Hot Stocks for the Coming Arms Race

A Fossil-Fueled Resurgence

President Ronald Reagan is rightly credited for toppling the Soviet Union by forcing its leaders to spend a ridiculous share of their national wealth on weapons. By 1988, a year before the fall of the Berlin Wall, military spending amounted to as much as 16% of the Soviets' gross national product and was rising 5% per year, a crippling pace.

After President Mikhail Gorbachev made his peace with Reagan and launched the dismantlement of the Soviet empire, arms spending plummeted -- falling by some estimates to a 10th of its former level by 1998. By the start of this decade, virtually all major weapons-system procurement inside Russia had ceased; all arms production was sold overseas.

Meanwhile, the U.S. briefly paused in its own arms buildup but quickly picked up the tempo again. Federal budget documents show that the U.S. will spend at least $650 billion on war efforts this year, a level that is something like 40% of the entire world total. By some estimates, we now spend four times the amount that Russia and China will spend on their militaries combined.