Defense Spending, Natural Resources, and Conflict

Defence and Peace Economics

ISSN: 1024-2694 (Print) 1476-8267 (Online) Journal homepage: http://www.tandfonline.com/loi/gdpe20

Defense Spending, Natural Resources, and Conflict Hamid E. Ali To cite this article: Hamid E. Ali (2015) Defense Spending, Natural Resources, and Conflict, Defence and Peace Economics, 26:1, 1-3, DOI: 10.1080/10242694.2013.848581 To link to this article: http://dx.doi.org/10.1080/10242694.2013.848581

Published online: 08 Dec 2014.

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Date: 21 October 2015, At: 17:44

Defence and Peace Economics, 2015

Vol. 26, No. 1, 1–3, http://dx.doi.org/10.1080/10242694.2013.848581

INTRODUCTION

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DEFENSE SPENDING, NATURAL RESOURCES, AND CONFLICT This special edition is the product of the 16th Annual International Conference on Economics and Security, held at the American University in Cairo, Egypt, 21–22 June 2012. The conference was organized by the Department of Public Policy and Administration, American University in Cairo, Economists for Peace and Security (Egypt), Economists for Peace and Security (UK), Economists for Peace and Security (US), and the School of Global Affairs at the American University in Cairo. The conference addressed a trajectory of current issues pertaining to the region and across the globe, ranging from applied to theoretical. The conference participants are policy scientists and researchers from different academic institutions and parts of the world, including Egypt, the UK, Greece, the USA, Sweden, China, Turkey, Italy, Germany, South Africa, the Netherlands, Portugal, Switzerland, and Spain. The first article, by Ali and Abdellatif, discusses the military expenditures and natural resources in the Middle East and North Africa (MENA). The authors argue that the military acts as the protector of regimes in MENA countries, as demonstrated by the Arab Spring: regimes fell when the military withdrew its support, as in the cases of Egypt and Tunisia. The regime must pay a premium to hedge against this risk. Having natural resources such as oil will reduce the opportunity costs of increasing military spending. In support of the ‘resource curse’ hypothesis, the authors claim that an abundance of natural resources, particularly oil, encourages increases in military spending. In contrast, the rent from coal and natural gas has a negative impact on military spending, while the rent from minerals has no impact on military spending. Despite the impressively large literature on the effect of military spending on the economic growth nexus, the second article, by Dunne and Tian, introduces robustness of the parameter estimates of growth models across a group of countries, with a special focus on heterogeneity and nonlinearity. Using a balanced panel of 104 countries from 1988 to 2010, the estimate provides strong support for the negative impact of military burden on growth. When countries were grouped by developed vs. developing countries, the long run of developed countries was significant. When countries that had both an abundance of natural resources and low foreign-aid receipts were considered as a group, there were no effects of military burden on growth. All findings show that the impact of military spending on growth ranges from negative to insignificant, but there is no evidence to support a positive impact. The third paper, by Lin et al., examines the relationship between defense and social welfare expenditures – specifically, health and education – using a panel of OECD countries from 1988 to 2005. The authors adopt the panel generalized method of moments (panel

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GMM) to allow for endogenous right-hand-side variables, where the panel data structure provides an excess of moment conditions available for estimation, taking advantage of greater instruments as a result of lag variables. The finding suggests a positive trade-off between defense spending and social-welfare expenditures. Although the authors used different data-sets and different empirical techniques, the findings are consistent with previous studies (see Ali, 2011; Harris and Pranowo, 1988; Kollias and Paleologou, 2011; Yildirim and Sezgin, 2002). The fourth paper, by Töngür and Elveren, provides detailed findings that shed light on the complicated nature of the relationship between defense spending, inequality, and types of political and welfare regimes. The author used the taxonomy of welfare regimes, including social-democratic, corporatist, liberal, post-communist, and productivist. The welfare state in general can be defined as an interventionist state that seeks to protect a minimum standard of citizen well-being. The finding that there is a positive relationship between income inequality and share of military expenditures, and that terror is statistically significant factor that affects both the level of military expenditure and inequality, are in line with the results of Ali (2007). In addition, the study shows that welfare regimes other than social-democratic ones in developing countries are more likely to have higher shares of military expenditures in the central government budget than developed countries. The fifth article, by Ecer and Veasey, analyzes the defense spending preferences in the USA using ordered logistic regression analysis. The authors use the political economy of defense spending and public opinion toward defense spending as bases to structure the preferences expressed by individual voters. The analysis of the longitudinal data from 1980 to 2008 shows that party identification as ‘Republican,’ or having a vested interest in defense industries, do correlate with a preference for increasing defense spending. ‘Security moms,’ and demographic groups other than white, do not express a preference for more defense spending. The sixth paper, by Elbadawi and Soto, contributes to the literature on ‘resource curse’ and violent civil conflicts by extending Bodea and Elbadawi (2007) and modeling the hazard of armed civil conflict as a manifestation of the ‘natural resource curse.’ The authors explicitly account for the role of good economic and political institutions in deterring recourse to violence, as well as the extent to which these institutions might weaken the resource-rents effect. The authors found a robust and positive association between resource rents per capita and the occurrence of armed civil conflict. In summary, good economic and political institutions do reduce the hazard of conflict; and strong political institutions for checks and balances appear to weaken the impact of resource rents on conflicts. In the final paper, Carbonnier examines the dynamic relationship between extractive resource dependence, armed violence, and sustainable development in a panel covering 104 developing countries over the recent commodity price boom period. The author’s results support the ‘resource-curse’ argument by examining sustainable development outcomes as measured by adjusted net savings (ANS) per capita. The natural capital depletion reduces genuine savings. Resource dependence tends to be associated with a higher probability of armed conflict and higher homicide rates, both of which have a significant negative impact on ANS per capita. The author shows that an increase of one sample standard deviation in resource dependence, as measured by oil, gas, and mineral exports, depletes ANS per capita by more than $35.

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References


Ali, H.E. (2007) Military expenditures and inequality: Empirical evidence from global data. Defence and Peace Economics 18(6) 519–535. Ali, H.E. (2011) Military expenditures and human development: Guns and butter arguments revisited: A case study from Egypt. Peace Economics, Peace Science and Public Policy 17(1) 1–19. Bodea, C., and Elbadawi, I. (2007) Riots, Coups, and Civil War: Revisiting the Greed and Grievance Debate. World Bank Policy Research Working Paper 4397, Washington, D.C. Harris, G. and Pranowo, M.K. (1988) Trade-offs between defence and education health expenditures in developing countries. Journal of Peace Research 25(2) 165–177. Kollias, C. and Paleologou, S.M. (2011) Budgetary trade-offs between defence, education, and social spending in Greece. Applied Economics Letters 18(11) 1071–1075. Yildirim, J. and Sezgin, S. (2002) Defence, education and health expenditures in Turkey 1924–96. Journal of Peace Research 39(5) 569–580.

HAMID E. ALI School of Global Affairs and Public Policy, The American University in Cairo, New Cairo, Egypt [email protected]