The Costs of a Military Establishment

Costa Rica abolished its military in 1949.

A major has now shown that this is associated with a 0.8% annual increase in per capita GDP:

This article estimates the causal long-term developmental effects of Costa Rica’s constitutional abolishment of its army in 1949 after the 1948 civil war.

This is done by performing synthetic control estimates and analyzing the political history of Costa Rica in the 1940s and 1950s. We find that upon the abolishment of the army, Costa Rica’s annual average per capita GDP growth increased from 1.42% to 2.28% in the 1950-2010 period relative to a counterfactual Costa Rica that did not abolish its army. This implies that Costa Rica doubled its per capita GDP every 30 years rather than every 49. These estimates are robust to different model specifications and we show that this shock is exclusive to Costa Rica in Latin America. Furthermore, we provide evidence that the positive effects associated with this increase in the per capita GDP growth rates have endured over time; namely because the abolition of the army granted a political and institutional context that allowed the country to devote more resources to public spending, which in turn contributed to its long run development. Our case study findings are evidence that committing to peace and democracy pays off in the long run.

Running the numbers, this means that Costa Rica’s per capita GDP is 75% larger than what it would have been with a military.

Obviously a part of this difference is because the resources of Costa Rica have not been diverted from other purposes.

To quote Dwight Eisenhower, “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”

Another reason for this is that the presence of a military in Latin America has led to repeated coups against military governments, and repeated insurgencies as a result, which are likely even more disruptive to the well-being of the nation.  (Google the School of the Americas to better understand how this was largely an artifact of US Policy)

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