Guns, Gains and Growth: The Relationship Between Military and Economic Power

• In Event: Projecting Power in a Global Economy: State Wealth, Security and Naval Power

Abstract

Do states that arm more grow less? Existing studies are divided on this question. Some find that countries that arm more have lower economic growth while others find that greater military spending leads to higher economic growth. A key limitation of existing findings is that they are based on limited data covering only the past 40-60 years. We overcome this limitation by utilizing novel estimates from a measurement model that provide annual coverage for all countries’ military burdens, arms levels, and economic growth rates over the past 200 years. This allows us to provide the most comprehensive and systematic analysis to date on the relationship between arming and economic growth over time. We expect to find two key relationships. First, we expect countries that invest too much into arming will have lower levels of economic growth relative to their peers which, over time, causes them to be economically less prosperous and militarily less powerful. Second, while arming economic growth, it also prevents catastrophic losses and, in extreme cases, elimination from the international system. Thus, we expect countries that spend too little on arming to suffer losses that negatively impact their economic growth and in extreme cases will result in them being removed from the dataset. Existing studies do not take this second effect into account and therefore potentially underestimate economic benefits from arming. We expect this second effect to be stronger in the post-WWII period, as the probability of territorial conquest and state death has decreased dramatically, thus lowering the economic benefits of arming to prevent such losses. In short, we expect to demonstrate the existence of an optimal “goldilocks” level of arming and show that this level has decreased dramatically in more recent periods of time. These findings will inform the debate over whether arming enhances or harms the wealth and power of nations.

Authors

• Christopher J. Fariss, University of Michigan

• Gaea Morales

• Jonathan Markowitz, University of Southern California

• Miriam Barnum, Stanford University