically from peace precisely because it has spent so much during the war preparing for a world in which peace could not be taken for granted. The military capabilities, infrastructure and industrial capacity built in response to the security crisis may become part of the foundation of Poland’s economic position in the post-war region.

So, can Poland make money from peace? Yes – but probably not by becoming a country that spends less. Our opportunity is to become a country where lower geopolitical risk, a stronger industrial base, closer integration with Ukraine and a strategically important position in Europe combine to produce more investment and higher productivity.

The Polish peace dividend may therefore be less about what disappears from the budget after the war than about what becomes possible once the worst-case scenario no longer dominates every economic calculation. Poland may have to pay heavily for security even after the war. But if that security creates the conditions for investment, trade and long-term planning, the bill does not have to be purely a cost. It can become part of the price of moving from Europe’s eastern frontier towards its new economic centre.

First the bill, then the dividend

It is worth dispelling the naive idea that the end of the war will automatically deliver a huge economic windfall to Poland. Economics does not work quite that neatly. Peace is not a magic transfer into the government’s bank account.

You cannot simply switch off the military like an unnecessary light in a warehouse. The armed forces still have to be maintained. Equipment has to be serviced. Ammunition has to be replenished. Soldiers have to be trained. Borders and airspace have to be protected. After several years of rapidly rising defence spending, Poland will have a substantial security bill to pay. Then there is the cost of money. If the risk of war genuinely declines, Poland could eventually benefit from a lower risk premium, stronger investment inflows and cheaper financing.

Capital may flow into the region more readily. Trade may recover. Companies may finally make investment decisions that they are postponing today. That would be the real economic peace dividend. But it will not appear on the day a peace agreement is signed. First will come the costs of maintaining security, rebuilding military stockpiles and adapting the economy to a new geopolitical reality. And some defence spending may remain high for many years. The end of a war does not automatically mean the end of geopolitical risk.

From Poland’s perspective, then, peace could be highly beneficial economically – but not because the Ministry of Finance will wake up the next morning and discover a magical new budget category called „post-war savings”. The peace dividend is not a reward for signing a peace agreement. It is what happens when falling risk allows an economy to redirect some of the money currently spent on survival and protection towards investment, production and development. And how large that dividend ultimately becomes will depend not on the word „peace” itself, but on the price of maintaining it.