Arms Imports and Third World Growth in the 1980s

Abstract

During the 1980s both defense spending and arms imports declined in many developing countries (DCs), especially in the Middle East and to a lesser degree in South Asia and Northern Africa1 • In large part, the reductions in defense allocations resulted from growing fiscal problems which forced governments to reorder their spending priorities. It is apparent for the developing world as a whole that countries are indeed examining the potential benefits of reduced defense allocations. Depending on the relative impact of defense spending, the concomitant resource reallocation may significantly affect the economic performance of these countries. This paper examines whether future "peace dividends" are likely to stimulate or to retard third world economic growth. To do this, we examine whether (a) military spending and arms imports helped or hindered growth in the 1980s, (b) military spending/arms imports were associated with changes in external debt, and (c) military expenditures impacted uniformly between groups of countries. We hypothesize that DCs will exhibit large variations in how defense spending has impacted economic performance. In turn these variations, it is believed, reflect the underlying health of the individual country, i.e., its ability to absorb the. potential adverse effects associated with changes in defense spending patterns.