Military Expenditures and Economic Growth

By Jasen Castillo; Julia Lowell et al. | Go to book overview

SUMMARY
By increasing their military expenditures, states with rapidly industrializing economies have the potential to develop significant military capabilities. Whether or not they choose to do so is of considerable policy relevance to the United States. In this monograph report, we look at the relationship between military expenditures and economic growth in five “great power” states—Germany, France, Russia, Japan, and the United States—each of which experienced rapid economic growth and industrialization in the decades following 1870. We choose these states for our examination because their military spending choices may provide useful insights into the choices of other potential powers that are either on the cusp of, or already undergoing, a similar economic takeoff.In the report, we address the following research questions:
1. To what extent did movements in military expenditures match movements in output levels and rates of growth in each of the relevant countries during the period 1870–1939?
2. What are the most plausible explanations for the increases in military expenditures that took place in each country?

Our approach to the first question consists of a descriptive data analysis together with statistical tests of the military expenditures—output relationship. We find that, for France, Germany, and the United States, none devoted a dramatically increasing share of their growing national resources to their militaries as they experienced profound economic transformations in nonwar years between 1870 and 1913. The share of Japanese output devoted to military expenditures, in

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