As NATO leaders convene in Ankara for their 2026 summit, there is a renewed emphasis on transforming increased defence spending into tangible military capabilities through the development of robust industrial capacity. Drawing parallels with Canada’s rapid military-industrial growth during World War II, experts highlight the importance of not only financial investment but also the creation of institutions and market structures that can translate political commitments into large-scale production.

During the Second World War, Canada, with a population of just 11 million, evolved from having a minimal military industry to producing thousands of aircraft, hundreds of naval vessels, and over 800,000 military vehicles. This transformation was driven by heavy government investment, but crucially, it also depended on the establishment of financing mechanisms, infrastructure, and institutions capable of managing industrial output efficiently in response to wartime demands.

The ongoing conflict in Ukraine further underscores the need for such capabilities. Since Russia’s full-scale invasion in 2022, Ukraine has mobilized billions of dollars to rapidly develop and produce drones, demonstrating how relatively inexpensive technology can inflict significant damage on much more costly military equipment. This success hinges on the availability of financing and industrial resources that enable production at scale.

NATO member countries generally possess the necessary resources, advanced technology, and political commitment to enhance their defence industries. However, analysts argue that what is lacking are market structures designed to effectively convert these assets into operational military capacities. The challenge lies in achieving industrial responsiveness comparable to wartime levels while avoiding the extensive economic controls that governments typically impose during armed conflict.

To address this, experts propose a market-making strategy focused on two key elements: establishing credible, multiyear procurement commitments among national governments and securing affordable, long-term capital for industrial expansion. Manufacturers often rely on commercial loans for investment, but these can be insufficient or prohibitively costly in the defence sector. Governments frequently need to intervene, though current models can be inefficient and place strain on defence budgets.

A proposed solution gaining attention is the creation of a specialized multilateral institution known as the Defence, Security and Resilience Bank (DSRB). This sovereign-backed entity would function as a dedicated financing platform for defence industries and supply chains, aiming to lower the cost of capital and promote sustained industrial growth. By doing so, it could ease fiscal pressures while enabling companies and governments to access funding tailored to the long-term investment horizons typical of defence projects.

Beyond enhancing military preparedness and deterrence, such investment and institutional frameworks also have broader economic implications. Strengthening defence industries could drive manufacturing innovation, boost exports, and support economic growth across allied nations. With steady procurement commitments providing demand certainty and the DSRB facilitating financing, NATO allies could establish a more effective and resilient defence market.

Ultimately, the lesson from Canada’s World War II experience remains relevant today: military strength depends not solely on the volume of spending but on the institutional capabilities that translate resources into productive industrial capacity. As geopolitical tensions persist, NATO’s ability to build and sustain a functioning defence industrial base may prove critical to maintaining collective security in the years ahead.