Research

Guns vs Butter? How States Financed Wars and the Military

with Jonathan Federle and Christoph Trebesch

Summary: Geopolitical risks have grown substantially over the past decade, resulting in calls for much more military spending by NATO governments. Policymakers in Western democracies, however, appear to have little fiscal capacity to respond. How can military buildups and rearmament be financed? In this paper we look back at 150 years of history to shed light on this question. We make four contributions. First, we put together a new, comprehensive database of public expenditures in 22 large countries 1870-2022, which covers not just military but also social and other types of spending. Second, we use this novel data to identify “military booms,” defined as strong increases in military spending. Third, we study how military booms were financed, focusing on three main options: (i) cuts in social spending (less “butter”), (ii) higher taxes, and (iii) more debt. Fourth, we study the response of economic variables to military booms. We find little evidence for a “guns vs butter” trade-off in the data. The large majority of military booms in the sample were instead financed by growing budget deficits and increasing tax revenues. Social spending often increased rather than decreased in periods of military buildups and wars. The response of economic variables is particularly strong during war booms.

Presented: Munich Security Conference 2024, Northwestern University Economic History Lunch Seminar 2024, CEPR Geoeconomics Conference Berlin 2024, Stanford University Research Seminar, Columbia University Research Seminar

Inequality in Relational Wealth Within the Upper Societal Segment: Evidence from Prehistoric Central Europe

with Julian Laabs, Johannes Müller, and Till Requate

Published in “Humanities and Social Sciences Communications” (2024)

Abstract: While our understanding of long-term trends in material wealth inequality in prehistoric societies has expanded in recent decades, we know little about long-term trends in other dimensions of wealth and about social developments within particular societal segments. This paper provides first evidence of inequality in relational wealth within the upper societal segment of a supra-regional network of communities in prehistoric Central Europe over the first four millennia BCE. To this end, we compiled a novel dataset of 5,000 single-funeral burial mounds and employed burial mound volume as a proxy for the buried individual’s relational wealth. Our analysis reveals a consistently high level of inequality among the buried individuals, showing a wave-like pattern with an increasing trend over time. Additionally, our findings show temporal shifts in the size of the upper societal segment. Based on a review of archaeological and paleo-environmental evidence, the temporal change in inequality may be explained by technological progress, climate and population dynamics, trade, and social networks, and/or sociopolitical transformations.