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Military Spending Patterns in History

Jari Eloranta, Appalachian State University

Introduction

Determining adequate levels of military spending and sustaining the burden of conflicts have been among key fiscal problems in history. Ancient societies were usually less complicated in terms of the administrative, fiscal, technological, and material demands of warfare. The most pressing problem was frequently the adequate maintenance of supply routes for the armed forces. On the other hand, these societies were by and large subsistence societies, so they could not extract massive resources for such ventures, at least until the arrival of the Roman and Byzantine Empires. The emerging nation states of the early modern period were much better equipped to fight wars. On the one hand, the frequent wars, new gunpowder technologies, and the commercialization of warfare forced them to consolidate resources for the needs of warfare. On the other hand, the rulers had to – slowly but surely – give up some of their sovereignty to be able to secure required credit both domestically and abroad. The Dutch and the British were masters at this, with the latter amassing an empire that spanned the globe at the eve of the First World War.

The early modern expansion of Western European states started to challenge other regimes all over the world, made possible by their military and naval supremacy as well as later on by their industrial prowess. The age of total war in the nineteenth and twentieth centuries finally pushed these states to adopt more and more efficient fiscal systems and enabled some of them to dedicate more than half of their GDP to the war effort during the world wars. Comparatively, even though military spending was regularly the biggest item in the budget for most states before the twentieth century, it still represented only a modest amount of their GDP. The Cold War period again saw high relative spending levels, due to the enduring rivalry between the West and the Communist Bloc. Finally, the collapse of the Soviet Union alleviated some of these tensions and lowered the aggregate military spending in the world. Newer security challenges such as terrorism and various interstate rivalries have again pushed the world towards growing overall military spending.

This article will first elaborate on some of the research trends in studying military spending and the multitude of theories attempting to explain the importance of warfare and military finance in history. This survey will be followed by a chronological sweep, starting with the military spending of the ancient empires and ending with a discussion of the current behavior of states in the post-Cold War international system. By necessity, this chronological review will be selective at best, given the enormity of the time period in question and the complexity of the topic at hand.

Theoretical Approaches

Military spending is a key phenomenon in order to understand various aspects of economic history: the cost, funding, and burden of conflicts; the creation of nation states; and in general the increased role of government in everyone’s lives especially since the nineteenth century. Nonetheless, certain characteristics can be distinguished from the efforts to study this complex topic among different sciences (mainly history, economics, and political sciences). Historians, especially diplomatic and military historians, have been keen on studying the origins of the two World Wars and perhaps certain other massive conflicts. Nonetheless, many of the historical studies on war and societies have analyzed developments at an elusive macro-level, often without a great deal of elaboration on the quantitative evidence behind the assumptions on the effects of military spending. For example, Paul Kennedy argued in his famous The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (1989) that military spending by hegemonic states eventually becomes excessive and a burden on its economy, finally leading to economic ruin. This argument has been criticized by many economists and historians, since it seems to lack the proper quantitative sources to support his notion of interaction between military spending and economic growth.[2] Quite frequently, as emerging from the classic studies by A.J.P. Taylor and many of the more current works, historians tend to be more interested in the impact of foreign policy decision-making and alliances, in addition to resolving the issue of “blame,” on the road towards major conflicts[3], rather than how reliable quantitative evidence can be mustered to support or disprove the key arguments. Economic historians, in turn, have not been particularly interested in the long-term economic impacts of military spending. Usually the interest of economic historians has centered on the economics of global conflicts — of which a good example of recent work combining the theoretical aspects of economics with historical case studies is The Economics of World War II, a compilation edited by Mark Harrison — as well as the immediate short-term economic impacts of wartime mobilization.[4]

The study of defense economics and military spending patterns as such is related to the immense expansion of military budgets and military establishments in the Cold War era. It involves the application of the methods and tools of economics to the study of issues arising from such a huge expansion. At least three aspects in defense economics set it apart from other fields of economics: 1) the actors (both private and public, for example in contracting); 2) theoretical challenges introduced by the interaction of different institutional and organizational arrangements, both in the budgeting and the allocation procedures; 3) the nature of military spending as a tool for destruction as well as providing security.[5] One of the shortcomings in the study of defense economics has been, at least so far, the lack of interest in periods before the Second World War.[6] For example, how much has the overall military burden (military expenditures as a percentage of GDP) of nation states changed over the last couple of centuries? Or, how big of a financial burden did the Thirty Years War (1618-1648) impose on the participating Great Powers?

A “typical” defense economist (see especially Sandler and Hartley (1995)) would model and attempt, based on public good theories, to explain military spending behavior (essentially its demand) by states with the following base equation:

(1)

In Equation 1, ME represents military expenditures by state i in year t, PRICE the price of military goods (affected by technological changes as well), INCOME most commonly the real GDP of the state in question, SPILLINS the impact of friendly states’ military spending (for example in an alliance), THREATS the impact of hostile states’ or alliances’ military expenditures, and STRATEGY the constraints imposed by changes in the overall strategic parameters of a nation. Most commonly, a higher price for military goods lowers military spending; higher income tends to increase ME (like during the industrial revolutions); alliances often lower ME due to the free riding tendencies of most states; threats usually increase military spending (and sometimes spur on arms races); and changes in the overall defensive strategy of a nation can affect ME in either direction, depending on the strategic framework implemented. While this model may be suitable for the study of, for example, the Cold War period, it fails to capture many other important explanatory factors, such as the influence of various organizations and interest groups in the budgetary processes as well as the impact of elections and policy-makers in general. For example, interest groups can get policy-makers to ignore price increases (on, for instance, domestic military goods), and election years usually alter (or focus) the behavior of elected officials.

In turn within peace sciences, a broader yet overlapping school of thought compared to defense economics, the focus in research has been to find the causal factors behind the most destructive conflicts. One of the most significant of such interdisciplinary efforts has been the Correlates of War (COW) project, which started in the spring of 1963. This project and the researchers loosely associated with it, not to mention its importance in producing comparative statistics, have had a big impact on the study of conflicts.[7] As Daniel S. Geller and J. David Singer have noted, the number of territorial states in the global system has ranged from fewer than 30 after the Napoleonic Wars to nearly 200 at the end of the twentieth century, and it is essential to test the various indicators collected by peace scientists against the historical record until theoretical premises can be confirmed or rejected.[8] In fact, a typical feature in most studies of this type is that they are focused on finding those sets of variables that might predict major wars and other conflicts, in a way similar to the historians’ origins-of-wars approach, whereas studies investigating the military spending behavior of monads (single states), dyads (pairs of states), or systems in particular are quite rare. Moreover, even though some cycle theorists and conflict scientists have been interested in the formation of modern nation states and the respective system of states since 1648, they have not expressed any real interest in pre-modern societies and warfare.[9]

Nevertheless, these contributions have had a lot to offer to the study of long-run dynamics of military spending, state formation, and warfare. According to Charles Tilly, there are four approximate approaches to the study of the relationships between war and power: 1) the statist; 2) the geopolitical; 3) the world system; and 4) the mode of production approach. The statist approach presents war, international relations, and state formation chiefly as a conse­quence of events within particular states. The geopolitical analysis is centered on the argument that state formation responds strongly to the current system of relations among states. The world system approach, á la Wallerstein, is mainly rooted in the idea that the different paths of state formation are influenced by the division of resources in the world system. In the mode of production framework, the way that production is organized determines the outcome of state formation. None of the approaches, as Tilly has pointed out, are adequate in their purest form in explaining state formation, international power relations, and economic growth as a whole.[10] Tilly himself maintains that coercion (a monopoly of violence by rulers and ability to wield coercion also externally) and capital (means of financing warfare) were the key elements in the European ascendancy to world domination in the early modern era. Warfare, state formation, and technological supremacy were all interrelated fundamentals of the same process.[11]

How can these theories of state behavior at the system level be linked to the analysis of military spending? According to George Modelski and William R. Thompson, proponents of Kondratieff waves and long cycles as explanatory forces in the development of world leadership patterns, the key aspect in a state’s ascendancy to prominence via such cycles in such models is naval power; i.e., a state’s ability to vie for world political leadership, colonization, and domination in trade.[12] One of the less explored aspects in most studies of hegemonic patterns is the military expenditure component in the competition between the states for military and economic leadership in the system. It is often argued, for example, that uneven economic growth levels cause nations to compete for economic and military prow­ess. The leader nation(s) thus has to dedicate increasing resources to armaments in order to maintain its position, while the other states, the so-called followers, can benefit from greater investments in other areas of economic activity. Therefore, the follower states act as free-riders in the international system stabilized by the hegemon. A built-in assumption in this hypothesized development pattern is that military spending eventually becomes harmful for economic development; a notion that has often been challenged based on empirical studies.[13]

Overall, the assertion arising from such a framework is that economic development and military spending are closely interdependent, with military spending being the driving force behind economic cycles. Moreover, based on this development pattern, it has been suggested that a country’s poor economic performance is linked to the “wasted” economic resources represented by military expenditures. However, as recent studies have shown, economic development is often more significant in explaining military spending rather than vice versa. The development of the U.S. economy since the Second World War certainly does not the type of hegemonic decline as predicted by Kennedy.[14] The aforementioned development pattern can be paraphrased as the so-called war chest hypothesis. As some of the hegemonic theorists reviewed above suggest, economic prosperity might be a necessary prerequisite for war and expansion. Thus, as Brian M. Pollins and Randall L. Schweller have indicated, economic growth would induce rising government expenditures, which in turn would enable higher military spending — therefore military expenditures would be “caused” by economic growth at a certain time lag.[15] In order for military spending to hinder economic performance, it would have to surpass all other areas of an economy, such as is often the case during wartime.

There have been relatively few credible attempts to model the military (or budgetary) spending behavior of states based on their long-run regime characteristics. Here I am going to focus on three in particular: 1) the Webber-Wildawsky model of budgeting; 2) the Richard Bonney model of fiscal systems; and 3) the Niall Ferguson model of interaction between public debts and forms of government. Caroly Webber and Aaron Wildawsky maintain essentially that each political culture generates its characteristic budgetary objectives; namely, productivity in market regimes, redistribution in sects (specific groups dissenting from an established authority), and more complex procedures in hierarchical regimes.[16] Thus, according to them the respective budgetary consequences arising from the chosen regime can be divided into four categories: despotism, state capitalism, American individualism, and social democracy. All of them in turn have implications for the respective regimes’ revenue and spending needs.

This model, however, is essentially a static one. It does not provide clues as to why nations’ behavior may change over time. Richard Bonney has addressed this problem in his writings on mainly the early modern states.[17] He has emphasized that the states’ revenue and tax collection systems, the backbone of any militarily successful nation state, have evolved over time. For example, in most European states the government became the arbiter of disputes and the defender of certain basic rights in the society by the early modern period. During the Middle Ages, the European fiscal systems were relatively backward and autarchic, with mostly predatory rulers (or roving bandits, as Mancur Olson has coined them).[18] In his model this would be the stage of the so-called tribute state. Next in the evolution came, respectively, the domain state (with stationary bandits, providing some public goods), the tax state (more reliance on credit and revenue collection), and finally the fiscal state (embodying more complex fiscal and political structures). A superpower like Great Britain in the nineteenth century, in fact, had to be a fiscal state to be able to dominate the world, due to all the burdens that went with an empire.[19]

While both of the models mentioned above have provided important clues as to how and why nations have prepared fiscally for wars, the most complete account of this process (along with Charles Tilly’s framework covered earlier) has been provided by Niall Ferguson.[20] He has maintained that wars have shaped all the most relevant institutions of modern economic life: tax-collecting bureaucracies, central banks, bond markets, and stock exchanges. Moreover, he argues that the invention of public debt instruments has gone hand-in-hand with more democratic forms of government and military supremacy – hence, the so-called Dutch or British model. These types of regimes have also been the most efficient economically, which has in turned reinforced the success of this fiscal regime model. In fact, military expenditures may have been the principal cause of fiscal innovation for most of history. Ferguson’s model highlights the importance, for a state’s survival among its challengers, of the adoption of the right types of institutions, technology, and a sufficient helping of external ambitions. All in all, I would summarize the required model, combining elements from the various frameworks, as being evolutionary, with regimes during different stages having different priorities and burdens imposed by military spending, depending also on their position in the international system. A successful ascendancy to a leadership position required higher expenditures, a substantial navy, fiscal and political structures conducive to increasing the availability of credit, and reoccurring participation in international conflicts.

Military Spending and the Early Empires

For most societies since the ancient river valley civilizations, military exertions and the means by which to finance them have been the crucial problems of governance. A centralized ability to plan and control spending were lacking in most governments until the nineteenth century. In fact, among the ancient civilizations, financial administration and the government were inseparable. Governments were organized on hierarchical basis, with the rulers having supreme control over military decisions. Taxes were often paid in kind to support the rulers, thus making it more difficult to monitor and utilize the revenues for military campaigns over great distances. For these agricultural economies, victory in war usually yielded lavish tribute to supplement royal wealth and helped to maintain the army and control the population. Thus, support of the large military forces and expeditions, contingent on food and supplies, was the ancient government’s principal expense and problem. Dependence on distant, often external suppliers of food limited the expansion of these empires. Fiscal management in turn was usually cumbersome and costly, and all of the ancient governments were internally unstable and vulnerable to external incursions.[21]

Soldiers, however, often supplemented their supplies by looting the enemy territory. The optimal size of an ancient empire was determined by the efficiency of tax collection and allocation, resource extraction, and its transportation system. Moreover, the supply of metal and weaponry, though important, was seldom the only critical variable for the military success an ancient empire. There were, however, important changing points in this respect, for example the introduction of bronze weaponry, starting with Mesopotamia about 3500 B.C. The introduction of iron weaponry about 1200 B.C. in eastern parts of Asia Minor, although the subsequent spread of this technology was fairly slow and gathered momentum from about 1000 B.C. onwards, and the use of chariot warfare introduced a new phase in warfare, due to the superior efficiency and cheapness of iron armaments as well as the hierarchical structures that were needed to use them during the chariot era.[22]

The river valley civilizations, nonetheless, paled in comparison with the military might and economy of one of the most efficient military behemoths of all time: the Roman Empire. Military spending was the largest item of public spending throughout Roman history. All Roman governments, similar to Athens during the time of Pericles, had problems in gathering enough revenue. Therefore, for example in the third century A.D. Roman citizenship was extended to all residents of the empire in order to raise revenue, as only citizens paid taxes. There were also other constraints on their spending, such as technological, geographic, and other productivity concerns. Direct taxation was, however, regarded as a dishonor, only to be extended in crisis times. Thus, taxation during most of the empire remained moderate, consisting of extraordinary taxes (so-called liturgies in ancient Athens) during such episodes. During the first two centuries of empire, the Roman army had about 150,000 to 160,000 legionnaires, in addition to 150,000 other troops, and during the first two centuries of empire soldiers’ wages began to increase rapidly to ensure the army’s loyalty. For example, in republican and imperial Rome military wages accounted for more than half of the revenue. The demands of the empire became more and more extensive during the third and fourth centuries A.D., as the internal decline of the empire became more evident and Rome’s external challengers became stronger. For example, the limited use of direct taxes and the commonness of tax evasion could not fulfill the fiscal demands of the crumbling empire. Armed forces were in turn used to maintain internal order. Societal unrest, inflation, and external incursions finally brought the Roman Empire, at least in the West, to an end.[23]

Warfare and the Rise of European Supremacy

During the Middle Ages, following the decentralized era of barbarian invasions, a varied system of European feudalism emerged, in which often feudal lords provided protection for communities for service or price. Since the Merovingian era, soldiers became more specialized professionals, with expensive horses and equipment. By the Carolingian era, military service had become largely the prerogative of an aristocratic elite. Prior to 1000 A.D., the command system was preeminent in mobilizing human and material resources for large-scale military enterprises, mostly on a contingency basis.[24] The isolated European societies, with the exception of the Byzantine Empire, paled in comparison with the splendor and accomplishment of the empires in China and the Muslim world. Also, in terms of science and inventions the Europeans were no match for these empires until the early modern period. Moreover, it was not until the twelfth century and the Crusades that the feudal kings needed to supplement the ordinary revenues to finance large armies. Internal discontent in the Middle Ages often led to an expansionary drive as the spoils of war helped calm the elite — for example, the French kings had to establish firm taxing power in the fourteenth century out of military necessity. The political ambitions of medieval kings, however, still relied on revenue strategies that catered to the short-term deficits, which made long-term credit and prolonged military campaigns difficult.[25]

Innovations in the ways of waging war and technology invented by the Chinese and the Islamic societies permeated Europe with a delay, such as the use of pikes in the fourteenth century and the gunpowder revolution of the fifteenth century, which in turn permitted armies to attack and defend larger territories. This also made possible a commercialization of warfare in Europe in the fourteenth and fifteenth centuries as feudal armies had to give way to professional mercenary forces. Accordingly, medieval states had to increase their taxation levels and tax collection to support the growing costs of warfare and the maintenance of larger standing armies. Equally, the age of commercialization of warfare was accompanied by the rising importance of sea power as European states began to build their overseas empires (as opposed to for example the isolationist turn of Ming China in the fifteenth century). States such as Portugal, the Netherlands, and England, respectively, became the “systemic leaders” due to their extensive fleets and commercial expansion in the period before the Napoleonic Wars. These were also states that were economically cohesive due to internal waterways and small geographic size as well. The early winners in the fight for world leadership, such as England, were greatly influenced by the availability of inexpensive credit, enabling them to mobilize limited resources effectively to meet military expenses. Their rise was of course preceded by the naval exploration and empire-building of many successful European states, especially Spain, both in Europe and around the globe.[26]

This pattern from command to commercialized warfare, from short-term to more permanent military management system, can be seen in the English case. In the period 1535-1547, the English defense share (military expenditures as a percentage of central government expenditures) averaged at 29.4 percent, with large fluctuations from year to year. However, in the period 1685-1813, the mean English defense share was 74.6 percent, never dropping below 55 percent in the said period. The newly-emerging nation states began to develop more centralized and productive revenue-expenditure systems, the goal of which was to enhance the state’s power, especially in the absolutist era. This also reflected on the growing cost and scale of warfare: During the Thirty Years’ War between 100,000 and 200,000 men fought under arms, whereas twenty years later 450,000 to 500,000 men fought on both sides in the War of the Spanish Succession. The numbers notwithstanding, the Thirty Years’ War was a conflict directly comparable to the world wars in terms of destruction. For example, Charles Tilly has estimated the battle deaths to have exceeded two million. Henry Kamen, in turn, has emphasized the mass scale destruction and economic dislocation this caused in the German lands, especially to the civilian population.[27]

With the increasing scale of armed conflicts in the seventeenth century, the participants became more and more dependent on access to long-term credit, because whichever government ran out of money had to surrender first. For example, even though the causes of Spain’s supposed decline in the seventeenth century are still disputed, nonetheless it can be said that the lack of royal credit and the poor management of government finances resulted in heavy deficit spending as military exertions followed one after another in the seventeenth century. Therefore, the Spanish Crown defaulted repeatedly during the sixteenth and seventeenth centuries, and on several occasions forced Spain to seek an end to its military activities. Spain still remained one of the most important Great Powers of the period, and was able to sustain its massive empire mostly intact until the nineteenth century.[28]

What about other country cases – can they shed further light into the importance of military spending and warfare in their early modern economic and political development? A key question for France, for example, was the financing of its military exertions. According to Richard Bonney, the cost of France’s armed forces in its era of “national greatness” were stupendous, with expenditure on the army by the period 1708-1714 averaging 218 million livres, whereas during the Dutch War of 1672-1678 it had averaged only 99 million in nominal terms. This was due to both growth in the size of the army and the navy, and the decline in the purchasing power of the French livre. The overall burden of war, however, remained roughly similar in this period: War expenditures accounted roughly 57 percent of total expenditure in 1683, whereas they represented about 52 percent in 1714. Moreover, as for all the main European monarchies, it was the expenditure on war that brought fiscal change in France, especially after the Napoleonic wars. Between 1815 and 1913, there was a 444 percent increase in French public expenditure and a consolidation of the emerging fiscal state. This also embodied a change in the French credit market structure.[29]

A success story, in a way a predecessor to the British model, was the Dutch state in this period. As Marjolein ‘t Hart has noted, the domestic investors were instrumental in supporting their new-born state as the state was able to borrow the money it needed from the credit markets, thus providing a stability in public finances even during crises. This financial regime lasted up until the end of the eighteenth century. Here again we can observe the intermarriage of military spending and the availability of credit, essentially the basic logic in the Ferguson model. One of the key features in the Dutch success in the seventeenth century was their ability to pay their soldiers relatively promptly. The Dutch case also underlines the primacy of military spending in state budgets and the burden involved for the early modern states. As we can see in Figure 1, the defense share of the Dutch region of Groningen remained consistently around 80 to 90 percent until the mid-seventeenth century, and then it declined, at least temporarily during periods of peace.[30]

Figure 1

Groningen’s Defense Share (Military Spending as a Percentage of Central Government Expenditures), 1596-1795

Source: L. van der Ent, et al. European State Finance Database. ESFD, 1999 [cited 1.2.2001]. Available from: http://www.le.ac.uk/hi/bon/ESFDB/frameset.html.

Respectively, in the eighteenth century, with rapid population growth in Europe, armies also grew in size, especially the Russian army. In Western Europe, a mounting intensity of warfare with the Seven Years War (1756-1763) finally culminated in the French Revolution and Napoleon’s conquests and defeat (1792-1815). The new style of warfare brought on by the Revolutionary Wars, with conscription and war of attrition as new elements, can be seen in the growth of army sizes. For example, the French army grew over 3.5 times in size from 1789 to 1793 – up to 650,000 men. Similarly, the British army grew from 57,000 in 1783 to 255,000 men in 1816. The Russian army acquired the massive size of 800,000 men in 1816, and Russia also kept the size of its armed forces at similar levels in the nineteenth century. However, the number of Great Power wars declined in number (see Table 1), as did the average duration of these wars. Yet, some of the conflicts of the industrial era became massive and deadly events, drawing in most parts of the world into essentially European skirmishes.

Table 1

Wars Involving the Great Powers

Century Number of wars Average duration of wars (years) Proportion of years war was underway, percentage
16th 34 1.6 95
17th 29 1.7 94
18th 17 1.0 78
19th 20 0.4 40
20th 15 0.4 53

Source: Charles Tilly. Coercion, Capital, and European States, AD 990-1990. Cambridge, Mass: Basil Blackwell, 1990.

The Age of Total War and Industrial Revolutions

With the new kind of mobilization, which became more or less a permanent state of affairs in the nineteenth century, centralized governments required new methods of finance. The nineteenth century brought on reforms, such as centralized public administration, reliance on specific, balanced budgets, innovations in public banking and public debt management, and reliance on direct taxation for revenue. However, for the first time in history, these reforms were also supported with the spread of industrialization and rising productivity. The nineteenth century was also the century of the industrialization of war, starting in the mid-century and gathering breakneck speed quickly. By the 1880s, military engineering began to forge ahead of even civil engineering. Also, a revolution in transportation with steamships and railroads made massive, long-distance mobilizations possible, as shown by the Prussian example against the French in 1870-1871.[31]

The demands posed by these changes on the state finances and economies differed. In the French case, the defense share stayed roughly the same, a little over 30 percent, throughout the nineteenth and early twentieth centuries, whereas its military burden increased about one percent to 4.2 percent. In the UK case, the defense share mean declined two percent to 36.7 percent in 1870-1913, compared to early nineteenth century. However, the strength of the British economy made it possible that the military burden actually declined a little to 2.6 percent, a similar figure incurred by Germany in the same period. For most countries the period leading to the First World War meant higher military burdens than that, such as Japan’s 6.1 percent. However, the United States, the new economic leader by the closing decades of the century, averaged spending a meager 0.7 percent of its GDP for military purposes, a trend that continued throughout the interwar period as well (military burden of 1.2 percent). As seen in Figure 2, the military burdens incurred by the Great Powers also varied in terms of timing, suggesting different reactions to external and internal pressures. Nonetheless, the aggregate, systemic real military spending of the period showed a clear upward trend for the entire period. Moreover, the impact of the Russo-Japanese was immense for the total (real) spending of the sixteen states represented in the figure below, due to the fact that both countries were Great Powers and Russian military expenditures alone were massive. The unexpected defeat of the Russians unleashed, along with the arrival of dreadnoughts, an intensive arms race.[32]

Figure 2

Military Burdens of Four Great Powers and Aggregate Real Military Expenditure (ME) for Sixteen Countries on the Aggregate, 1870-1913

Sources: See Jari Eloranta, “Struggle for Leadership? Military Spending Behavior of the Great Powers, 1870-1913,” Appalachian State University, Department of History, unpublished manuscript 2005b, also on the constructed system of states and the methods involved in converting the expenditures into a common currency (using exchange rates and purchasing power parities), which is always a controversial exercise.

With the beginning of the First World War in 1914, this military potential was unleashed in Europe with horrible consequences, as most of the nations anticipated a quick victory but ended up fighting a war of attrition in the trenches. Mankind had finally, even officially, entered the age of total war.[33] It has been estimated that about nine million combatants and twelve million civilians died during the so-called Great War, with property damage especially in France, Belgium, and Poland. According to Rondo Cameron and Larry Neal, the direct financial losses arising from the Great War were about 180-230 billion 1914 U.S. dollars, whereas the indirect losses of property and capital rose to over 150 billion dollars.[34] According to the most recent estimates, the economic losses arising from the war could be as high as 692 billion 1938 U.S. dollars.[35] But how much of their resources did they have to mobilize and what were the human costs of the war?

As Table 2 displays, the French military burden was fairly high, in addition to the size of its military forces and the number of battle deaths. Therefore, France mobilized the most resources in the war and, subsequently, suffered the greatest losses. The mobilization by Germany was also quite efficient, because almost the entire state budget was used to support the war effort. On the other hand, the United States barely participated in the war, and its personnel losses in the conflict were relatively small, as were its economic burdens. In comparison, the massive population reserves of Russia enabled fairly high personnel losses, quite similar to the Soviet experience in the Second World War.

Table 2

Resource Mobilization by the Great Powers in the First World War

Country and years in the war Average military burden (percent of GDP) Average defense share of government spending Military personnel as a percentage of population Battle deaths as a percentage of population
France

1914-1918

43 77 11 3.5
Germany

1914-1918

.. 91 7.3 2.7
Russia

1914-1917

.. .. 4.3 1.4
UK

1914-1918

22 49 7.3 2.0
US

1917-1918

7 47 1.7 0.1

Sources: Historical Statistics of the United States, Colonial Times to 1970, Washington, DC: U.S. Bureau of Census, 1975; Louis Fontvieille. Evolution et croissance de l’Etat Français: 1815-1969, Economies et sociëtës, Paris: Institut de Sciences Mathematiques et Economiques Appliquees, 1976 ; B. R. Mitchell. International Historical Statistics: Europe, 1750-1993, 4th edition, Basingstoke: Macmillan Academic and Professional, 1998a; E. V. Morgan, Studies in British Financial Policy, 1914-1925., London: Macmillan, 1952; J. David Singer and Melvin Small. National Material Capabilities Data, 1816-1985. Ann Arbor, MI: Inter-university Consortium for Political and Social Research, 1993. See also Jari Eloranta, “Sotien taakka: Makrotalouden ongelmat ja julkisen talouden kipupisteet maailmansotien jälkeen (The Burden of Wars: The Problems of Macro Economy and Public Sector after the World Wars),” in Kun sota on ohi, edited by Petri Karonen and Kerttu Tarjamo (forthcoming), 2005a.

In the interwar period, the pre-existing tendencies to continue social programs and support new bureaucracies made it difficult for the participants to cut their public expenditure, leading to a displacement of government spending to a slightly higher level for many countries. Public spending especially in the 1920s was in turn very static by nature, plagued by budgetary immobility and standoffs especially in Europe. This meant that although in many countries, except the authoritarian regimes, defense shares dropped noticeably, their respective military burdens stayed either at similar levels or even increased — for example, the French military burden rose to a mean level of 7.2 percent in this period. In Great Britain also, the defense share mean dropped to 18.0 percent, although the military burden mean actually increased compared to the pre-war period, despite the military expenditure cuts and the “Ten-Year Rule” in the 1920s. For these countries, the mid-1930s marked the beginning of intense rearmament whereas some of the authoritarian regimes had begun earlier in the decade. Germany under Hitler increased its military burden from 1.6 percent in 1933 to 18.9 percent in 1938, a rearmament program combining creative financing and promising both guns and butter for the Germans. Mussolini was not quite as successful in his efforts to realize the new Roman Empire, with a military burden fluctuating between four and five percent in the 1930s (5.0 percent in 1938). The Japanese rearmament drive was perhaps the most impressive, with as high as 22.7 percent military burden and over 50 percent defense share in 1938. For many countries, such as France and Russia, the rapid pace of technological change in the 1930s rendered many of the earlier armaments obsolete only two or three years later.[36]

Figure 3
Military Burdens of Denmark, Finland, France, and the UK, 1920-1938

Source: Jari Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good among Eleven European States, 1920-1938,” Dissertation, European University Institute, 2002.

There were differences between democracies as well, as seen in Figure 3. Finland’s behavior was similar to the UK and France, i.e. part of the so-called high spending group among European democracies. This was also similar to the actions of most East European states. Denmark was among the low-spending group, perhaps due to the futility of trying to defend its borders amidst probable conflicts involving giants in the south, France and Germany. Overall, the democracies maintained fairly steady military burdens throughout the period. Their rearmament was, however, much slower than the effort amassed by most autocracies. This is also amply displayed in Figure 4.

Figure 4
Military Burdens of Germany, Italy, Japan, and Russia/USSR, 1920-1938

Sources: Eloranta (2002), see especially appendices for the data sources. There are severe limitations and debates related to, for example, the German (see e.g. Werner Abelshauser, “Germany: Guns, Butter, and Economic Miracles,” in The Economics of World War II: Six Great Powers in International Comparison, edited by Mark Harrison, 122-176, Cambridge: Cambridge University Press, 2000) and the Soviet data (see especially R. W. Davies, “Soviet Military Expenditure and the Armaments Industry, 1929-33: A Reconsideration,” Europe-Asia Studies 45, no. 4 (1993): 577-608, as well as R. W. Davies and Mark Harrison. “The Soviet Military-Economic Effort under the Second Five-Year Plan, 1933-1937,” Europe-Asia Studies 49, no. 3 (1997): 369-406).

In the ensuing conflict, the Second World War, the initial phase from 1939 to early 1942 favored the Axis as far as strategic and economic potential was concerned. After that, the war of attrition, with the United States and the USSR joining the Allies, turned the tide in favor of the Allies. For example, in 1943 the Allied total GDP was 2,223 billion international dollars (in 1990 prices), whereas the Axis accounted for only 895 billion. Also, the impact of the Second World War was much more profound for the participants’ economies. For example, Great Britain at the height of the First World War incurred a military burden of about 27 percent, whereas the military burden level consistently held throughout the Second World War was over 50 percent.[37]

Table 3

Resource Mobilization by the Great Powers in the Second World War

Country and years in the war Average military burden (percent of GDP) Average defense share of government spending Military personnel as a percentage of population Battle deaths as a percentage of population
France

1939-1945

.. .. 4.2 0.5
Germany

1939-1945

50 .. 6.4 4.4
Soviet Union

1939-1945

44 48 3.3 4.4
UK

1939-1945

45 69 6.2 0.9
USA

1941-1945

32 71 5.5 0.3

Sources: Singer and Small (1993); Stephen Broadberry and Peter Howlett, “The United Kingdom: ‘Victory at All Costs’,” in The Economics of World War II: Six Great Powers in International Comparisons, edited by Mark Harrison (Cambridge University Press, 1998); Mark Harrison. “The Economics of World War II: An Overview,” in The Economics of World War II: Six Great Powers in International Comparisons, edited by Mark Harrison (Cambridge: Cambridge University Press, 1998a); Mark Harrison, “The Soviet Union: The Defeated Victor,” in The Economics of World War II: Six Great Powers in International Comparison, edited by Mark Harrison, 268-301 (Cambridge: Cambridge University Press, 2000); Mitchell (1998a); B.R. Mitchell. International Historical Statistics: The Americas, 1750-1993, fourth edition, London: Macmillan, 1998b. The Soviet defense share only applies to years 1940-1945, whereas the military burden applies to 1940-1944. These two measures are not directly comparable, since the former is measured in current prices and the latter in constant prices.

As Table 3 shows, the greatest military burden was most likely incurred by Germany, even though the other Great Powers experienced similar levels. Only the massive economic resources of the United States made possible its lower military burden. Also the UK and the United States mobilized their central/federal government expenditures efficiently for the military effort. In this sense the Soviet Union fared the worst, and additionally the share of military personnel out of the population was relatively small compared to the other Great Powers. On the other hand, the economic and demographic resources that the Soviet Union possessed ultimately ensured its survival during the German onslaught. On the aggregate, the largest personnel losses were incurred by Germany and the Soviet Union, in fact many times those of the other Great Powers.[38] In comparison with the First World War, the second one was even more destructive and lethal, and the aggregate economic losses from the war exceeded even 4,000 billion 1938 U.S. dollars. After the war, the European industrial and agricultural production amounted to only half of the 1938 total.[39]

The Atomic Age and Beyond

The Second World War brought with it also a new role for the United States in world politics, a military-political leadership role warranted by its dominant economic status established over fifty years earlier. With the establishment of NATO in 1949, a formidable defense alliance was formed for the capitalist countries. The USSR, rising to new prominence due to the war, established the Warsaw Pact in 1955 to counter these efforts. The war also meant a change in the public spending and taxation levels of most Western nations. The introduction of welfare states brought the OECD government expenditure average from just under 30 percent of the GDP in the 1950s to over 40 percent in the 1970s. Military spending levels followed suit and peaked during the early Cold War. The American military burden increased above 10 percent in 1952-1954, and the United States has retained a high mean value for the post-war period of 6.7 percent. Great Britain and France followed the American example after the Korean War.[40]

The Cold War embodied a relentless armaments race, with nuclear weapons now as the main investment item, between the two superpowers (see Figure 5). The USSR, according to some figures, spent about 60 to 70 percent of the American level in the 1950s, and actually spent more than the United States in the 1970s. Nonetheless, the United States maintained a massive advantage over the Soviets in terms of nuclear warheads. However, figures collected by SIPRI (Stockholm International Peace Research Institute), suggest an enduring yet dwindling lead for the US even in the 1970s. On the other hand, the same figures point to a 2-to-1 lead in favor of the NATO countries over the Warsaw Pact members in the 1970s and early 1980s. Part of this armaments race was due to technological advances that led to increases in the cost per soldier — it has been estimated that technological increases have produced a mean annual increase in real costs of around 5.5 percent in the post-war period. Nonetheless, spending on personnel and their maintenance has remained the biggest spending item for most countries.

Figure 5

Military Burdens (=MILBUR) of the United States and the United Kingdom, and the Soviet Military Spending as a Percentage of the US Military Spending (ME), 1816-1993

Sources: References to the economic data can be found in Jari Eloranta, “National Defense,” in The Oxford Encyclopedia of Economic History, edited by Joel Mokyr, 30-33 (Oxford: Oxford University Press, 2003b). ME (Military Expenditure) data from Singer and Small (1993), supplemented with the SIPRI (available from: http://www.sipri.org/) data for 1985-1993. Details are available from the author upon request. Exchange rates from Global Financial Data (Online databank), 2003. Available from http://www.globalfindata.com/. The same caveats apply to the underlying currency conversion methods as in Figure 2.

The one outcome of this Cold War arms race that is often cited is the so-called Military Industrial Complex (MIC), referring usually to the influence that the military and industry would have on each other’s policies. The more nefarious connotation refers to the unduly large influence that military producers might have over public sector’s acquisitions and foreign policy in particular in such a collusive relationship. In fact, the origins of this type of interaction can be found further back in history. As Paul Koistinen has emphasized, the First World War was a watershed in business-government relationships, since businessmen were often brought into government, to make supply decisions during this total conflict. Most governments, as a matter of fact, needed the expertise of the core business elites during the world wars. In the United States some form of an MIC came into existence before 1940. Similar developments can be seen in other countries before the Second World War, for example in the Soviet Union. The Cold War simply reinforced these tendencies.[41] Findings by, for example, Robert Higgs establish that the financial performance of the leading defense contracting companies was, on the average, much better than that of comparable large corporations during the period 1948-1989. Nonetheless, his findings do not support the normative conclusion that the profits of defense contractors were “too high.”[42]

World spending levels began a slow decline from the 1970s onwards, with the Reagan years being an exception for the US. In 1986, the US military burden was 6.5 percent, whereas in 1999 it was down to 3.0 percent. In France during the period 1977-1999, the military burden has declined from the post-war peak levels in the 1950s to a mean level of 3.6 percent at the turn of the millennium. This has been mostly the outcome of the reduction in tensions between the rival groups and the downfall of the USSR and the communist regimes in Eastern Europe. The USSR was spending almost as much on its armed forces as the United States up until mid-1980s, and the Soviet military burden was still 12.3 percent in 1990. Under the Russian Federation, with a declining GDP, this level has dropped rapidly to 3.2 percent in 1998. Similarly, other nations have downscaled their military spending since the late 1980s and the 1990s. For example, German military spending in constant US dollars in 1991 was over 52 billion, whereas in 1999 it declined to less than 40 billion. In the French case, the decline was from little over 52 billion in 1991 to below 47 billion in 1999, with its military burden decreasing from 3.6 percent to 2.8 percent.[43]

Overall, according to the SIPRI figures, there was a reduction of about one-third in real terms in world military spending in 1989-1996, with some fluctuation and even small increase since then. In the global scheme, world military expenditure is still highly concentrated on a few countries, with the 15 major spenders accounting for 80 percent of the world total in 1999. The newest military spending estimates (see e.g. http://www.sipri.org/) put the world military expenditures on a growth trend once again due to new threats such as international terrorism and the conflicts related to terrorism. In terms of absolute figures, the United States still dominates the world military spending with a 47 percent share of the world total in 2003. The U.S. spending total becomes less impressive when purchasing power parities are utilized. Nonetheless, the United States has entered the third millennium as the world’s only real superpower – a role that it embraces sometimes awkwardly. Whereas the United States was an absent hegemon in the late nineteenth and first half of the twentieth century, it now has to maintain its presence in many parts of the world, sometimes despite objections from the other players in the international system.[44]

Conclusions

Warfare has played a crucial role in the evolution of human societies. The ancient societies were usually less complicated in terms of the administrative, fiscal, technological, and material demands of warfare. The most pressing problem was commonly the maintenance of adequate supply for the armed forces during prolonged campaigns. This also put constraints on the size and expansion of the early empires, at least until the introduction of iron weaponry. The Roman Empire, for example, was able to sustain a large, geographically diverse empire for a long time period. The disjointed Middle Ages splintered the European societies into smaller communities, in which so-called roving bandits ruled, at least until the arrival of more organized military forces from the tenth century onwards. At the same time, the empires in China and the Muslim world developed into cradles of civilization in terms of scientific discoveries and military technologies.

The geographic and economic expansion of early modern European states started to challenge other regimes all over the world, made possible in part by their military and naval supremacy as well as their industrial prowess later on. The age of total war and revolutions in the nineteenth and twentieth centuries finally pushed these states to adopt more and more efficient fiscal systems and enabled some of them to dedicate more than half of their GDP to the war effort during the world wars. Even though military spending was regularly the biggest item in the budget for most states before the twentieth century, it still represented only a modest amount of their respective GDP. The Cold War period again saw high relative spending levels, due to the enduring rivalry between the West and the Communist bloc. Finally, the collapse of the Soviet Union alleviated some of these tensions and lowered the aggregate military spending in the world, if only temporarily. Newer security challenges such as terrorism and various interstate rivalries have again pushed the world towards a growth path in terms of overall military spending.

The cost of warfare has increased especially since the early modern period. The adoption of new technologies and massive standing armies, in addition to the increase in the “bang-for-buck” (namely, the destructive effect of military investments), have kept military expenditures in a central role vis-à-vis modern fiscal regimes. Although the growth of welfare states in the twentieth century has forced some tradeoffs between “guns and butter,” usually the spending choices have not been competing rather than complementary. Thus, the size and spending of governments have increased. Even though the growth in welfare spending has abated somewhat since the 1980s, according to Peter Lindert they will most likely still experience at least modest expansion in the future. Nor is it likely that military spending will be displaced as a major spending item in national budgets. Various international threats and the lack of international cooperation will ensure that military spending will remain the main contender to social expenditures.[45]


[1] I thank several colleagues for their helpful comments, especially Mark Harrison, Scott Jessee, Mary Valante, Ed Behrend, David Reid, as well as an anonymous referee and EH.Net editor Robert Whaples. The remaining errors and interpretations are solely my responsibility.

[2] See Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (London: Fontana, 1989). Kennedy calls this type of approach, following David Landes, “large history.” On criticism of Kennedy’s “theory,” see especially Todd Sandler and Keith Hartley, The Economics of Defense, ed. Mark Perlman, Cambridge Surveys of Economic Literature (Cambridge: Cambridge University Press, 1995) and the studies listed in it. Other examples of long-run explanations can be found in, e.g., Maurice Pearton, The Knowledgeable State: Diplomacy, War, and Technology since 1830 (London: Burnett Books: Distributed by Hutchinson, 1982) and William H. McNeill, The Pursuit of Power: Technology, Armed Force, and Society since A.D. 1000 (Chicago: University of Chicago Press, 1982).

[3] Jari Eloranta, “Kriisien ja konfliktien tutkiminen kvantitatiivisena ilmiönä: Poikkitieteellisyyden haaste suomalaiselle sotahistorian tutkimukselle (The Study of Crises and Conflicts as Quantitative Phenomenon: The Challenge of Interdisciplinary Approaches to Finnish Study of Military History),” in Toivon historia – Toivo Nygårdille omistettu juhlakirja, ed. Kalevi Ahonen, et al. (Jyväskylä: Gummerus Kirjapaino Oy, 2003a).

[4] See Mark Harrison, ed., The Economics of World War II: Six Great Powers in International Comparisons (Cambridge, UK: Cambridge University Press, 1998b). Classic studies of this type are Alan Milward’s works on the European war economies; see e.g. Alan S. Milward, The German Economy at War (London: Athlon Press, 1965) and Alan S. Milward, War, Economy and Society 1939-1945 (London: Allen Lane, 1977).

[5] Sandler and Hartley, The Economics of Defense, xi; Jari Eloranta, “Different Needs, Different Solutions: The Importance of Economic Development and Domestic Power Structures in Explaining Military Spending in Eight Western Democracies during the Interwar Period” (Licentiate Thesis, University of Jyväskylä, 1998).

[6] See Jari Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good among Eleven European States, 1920-1938″ (Dissertation, European University Institute, 2002) for details.

[7] Ibid.

[8] Daniel S. Geller and J. David Singer, Nations at War. A Scientific Study of International Conflict, vol. 58, Cambridge Studies in International Relations (Cambridge: Cambridge University Press, 1998), e.g. 1-7.

[9] See e.g. Jack S. Levy, “Theories of General War,” World Politics 37, no. 3 (1985). For an overview, see especially Geller and Singer, Nations at War: A Scientific Study of International Conflict. A classic study of war from the holistic perspective is Quincy Wright, A Study of War (Chicago: University of Chicago Press, 1942). See also Geoffrey Blainey, The Causes of War (New York: Free Press, 1973). On rational explanations of conflicts, see James D. Fearon, “Rationalist Explanations for War,” International Organization 49, no. 3 (1995).

[10] Charles Tilly, Coercion, Capital, and European States, AD 990-1990 (Cambridge, MA: Basil Blackwell, 1990), 6-14.

[11] For more, see especially ibid., Chapters 1 and 2.

[12] George Modelski and William R. Thompson, Leading Sectors and World Powers: The Coevolution of Global Politics and Economics, Studies in International Relations (Columbia, SC: University of South Carolina Press, 1996), 14-40. George Modelski and William R. Thompson, Seapower in Global Politics, 1494-1993 (Houndmills, UK: Macmillan Press, 1988).

[13] Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000, xiii. On specific criticism, see e,g, Jari Eloranta, “Military Competition between Friends? Hegemonic Development and Military Spending among Eight Western Democracies, 1920-1938,” Essays in Economic and Business History XIX (2001).

[14] Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good among Eleven European States, 1920-1938,” Sandler and Hartley, The Economics of Defense.

[15] Brian M. Pollins and Randall L. Schweller, “Linking the Levels: The Long Wave and Shifts in U.S. Foreign Policy, 1790- 1993,” American Journal of Political Science 43, no. 2 (1999), e.g. 445-446. E.g. Alex Mintz and Chi Huang, “Guns versus Butter: The Indirect Link,” American Journal of Political Science 35, no. 1 (1991) suggest an indirect (negative) growth effect via investment at a lag of at least five years.

[16] Caroly Webber and Aaron Wildavsky, A History of Taxation and Expenditure in the Western World (New York: Simon and Schuster, 1986).

[17] He outlines most of the following in Richard Bonney, “Introduction,” in The Rise of the Fiscal State in Europe c. 1200-1815, ed. Richard Bonney (Oxford: Oxford University Press, 1999b).

[18] Mancur Olson, “Dictatorship, Democracy, and Development,” American Political Science Review 87, no. 3 (1993).

[19] On the British Empire, see especially Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2003). Ferguson has also tackled the issue of a possible American empire in a more polemical Niall Ferguson, Colossus: The Price of America’s Empire (New York: Penguin Press, 2004).

[20] Ferguson outlines his analytical framework most concisely in Niall Ferguson, The Cash Nexus: Money and Power in the Modern World, 1700-2000 (New York: Basic Books, 2001), especially Chapter 1.

[21] Webber and Wildavsky, A History of Taxation and Expenditure in the Western World, 39-67. See also McNeill, The Pursuit of Power: Technology, Armed Force, and Society since A.D. 1000.

[22] McNeill, The Pursuit of Power: Technology, Armed Force, and Society since A.D. 1000 , 9-12.

[23] Webber and Wildavsky, A History of Taxation and Expenditure in the Western World.

[24] This interpretation of early medieval warfare and societies, including the concept of feudalism, has been challenged in more recent military history literature. See especially John France, “Recent Writing on Medieval Warfare: From the Fall of Rome to c. 1300,” Journal of Military History 65, no. 2 (2001).

[25] Webber and Wildavsky, A History of Taxation and Expenditure in the Western World, McNeill, The Pursuit of Power. Technology, Armed Force, and Society since A.D. 1000. See also Richard Bonney, ed., The Rise of the Fiscal State in Europe c. 1200-1815 (Oxford: Oxford University Press, 1999c).

[26] Ferguson, The Cash Nexus: Money and Power in the Modern World, 1700-2000, Tilly, Coercion, Capital, and European States, AD 990-1990, Jari Eloranta, “National Defense,” in The Oxford Encyclopedia of Economic History, ed. Joel Mokyr (Oxford: Oxford University Press, 2003b). See also Modelski and Thompson, Seapower in Global Politics, 1494-1993.

[27] Tilly, Coercion, Capital, and European States, AD 990-1990, 165, Henry Kamen, “The Economic and Social Consequences of the Thirty Years’ War,” Past and Present April (1968).

[28] Eloranta, “National Defense,” Henry Kamen, Empire: How Spain Became a World Power, 1492-1763, 1st American ed. (New York: HarperCollins, 2003), Douglass C. North, Institutions, Institutional Change, and Economic Performance (New York.: Cambridge University Press, 1990).

[29] Richard Bonney, “France, 1494-1815,” in The Rise of the Fiscal State in Europe c. 1200-1815, ed. Richard Bonney (Oxford: Oxford University Press, 1999a). War expenditure percentages (for the seventeenth and eighteenth centuries) were calculated using the so-called Forbonnais (and Bonney) database(s), available from European State Finance Database: http://www.le.ac.uk/hi/bon/ESFDB/RJB/FORBON/forbon.html and should be considered only illustrative.

[30] Marjolein ’t Hart, “The United Provinces, 1579-1806,” in The Rise of the Fiscal State in Europe c. 1200-1815, ed. Richard Bonney (Oxford: Oxford University Press, 1999). See also Ferguson, The Cash Nexus..

[31] See especially McNeill, The Pursuit of Power..

[32] Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good Among Eleven European States, 1920-1938,” Eloranta, “National Defense”. See also Ferguson, The Cash Nexus.. On the military spending patterns of Great Powers in particular, see J. M. Hobson, “The Military-Extraction Gap and the Wary Titan: The Fiscal Sociology of British Defence Policy 1870-1914,” Journal of European Economic History 22, no. 3 (1993).

[33] The practice of total war, of course, is as old as civilizations themselves, ranging from the Punic Wars to the more modern conflicts. Here total war refers to the twentieth century connotation of this term, embodying the use of all economic, political, and military might of a nation to destroy another in war. Therefore, even though the destruction of Carthage certainly qualifies as an action of total war, it is only in the nineteenth and twentieth centuries that this type of warfare and strategic thinking comes to full fruition. For example, the famous ancient military genius Sun Tzu advocated caution and planning in warfare, rather than using all means possible to win a war: “Thus, those skilled in war subdue the enemy’s army without battle. They capture his cities without assaulting them and overthrow his state without protracted operations.” Sun Tzu, The Art of War (Oxford: Oxford University Press, 1963), 79. With the ideas put forth by Clausewitz (see Carl von Clausewitz, On War (London: Penguin Books, 1982, e.g. Book Five, Chapter II) in the century century, the French Revolution, and Napoleon, the nature of warfare began to change. Clausewitz’s absolute war did not go as far as prescribing indiscriminate slaughter or other ruthless means to subdue civilian populations, but did contribute to the new understanding of the means of warfare and military strategy in the industrial age. The generals and despots of the twentieth century drew their own conclusions, and thus total war came to include not only subjugating the domestic economy to the needs of the war effort but also propaganda, destruction of civilian (economic) targets, and genocide.

[34] Rondo Cameron and Larry Neal, A Concise Economic History of the World: From Paleolithic Times to the Present, 4th ed. (Oxford: The Oxford University Press, 2003), 339. Thus, the estimate in e.g. Eloranta, “National Defense” is a hypothetical minimum estimate originally expressed in Gerard J. de Groot, The First World War (New York: Palgrave, 2001).

[35] See Table 13 in Stephen Broadberry and Mark Harrison, “The Economics of World War I: An Overview,” in The Economics of World War I, ed. Stephen Broadberry and Mark Harrison ((forthcoming), Cambridge University Press, 2005). The figures are, as the authors point out, only tentative.

[36] Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good Among Eleven European States, 1920-1938″, Eloranta, “National Defense”, Webber and Wildavsky, A History of Taxation and Expenditure in the Western World.

[37] Eloranta, “National Defense”.

[38] Mark Harrison, “The Economics of World War II: An overview,” in The Economics of World War II: Six Great Powers in International Comparisons, ed. Mark Harrison (Cambridge, UK: Cambridge University Press, 1998a), Eloranta, “National Defense.”

[39] Cameron and Neal, A Concise Economic History of the World, Harrison, “The Economics of World War II: An Overview,” Broadberry and Harrison, “The Economics of World War I: An Overview.” Again, the same caveats apply to the Harrison-Broadberry figures as disclaimed earlier.

[40] Eloranta, “National Defense”.

[41] Mark Harrison, “Soviet Industry and the Red Army under Stalin: A Military-Industrial Complex?” Les Cahiers du Monde russe 44, no. 2-3 (2003), Paul A.C. Koistinen, The Military-Industrial Complex: A Historical Perspective (New York: Praeger Publishers, 1980).

[42] Robert Higgs, “The Cold War Economy: Opportunity Costs, Ideology, and the Politics of Crisis,” Explorations in Economic History 31, no. 3 (1994); Ruben Trevino and Robert Higgs. 1992. “Profits of U.S. Defense Contractors,” Defense Economics Vol. 3, no. 3: 211-18.

[43] Eloranta, “National Defense”.

[44] See more Eloranta, “Military Competition between Friends? Hegemonic Development and Military Spending among Eight Western Democracies, 1920-1938.”

[45] For more, see especially Ferguson, The Cash Nexus, Peter H. Lindert, Growing Public. Social Spending and Economic Growth since the Eighteenth Century, 2 Vols., Vol. 1 (Cambridge: Cambridge University Press, 2004). On tradeoffs, see e.g. David R. Davis and Steve Chan, “The Security-Welfare Relationship: Longitudinal Evidence from Taiwan,” Journal of Peace Research 27, no. 1 (1990), Herschel I. Grossman and Juan Mendoza, “Butter and Guns: Complementarity between Economic and Military Competition,” Economics of Governance, no. 2 (2001), Alex Mintz, “Guns Versus Butter: A Disaggregated Analysis,” The American Political Science Review 83, no. 4 (1989), Mintz and Huang, “Guns versus Butter: The Indirect Link,” Kevin Narizny, “Both Guns and Butter, or Neither: Class Interests in the Political Economy of Rearmament,” American Political Science Review 97, no. 2 (2003).

Citation: Eloranta, Jari. “Military Spending Patterns in History”. EH.Net Encyclopedia, edited by Robert Whaples. September 16, 2005. URL http://eh.net/encyclopedia/military-spending-patterns-in-history/