Economics of Military Spending


Semester 1; Level 3; Credits 10; BUEC3140


Lecturer: Dr J Paul Dunne


Wednesday 12-2pm


Revised Reading List 29.11.94


General Texts:

Ron Smith and Dan Smith (1983) "The Economics of Militarism", Pluto Press.

Keith Hartley (1991) "The Economics of Defence Policy", Brassey's.

Gavin Kennedy (1983) "Defense Economics", Duckworth.

Kapstein EB (1992) "The Political Economy of National Security: A Global Perspective"


General Information:

Deger Saadet and Somnath Sen "Military Expenditure: The Political Economy of International Security", SIPRI/Oxford University Press.

Ruth Leger Sivard "World Military and Social Expenditures",

Stockholm International Peace Research Institute (SIPRI) Yearbook (annual)

ACDA (1991-2) "World Military Expenditures and Arms Transfers", US Arms Control and Disarmament Agency, Washington DC.

HMSO (various years) "Statement on the Defence Estimates", Cmnd

HMSO (1993) "Defence Statistics"


Background/ General Reading

Kaldor M (1983) "The Baroque Arsenal", Abacus.

Keegan J (1983) "The Face of Battle", Penguin.

Sampson A (1991) "The Arms Bazaar", Coronet.


Project on Demilitarisation (ProDem) Briefing Guides

1.  The Triumph of Unilateralism: The Failure of Western Militarism

A1. NATO's Military Supremacy: What is it For?

A2. Western Generals: The Dangers from British and American Military Success.

B1. Militarism or Disarmament?: Challenging the West's Technological Arms Race

C1. Western Hypocrisy on Arms Conversion: Helping Military Industries Disarm in the East but not in the West.



The Political Economy of Military Spending:

NB The readings in this section will also be relevant for the rest of the course as we take a more detailed look at aspects of the military economy.

General texts plus:


Baran P and Sweezy P (1966) Monopoly Capital, London, Monthly Review Press.


Dumas L (1986) "The Overburdened Economy", Univ of California Press.


Dunne P (1990) The Political Economy of Military Expenditure: an introduction, Cambridge Journal of Economics, Vol 14, no 4, pp 395-404.


Georgiou G (1983) The Political Economy of Military Expenditure, Capital and Class, No 19.


Howard MC and J King (1992) "A History of Marxian Economics: VolII, 1929-90", Macmillan. Ch 8.


Kennedy P (1987) The Rise and Fall of the Great Powers, Unwin.


Melman S (1985) "The Permanent War Economy", Simon and Schuster.


Pivetti M (1992) "Military Spending as a Burden on Growth: An 'Underconsumptionist' Critique", Cambridge Journal of Economics, 16, 373-84.


ProDem Breifing Guide No. 1


Smith R and Dunne P (1994) "Is Military Spending A Burden: A Marxo-Marginalist Response to Pivetti", Cambridge Journal of Economics, 18, 515-527.


Smith R (1977) Military Expenditure and Capitalism. Cambridge Journal of Economics, Vol 1, pp 61-76. Also a reply to comments in CJE (1978), no 2.


Smith R (1983) "Aspects of Militarism", Capital and Class, Vol 19.


Seminar topic: What is the role of military expenditure in the development of advanced capitalist economies?



Determinants of Military Spending

General texts plus:


Borooah VK (1993) "Public Choice: An Introductory Survey", Chapter 6 in Jackson (ed) "Current Issues in Public Sector Economics", Macmillan.


Brown CV and PM Jackson "Public Sector Economics", Blackwell.


Dunne P and Smith R(1992) "Thatcherism and the UK Defence Industry", In Michie (ed) "1979-92 The Economic Legacy", Academic Press.


Dunne JP and P Pashardes and RP Smith (1984) "Needs, Costs and Bureaucracy: The Allocation of Public Consumption in the UK", Economic Journal, 94, 1-15.


Georgiou G and R Smith (1982) "Assessing the Effect of Military Expenditure on OECD Countries: A Survey", Birkbeck College Discussion Paper no 124, August 1982.


Gleditsch NP and O Njolstad (eds)(1990) "Arms Races", PRIO, Sage.


Hewitt DP (1991) "Military Expenditure: Econometric Testing of Economic and Political Influence", IMF Working paper WP/91/53.


Higgs R (ed)(1990) "Arms, Politics and the Economy: Historical and Contemporary Perspectives", Holmes and Mieir.


ProDem Briefing Guide B1


Smith R (1990) "Defence Spending in the United Kingdom", Chapter 4 in Hartley K and T Sandler (eds)(1990) "The Economics of Defence Spending", Routledge.


Smith RP (1980) "The Demand for Military Expenditure", Economic Journal, Vol 90, pp811-20.


Seminar Topic: What determines the level of military spending in an advanced capitalist economy?



Economic Effects of Military Spending

General texts plus:


Abell JD (1990) "Defence Spending and Unemployment Rates: An Empirical Analysis Disaggreated by Race", Cambridge Journal of Economics, 14, pp405-419.


Cappelen et al (1984)"Military Spending and Economic Growth in the OECD Countries", Journal of Peace Research, Vol 21, No 4.


Chalmers M (1992) "British Economic Decline: The Contribution of Military Spending", The Royal Bank of Scotland Bank Review.


Chan S (1986) "Military expenditures and economic performance", in "World military expenditure and arms transfers", US Arms Control and Disarmament Agency, US Government Printing Office, 1987.


Dumas L (1990) "Making Sense out of Nonesense", Mimeo, University of Texas.


Dunne P (1994) "The Economic Effects of Military Expenditure in Developing Countries", Mimeo, School of Business and Economic Studies, University of Leeds.


Dunne JP and RP Smith (1984) "The Economic Consequences of Reduced UK Military Expenditure", Cambridge Journal of Economics, Volume 8, No. 3, September pp 297-310.


Dunne and Smith (1990) Military Expenditure and Unemployment in the OECD, Defence Economics, Vol 1, pp57-73.


Edelstein M (1990) "What Price Cold War? Military spending and Private Investment in the US, 1946-79", Cambridge Journal of Economics, 14, 421-37.


Gleditsch et al (1994) "The Economics of Military Spending", Chapter 2 in "The Wages of Peace", PRIO, Sage.


Gold D and G Adams (1990) "Defence Spending and the American Economy", Defence Economics, Vol 1, 275-93.


Gold A (1990) The impact of defense spending on investment, productivity and economic growth, Defense Budget Project, February


Griffin LJ, Wallace M and J Devine (1982) The political economy of military spending: evidence from the United States, cambridge Journal of Economics, 6, p1-14.


Kaldor et al (1986) "Industrial Competitiveness and Britain's Defence", Lloyds Bank Review, October.


Paukert L and P Richards (eds) (1991) "Defence Expenditure and Local Employment", International Labour Office, Geneva, forthcoming.


Seagrim M (1992) "The Effect of Defence Spending on the UK Economy", The Royal Bank of Scotland Bank Review.


Smith, RP (1980) Military Expenditure and Investment in OECD Countries", Journal of Comparative Economics.



Seminar Topic: Is military spending a burden on advanced capitalist economies?



The Military Industrial Complex and the Arms Trade:

General references plus the relevant chapter in the SIPRI Yearbook on Arms Transfers and Production, plus:


Broszka and Lock (eds) (1993)"Restructuring of Arms Production in Western Europe", SIPRI, Oxford University Press


Chalmers M (1985) Paying for Defence: Military Spending and British Decline. Pluto.


Dunne P (1993) "The Changing Military Industrial Complex in the UK", Defence Economics.


Dunne P and Smith R(1992) "Thatcherism and the UK Defence Industry", In Michie (ed) "1979-92 The Economic Legacy", Academic Press.


Edgerton D (1991) "Liberal Militarism and the British State", New Left Review, 185.


Fine B (1993) "The Military Industrial Complex: An Analytical Assessment", Cyprus Journal of Economics, Vol 6, 1,pp26-53.


Hartley K and Hooper N (1987) "Defence procurement and the Defence Industrial Base", Public Money, Sept., pp21‑26.


Hartley K, Hussain F, and R Smith (1987) "The UK Defence Industrial Base", Political Quarterly, 58, 1,pp62-72.


Kaldor M, Sharp J and W Walker (1986) "Industrial Competitiveness and Britain's Defence", Lloyds Bank Review, No 169.


Lovering J (1993) "After the Cold War: The Defence Industry and the New Europe", Mimeo.


Lovering J (1993) "Restructuring the British Defence Industrial Base After the Cold War: Institutional and Geographical Perspectives", Defence Economics, Vol 4, pp 123-139.


Taylor and Hayward (1989) "The UK Defence Industrial Base", Brassey's


Wulf (ed)(1993) "Arms Industry Limited", SIPRI, Oxford University Press


Seminar Topic: Analyse the military industrial complex in the UK and assess its impact and importance.



Disarmament and Conversion

General texts plus:


Anderson et al (1991) "Converting the American Economy", Employment Research Associates.


Barker T, Dunne P and Smith R (1992) Measuring the peace dividend in the United Kingdom, Journal of Peace Research, Vol 28, no 4, pp 345-58.


Dunne JP (1994) "The Economic Effects of Military Expenditure in Developing Countries", Mimeo.


Dunne P and S Willett (1992) "Disarming the UK: The Economics of Conversion", Discussion Paper no 2, Centre for Industrial Policy and Performance, University of Leeds.


Gleditsch et al (1994) "The Wages of Peace: Disarmament in a Small Industrialised Economy", PRIO, Sage.


Hartley et al (1993) "Economic Aspects of Disarmament: Disarmament as an Investment Process", United Nations Institute for Disarmament Research (UNIDIR), New York.


Leontief W and F Duchin (1983) "Military Spending", Oxford University Press, Oxford.


Markusen Ann and Joel Yudken (1992) "Dismantling the Cold War Economy", Basic Books.


ProDem Briefing Guide C1


Renner M (1992)"Economic Adjustments After the Cold War: Strategies for Conversion", UNIDIR, Dartmouth.


Schofield S and Quigley P (1994) "Alternative Uses Better Futures", Bradford Arms Conversion Group.


Southwood, P "Disarming Military Industries", Macmillan


Seminar Topic: Is there a "peace dividend" or a "peace penalty"




1. Critically assess the "effective demand" or "underconsumptionist" view that high military spending explains relatively good economic performance.


2. "We can only understanding the military burden as a response to external threat" Discuss with reference to the UK or the US.


3. Either

"Cuts in defence spending are bound to lead to unemployment" Discuss


"Defence spending reduces investment and productivity and leads to economic decline" Discuss.


4. "The Defence Industrial Base represents the most important, efficient and successful industrial sector in the UK and needs support and protection" Discuss.


5. "Conversion policy in the UK simply requires cuts in military spending, the market will sort out everything else" Discuss.

Economics of Military Spending: Mock Exam Paper

JPD 19.11.94


Answer 3 questions


1. "It is difficult to accept a theory that sees military spending as an important tool in the promotion of economic growth in advanced economies." Discuss.


2. "Defence spending can only be understood as a public good" Discuss.


3. "The vested interests involved in defence are powerful and the main determinant of the level of defence expenditure" Discuss.


4. "Military expenditure is at the expense of investment and so is undertaken at the expense of economic growth." Discuss.


5. "There is neither theory nor evidence to suggest a link between military spending and the level of employment". Discuss.


6. "At the end of the Cold War the restructuring of the defence industries makes concern for their future unecessary." Discuss


7. "Conversion of the military industries is no different to the conversion of any declining industry." Discuss


8. "The UK's involvement in the arms trade is both costly and abhorent." Discuss.



Military expenditure has been important for economic development in the UK and the US.


How can we explain the allocation of military spending in the UK?


Discuss the channels through which military spending can influence economic development


Economics of Military Spending: BUEC3140

jpd 19.11.94


Suggested Exam Questions


1. Critically evaluate the "Underconsumptionist" or "Effective Demand" approach to understanding the effect of military spending on economic growth.


2. "We can only understand the determinants of military spending in the UK as the result of optimising a social welfare function where security is one of the arguments." Discuss.


3. What is the Military Industrial Complex in the UK and why is it important?


4. "Military expenditure comes out of consumption and so has little impact on the economic growth of developed economies" Discuss.


5. "The evidence shows that cuts in military spending will always lead to loss of jobs and unemployment" Discuss


6. "The Defence Industrial Base in the UK should be a source of pride rather than concern". Discuss.


7. Either:

Discuss whether or not there has been a "peace dividend" in either the US or the UK as a result of the end of the Cold War.


"It is not possible to have a successful policy of conversion from military to civilian production." Discuss


8. "The involvement of the UK in the arms trade can be justified on economic grounds". Discuss.