Military expenditure and economic development : the case of Greece, 1952-1987
Throughout the post-war period, Greece has allocated between five and six per cent of her annual Gross Domestic Product to defence. On many occasions she had the highest defence burden in NATO and Europe. There is evidence that the level, form and content of this defence expenditure have been determined by a combination of both external and internal factors. Greek military spending needs to be understood in relation to external security concerns and in particular in terms of her relations with Turkey. Membership of NATO, U.S. foreign policies and internal security factors have also influenced military expenditure. There is no substantial evidence to suggest that military expenditure has so far been used as a tool of economic policy. Dependency on imported weapons systems will not be substantially reduced by domestic arms production. It will merely be replaced by another form of dependency. Neither will domestic arms production generate appreciable backward and forward linkages which could pull the country out of the present economic crisis. The peculiarities of Greek development have created long term dependency on imported technology and capital goods which will not be reduced by arms production. Foreign military transfers have been instrumental in forging these dependency links and keeping the country open to foreign capital to operate under free and unregulated conditions. The links between military expenditure and economic growth are first established at the growth model level. They are then estimated in the context of a growth model directly and indirectly through the effect on savings and investment. The growth rate is treated as a function of both exogenous and endogenous variables and the impact of defence spending is estimated by two stage least squares in a series of equations. The results indicate that military expenditure has adversely affected growth in the period 1953-84 mainly through the crowing out of investment.