The Economic Trade Offs of AI Driven Defense Transformation: Exploring How Military AI Investment Reshapes Public Spending, Industrial Development, and Human Capital in Developing Countries

Abstract

Military artificial intelligence investment presents developing countries with competing priorities concerning national security, public expenditure, and economic development. This study explores these trade-offs through interviews with sixteen participants in Pakistan. Guided by the defense-welfare trade-off and dual-use technology and knowledge spillover perspectives, the study employs reflexive thematic analysis to examine perceived implications for public spending, industrial development, and human capital. Six themes were developed: conditional fiscal pressures, domestic supplier participation, civilian technology transfer, skills expansion and talent concentration, technological dependence, and investment accountability. Participants associated potential developmental benefits with sustainable financing, accessible procurement, research partnerships, and transferable workforce training. Conversely, recurring costs, restricted commercialization, foreign supplier dependence, and competition for scarce professionals were identified as possible constraints. The findings suggest that military AI investment's developmental value depends on institutional arrangements and implementation choices. The study recommends phased investment, comprehensive ownership-cost assessments, domestic capability development, and independent evaluation. It contributes an integrated understanding of perceived economic mechanisms within Pakistan, while recognizing that interviews cannot establish causal effects or support unrestricted generalization across developing countries with different institutional circumstances.

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