Military Expenditures and Economic Growth


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This study explores the historical relationship between economic growth and military expenditures in five great power countries: Germany, France,Russia, Japan, and the United States. Using statistical and case-studymethodologies, the authors examine how each country’s military expenditures responded to increases in economic output levels and in economic growth during the period 1870-1939, and they offer explanations for the relationship in each country. If historical experience holds true, economic growth in some of the present-day candidates for great-power status will spur them to increase the growth rate of their military expenditures and, as a result, their military capabilities. But each country is unique, and strong economic growth need not imply a commensurate expansion of military spending or capability. History suggests that perceived threats from abroad may be the most important factor leading potential great powers to increase military expenditures. This distinction is important, because policies designed to deter foreign military expansions motivated by ambition may have perverse effects if the expansions are in fact motivated by fear. This analysis suggests that today’s large and fast-growing economies are most likely to devote a growing share of their government and national resources to military expenditures when the external environment appears highly unstable. During such times, an increase in the size and effectiveness of these states’ armed forces can lead to a significant reconfiguration of the global balance of power.

Table of Contents

  • Preface PDF

  • Figures PDF

  • Tables PDF

  • Summary PDF

  • Chapter 1

    Defining the Problem PDF

  • Chapter 2

    A Brief Review of the Statistical Literature PDF

  • Chapter 3

    Empirical Determination of the Growth-Military Expenditures Relationship PDF

  • Chapter 4

    Alternative Hypotheses About the Growth-Military Expenditures Relationship PDF

  • Chapter 5

    Historical Case Studies of the Alternative Hypotheses PDF

  • Chapter 6

    Should the United States Worry About Large, Fast-Growing Economies? PDF

  • Bibliography PDF

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This research was conducted within RAND’s Arroyo Center.

This report is part of the RAND Corporation monograph report series. The monograph/report was a product of the RAND Corporation from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

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