Fiona Murray, faculty director of the MIT-United Kingdom Program, argues that NATO nations will need to expand their industrial capacity to convert resources into military capabilities, beginning with making defense a strategic priority, increasing spending, and improving procurement systems.
When World War II began in 1939, Canada had almost no meaningful military industry. Six years later, Canadian factories had produced thousands of aircraft, hundreds of naval vessels, and more than 800,000 military vehicles. A country of just 11 million people had become a military-industrial powerhouse.
Heavy government investment was vital to this transformation. But that spending would have meant little if Canada had not also built institutions, financing mechanisms, and physical structures capable of rapidly transforming political commitments into large-scale industrial output. As NATO’s leaders gather in Ankara for their 2026 summit on July 7-8, they should be taking this lesson to heart.
Across Europe and North America, governments are ramping up their defense spending. They are announcing new equipment plans, procurement programs, and spending targets, including commitments to spend 5% of GDP on defense by 2035. Establishing defense as a strategic priority, increasing spending, and improving procurement systems are all steps in the right direction. But converting resources into military capabilities will require the development of industrial capacity.
Ukraine has demonstrated that modern wars are financed before they are fought. Since Russia’s full-scale invasion in 2022, Ukraine has mobilized billions of dollars to expand drone development and production. The returns have been extraordinary: drones costing just a few thousand dollars can destroy military equipment worth hundreds or even thousands of times more. Even when intercepted, they impose big losses on Russia, which might have to fire air-defense missiles costing tens or hundreds of thousands of dollars. None of this would have been possible without financing for the factories, engineers, software, supply chains, and production capacity needed to produce drones at scale.
NATO countries do not lack resources, technological expertise, or political will. What they lack are market structures capable of converting these strengths into military capabilities at the speed and scale today’s security environment demands. Production capacity remains constrained, delivery schedules stretch years into the future, and critical supply chains are fragile. As bottlenecks persist, defense inflation continues to climb, eroding purchasing power and delaying the fielding of urgently needed capabilities.
If NATO allies are to build the industrial capacity required for deterrence, they will need to deliver wartime levels of industrial responsiveness, without adopting wartime levels of economic control. This requires a new approach to market-making.
