Occupation is good for you: US troop presence & economic growth
Given that the US is in the midst of a deeply unpopular occupation in the Middle East, in a new paper on SSRN, economists Garett Jones and Tim Kane ask a question conspicuous by its absence in the contemporary debate: “Is the presence of American forces in a foreign nation a help or hindrance to that occupied country’s development?”
The authors consider development, economic history and institutional economics literature, which suggest that security — as in the monopolisation of the use of force — is a precondition of growth. For instance, in Douglass North et al’s model (already covered in an earlier post) of social order development, the organisation of the state moves in linear fashion from a primitive, small band type order, through a limited access order or “natural state”, wherein an elite monopolises the use of force and limits access to power through patronage networks, to an open access order, where access to power is democratic and theoretically evenly distributed across society. According to this model, solving the question of violence is the first and possibly most important problem facing a society. Without monopolisation and the resulting high barriers to entry, activity in the markets for violence is likely to be extensive, and as a consequence actual economic activity is likely to be limited.
There are, then, theoretical reasons for believing that “troop presence”, broadly defined as a functioning security force, be it foreign or local, will be positively correlated with economic growth. Certainly, it is unlikely that chaotic and violent hollowed-out states will produce successful and dynamic economies.
Garett and Kane suggest that US troop presence might positively impact growth along three dimensions: improved security, the diffusion of improved technologies and institutions, and the increased aggregate demand effect of large numbers of relatively wealthy US soldiers. In fact they find that “countries hosting large numbers of U.S. troops experience large and persistent increases in their long-run growth rate.” In addition, they also show that “when a country hosts U.S. military troops, the quality of economic policy and economic institutions in that country generally improves.” The results indicate that “on average, an increase in troop levels of an order of magnitude is associated with a 0.3% higher long-term growth rate of per capita gross domestic product (GDP).”
Furthermore, these results are not simply driven by the experiences of Germany, Japan and South Korea. The authors note that
countries that ranked 11th through 20th in troop deployments (a group that includes Turkey, Iceland, and Morocco) grew twice as quickly as the fifty countries with the lowest troop deployment levels. Thus the positive unconditional correlation between troop levels and growth is not driven by a few observations.
