Military Expenditures and Economic Growth

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-study methodologies, 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 preceived threats from abroad may be the most important factor leading potential great powers to increase military expenditures.