Professor Jari Eloranta: Military spending accounts for an ever smaller proportion of the world economy

19.11.2018
Research on the economics of warfare can reveal strange details. Military operations have even been financed by selling grain to the enemy.

Did you know that Finland was practically as wealthy as Sweden in the early 19th century?

Or that during the American War of Independence, the Americans not only fought the British army, but also sold grain to it?

Or that the wages of seamen multiplied in the 19th century until the transition to steamships again led them to fall drastically?

These are just some of the nuggets of trivia you pick up during a thirty-minute discussion with Jari Eloranta, professor of economic history.

Details make good copy for the media, but Eloranta is interested in the big picture behind the headlines. For example, Sweden achieved prosperity as a result of major changes in logistics and world trade.

“Sweden rode the wave of development sweeping through the world, but Finland, which was part of the Russian Empire, turned inwards and towards Russia. And Russia was not among the most agile of world players,” Eloranta notes.

The same development increased the demand for sailors, and raised their wages until the introduction of steamships that required smaller crews again led to a drop in demand.

Eloranta’s research focuses not only on the world economy but also on the war industry and military spending. He is currently working on a project concerning the development of global military expenditure from the Napoleonic era to the present.

It seems that if a government is not buying guns, it is not buying anything else either.

Over the past two centuries, military spending has seen a proportional decline throughout the world. This is due to the massive growth of the world economy. Interestingly, the decline has not been offset by a corresponding rise in other public spending.

“Quite often people talk about military expenditure as if it were the opposite of other government spending: which is it going to be, butter or guns? But it actually seems that if a government is not buying guns, it is not buying anything else either.”

Research on military spending sometimes brings surprises. For example, when fighting for its independence, the nation that would become the United States financed its military expenses by selling grain to England, its enemy.

“The Americans had grain but no currency, while the opposite was true for England. So the Americans sold the produce via Portugal to England. Both parties benefited from the trade although they were at war with each other.”

The example also demonstrates that a small country such as Portugal can influence world history.

“The decisions of a small country can change history in unexpected ways.”

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