Economics and Disarmament

Economics and Disarmament

Below is outline of talk given by Prof. J Paul Dunne of Economists for Peace and Security UK On Monday 27th February, 2006 6-8.00pm, at the House of Lords, Committee Room 4. ARC held a public meeting, titled ‘Towards the peaceful use of national resources in the 21st Century How can we achieve this? And what is the role of campaign groups and civil society?”

Context

Military Spending important topic with influence beyond the resources it takes up

Changed international security environment

End of Cold War:

Reductions in Military Spending: bottomed out

Not result of obvious strategic needs, but internal pressures?

Disarmament needs to be back on the agenda

Table 8.2. World and organizational military expenditure estimates, 1996–2005
Figures are in US $b., at constant (2003) prices and exchange rates. Figures in italics are percentages. Figures do not always add up to totals because of the conventions of rounding.

								Military
							Change	expenditure 2004
Organization/							96–05
income groupa	2000	2001	2002	2003	2004	2005	(%)	per capita	% GDP

Organization
ASEAN	11.1	11.7	12.4	13.3	13.3	13.1	8.2	24.3	1.5
CIS	16.4	17.9	19.7	21.1	22.1	24.1	50.4	89.5	3.4
EU	196	196	199	206	219	212	11	473.8	1.9
NATO	539	541	585	642	687	706	34.5	793.9	2.9
NATO Europe	207	207	211	217	224	217	10.5	416.2	2
OECD	622	625	670	727	768	789	29.6	706.1	2.5
OPEC	37.1	39.6	36.3	38	42	46.7	72.4	81.5	3.8
Income group (by 2003 gross national income per capita)
Low	24.3	24.6	25.4	25.6	28.3	29.5	64	12.4	1.9
Lower middle	90.5	99	105	109	114	122	59	43.4	2.5
Upper middle	42.2	45.2	42.5	43.9	46.7	51	48	137.3	2.3
High	627	631	678	736	780	799	29	810.1	2.6

GDP = Gross Domestic Product
a For the country coverage of the organizations and groups, see appendix 8A, table 8A.1. Some countries are excluded in the per capita figures because of lack of data on population. These countries are: Afghanistan, Brunei, Cuba, Haiti, Iraq, North Korea, Romania, Serbia and Montenegro, Somalia, Turkmenistan and Uzbekistan.
Sources: Military expenditure: Appendix 8A.1, GDP and population: International Monetary Fund, International Finan-cial Statistics database, URL < http://ifs.apdi.net/imf/logon.aspx >.

general trends always hid more complex patterns

Some increased because of local insecurity

Encouragement of push for arms exports

Continued use of economic arguments to justify security expenditures –important to deal with these

Disarmament always political as well as economic

Issues are important for Africa in particular

Military Spending and the Economy: Theories

Neoclassical: guns v butter.
Keynesian: Milex one component of government spending; effective demand/multiplier effects; Positive economic effect
Institutionalist: Predicated on existence of MIC; internal pressures for increases independent of threat; creates inefficiencies in economy; negative economic effect.
Marxist: Marx little to say: Overall unclear what effect would be.
Monopoly Capital: Baran and Sweezy. Only one with definitive positive effect

Fall back on complex understanding:
- Historical process: specific
- Contingent
- Contradictory: imp but econ cost
Wouldn’t expect simple economic relation and don’t find it

Have to undertake empirical analysis that recognises historical specificity of any likely impact of milex and changing nature of the military economy.

Can identify post WW2 examples of combinations of military burden growth

No theoretical consensus >>> empirical question

Empirical Analysis

Determinants:

Interdependence of demand and supply
Arms Race models
Other models

Finding generally non-economic factors

Economic Effects: all can be positive or negative

Supply side effects
Keynesian demand: direct and indirect

Labour
Capital/investment
External relations
Socio-political
Debt

Econometric Studies:

Ad hoc approaches: Benoit
Single equation reduced form growth models
Simultaneous equation systems
Macroeconometric models: Peace Dividend book
Case studies vs general studies

Findings:

While no clear consensus most common finding is that military burden has no significant effect or a negative effect on economic growth.

Few studies post-Benoit have claimed to discover positive.

So decrease milex positive effect?

Yes, but not so simple

Whether positive may depend upon other policies: Disarmament needs to be treated as an investment process (Hartley, 1983)

Economic opportunity rather than a problem:

Needs political will

Individual country problems >>> need international support for disarmament

Complicating Factors:

Reducing demand overall
Demobilisation and retrenchment can cause problems
Role of army can vary
Importance of arms industry
Trade in arms/foreign exchange/pressures from exporters
Role of WB/IMF
Development aid
Role of international community: peacekeeping; governance
Still large numbers of conflicts: changing nature of conflicts (civilians) (Kaldor)

Evidence are getting:

Increasing recognition of the problems of post conflict reconstructions
Increasing recognition of the role economic factors play in conflict (Collier)
Increasing recognition of importance economic and human security
Increasing recognition of importance of planning and transparency

J. Paul Dunne , UWE Bristol

EPS(UK), EPS journal

Prof. J Paul Dunne of Economists for Peace and Security UK