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Political Economy of Arms

MaginotLine

Military power means "arms", referring to both "weapons" (e.g. guns, tanks, battleships, fortresses, etc.) and "warriors" (e.g. soldiers, sailors, pilots and support personnel). How do money and markets influence the acquisition and application of "weapons" and "warriors"? This is the fundamental question asked by scholars who explore the political economy of security.

My earliest academic-oriented writing delved into this subject, appearing as a textbook titled The Economics of War. This textbook was published by McGraw Hill-Irwin (Poast 2006) and, as is the case with most textbooks, was focused on organizing existing ideas in the literature, rather than producing original research itself. But organizing ideas within this book established the foundation upon which I then made original research contributions a few years later. These contributions will culminate in a piece I was invited to write for the Annual Review of Political Science, in which I will situate the political economy of security within the broader field of international relations (a version of this paper targeted towards undergraduates is available here).

My original research on the political economy of arms makes two contributions: (1) unpacks how states must have “financial wherewithal” in order to debt finance a war, and (2) unveils the economic factors motivating the creation of border fortifications. I will now describe both contributions.

Financial Wherewithal and the Debt Financing of War

My research clarifies the methods and consequences of debt financing a war. As conducting war became increasingly expensive, especially after 1500, governments increasingly relied on borrowing to pay for the acquisition of military equipment and labor. Compared to taxation, borrowing money gives a government access to a substantially larger pool of funds. But after acquiring a large sum of debt to finance war, some governments may refuse to repay the borrowed funds. This fundamental problem of sovereign debt can make some (or even most) lenders reluctant to loan funds to a government. What can governments do to alleviate the concerns of lenders?

In a paper I co-authored with a former student (Patrick Shea) that was published recently in the Journal of Conflict Resolution, I discuss how only states with particular financial and economic attributes -- what we call ``financial wherewithal'' -- are able to debt finance military expenditures. Stated bluntly, the rich get richer and only the rich can afford war. On average, lenders are only willing to give money to states with the financial institutions, economic performance, and political characteristics that make debt repayment likely. Hence, only states with these attributes will enter war. This clarifies a mechanism by which economic power underpins military power (an early probe into the politics of default served as the foundation for this paper).

The argument and findings of this paper also challenge a prominent assumption in the literature. Some notable work assumes that losing a war necessarily leads a nation to default on its debt obligations. But we find that war outcomes have no association with default. In reality, nearly all nations that go to war, win or lose, repay their debts. Default is instead a function of economic fundamentals and political expediency, not whether a war ended in defeat (or victory).

Historically, one component of ``financial wherewithal'' attractive to lenders is the existence of a central bank. In a paper published in International Organization, I detail how early central banks enabled governments to credibly commit to repay the massive quantities of debt accumulated during war. Specifically, prior to 1914, the existence of a central bank was viewed by private lenders as a signal of a government's willingness to create institutions necessary to finance debt payments. This encouraged lenders to provide governments with funds, even during times of war when governments commonly acquire a massive amount debt in a short period of time. After collecting original data on central bank presence from 1700 to 1950, I combine these data with sovereign debt data and, using a host of analysis techniques for panel data, show that states at war are charged lower interest rates if they have a central bank.

The Economic Incentives and Consequences of Border Fortifications

In research coauthored with David Carter, I elucidate the economic causes and consequences of states constructing a particular form of "arms": border fortifications, such as border walls. In a piece published in the Journal of Conflict Resolution, we find that border fortification construction is a growing global phenomenon and argue that cross-border economic inequality is the critical factor leading states to construct border walls. The mechanism in our argument is that cross-border inequality drives illegal immigration from the poorer state into the wealthier state. In response, the wealthier state constructs border fortifications, such as a wall. We find little systematic evidence that security considerations, such as guarding against a territorial rival, play a primary role in motivating the construction of border fortifications. In other words, the processes motivating the construction of a border wall between the United States and Mexico extend globally, and some prominent examples of security driven fortification construction, such as the French Maginot Line (constructed largely out of fear of attack from neighboring Germany), are exceptions to the more general reason that states build walls. We test this argument by introducing new data on the construction of border walls from 1800 to 2013. The broader policy implications of this work was discussed here.

Beyond the intellectual contributions, this project is exciting for three reasons. First, it is a clear combination of our respective research interests (mine on the political-economic determinants of arms acquisition and creation; David’s on the determinants of international borders and the drivers of territorial disputes). Second, this is a highly active area of new research, as we are not the only research team collecting and analyzing data on border walls. As Ron Hassner (a member of one of the other teams) and I discussed at panel during the 2016 International Studies Association annual meeting, our teams worked independently and yet came across similar findings regarding the construction of walls. Third, this is a very timely topic. Our research has been used by media outlets (such as The New York Times) and led us to be invited to a May 2018 workshop by Beth Simmons at the Perry World House titled “International Barriers in the Globalized World”.

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