Review Essay : Armaments and Economic Performance in Industrialized Market Economies

Abstract

Abstract In the review of the literature, it is found that there are two main traditions of empirical studies on the consequences of milex (= military expenditure) in industrialized market economies. One is the marxist influence from Baran & Sweezy (1968) where milex is seen as necessary for the survival of capitalism. Another is the investigation of trade-offs (reduced civilian components when milex is increased). The literature is scrutinized with respect to five areas for effects of milex. Investment is reduced when milex increases. Most studies have found economic growth hindered by higher milex, partly because of the effect on investment. No clear association between milex and employment was found. However, the same amount of other public expenditure creates more jobs. There was some evidence for milex as counter-cyclical instrument in the US. The result for studies if milex is used in electoral cycles in the US is contradictory. Disaggregated data were emphasized as a possible solution to get more definite results. National data ought to be divided into regional and sectoral data and milex ought to be divided into separate parts. Standardized information on military budgets to the United Nations would be very helpful for future research.