Anyone who has plenty of financial resources at their disposal in war has a good chance of victory. A study has now empirically confirmed this informal assumption. Analyzes of more than 700 interstate conflicts show that higher military spending significantly increases the chances of victory. In particular, additional income from raw material exports can be the difference between victory and defeat, reports the research team. This is also relevant to current conflicts such as those in Ukraine.
It has been known for centuries that financial resources have a significant impact on who wins a war. The Roman Empire was able to develop into a great power militarily, primarily thanks to its economic superiority. To this day, money plays an important role in interstate conflicts. In the current conflict between Russia and Ukraine, rising raw material prices are ensuring that Russia is generating additional revenue from oil and gas despite sanctions and can therefore invest more money in the military. Ukraine’s chances of success, on the other hand, depend to a large extent on financial support from the West.
Over 700 conflicts analyzed
But can a connection between money and military success actually be proven beyond anecdotal reports? And if so, how strong is the influence? To answer these questions, a team led by Jonathan Federle from the Kiel Institute for the World Economy (IfW) has now analyzed more than 700 real interstate conflicts that took place between 1977 and 2013. They divided the outcome into victory, draw or defeat and evaluated the extent to which there was a connection to military spending and income from raw material sales.
“Our study shows how money flows can shift the balance of power in interstate conflicts,” explains Federle’s colleague Moritz Schularick. A sudden increase in government revenue, for example from raw material sales, enables states to increase their military spending and thus significantly increase their chances of victory. This makes it possible to say causally for the first time: Countries win wars because of their financial resources.”
Raw material profits promote war success
In particular, the researchers looked at so-called windfall profits, i.e. unexpected additional income due to a changed market situation, for example for raw materials. Federle and his colleagues cite the conflict between Libya and Chad in the 1980s as a case study for the close relationship between raw material sales and military success. High oil prices ensured Libya’s superiority for a long time. But when prices collapsed in 1986 because Saudi Arabia provided cheap oil to the world market, Libya was forced to withdraw its troops from the occupied territories in Chad.
According to the researchers, the influence of additional revenue on military success is significant: “Our analyzes show that a windfall profit of ten percent of the gross domestic product increases the probability of a draw instead of a defeat or of a victory instead of a draw increased by around 3.2 percentage points,” they report. Assuming that only about ten percent of the additional income flows into the military, Federle and his team come to the conclusion that ten percent higher military spending increases the chances of success by 32 percent. Whether the additional funds come from raw material sales or other sources such as financial aid is of secondary importance.
“Economic strength is a decisive factor in the history of past conflicts and in present-day international security policy,” says Federle. “Positive inflows can increase military capability to the same extent that negative inflows can degrade it. Our study shows how closely economic strength and military performance are linked.”
Source: Jonathan Federle (IfW Kiel) et al., Kiel working papers, 2280