Guns, Debt, and Politics: New Variations on an Old Theme

Armed Forces & Society

Volumn 17, Issue 2, 1991, Pages 167-190

  Snider, Lewis W ^a  

^a CLAREMONT GRADUATE UNIVERSITY   (United States)

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EID: 84970691324     PISSN: 0095327X     EISSN: None     Source Type: Journal    
DOI: 10.1177/0095327X9101700201     Document Type: Article

References (21)

1. Ron P. Smith and George Georgiou, “Assessing the Effect of Military Expenditure on OECD Economies: A Survey,” Arms Control 13, 4 (May 1983): 15.
2. See Stephen D. Krasner, “Domestic Constraints on International Economic Leverage,” in Economic Issues and National Security, ed. Klaus Knorr and Frank N. Trager (Lawrence: University Press of Kansas, 1977), 160; Barbara Haskel, “Access to Society: A Neglected Dimension of State Power,” International Organization 34, 4 (Winter 1980): 89-120; Jacek Kugler and William Domke, “Comparing the Strength of Nations,” Comparative Political Studies 19,1 (April 1986): 39-69; Lewis W. Snider, “Identifying the Elements of State Power: Where Do We Begin?” Comparative Political Studies 20, 3 (October 1987): 314-56; and Joel S. Migdal, Strong Societies and Weak States: State-Society Relations and State Capabilities in the Third World (Princeton, N.J.: Princeton University Press, 1988).
3. Krasner, “Domestic Constraints,” 160.
4. Nicole Ball, Security and Economy in the Third World (Princeton, N.J.: Princeton University Press, 1988), 207-10.
5. Government consumption comprises the sum of (1) government purchases, less sales, of consumer goods and services, reduced by the value of the own-account of fixed assets; (2) compensation of employees; (3) consumption of fixed assets; and (4) any payments of direct taxes. Expanding government payrolls is one form of political patronage. Paying inflated prices to domestic vendors of goods and services is another.
6. See Jeff Frieden, “Classes, Sectors, and Foreign Debt in Latin America,” Comparative Politics 21, 1 (October 1988): 3-6.
7. Gabriel Ardant, “Financial Policy and Economic Infrastructure of Modern States and Nations,” in The Formation of National States in Western Europe, ed. Charles Tilly (Princeton, N.J.: Princeton University Press, 1975), 220.
8. See Roy W. Bahl, “A Regression Approach to Tax Effort and Tax Ratio Analysis,” IMF Staff Papers 18, 3 (November 1971): 570-610; Raja J. Chelliah, “Trends in Taxation in Developing Countries,” IMF Staff Papers 18, 2 (July 1971); 254-321; Jorgen R. Lotz and Elliot R. Morss, “A Theory of Tax Level Determinants for Developing Countries,” Economic Development and Cultural Change 18, 3 (April 1970): 328-41; and Alan A. Tait, Wilfrid L. M. GrMz and Barry J. Eichengreen, “International Comparisons of Taxation for Selected Developing Countries, 1972-1976,” IMF Staff Papers 26, 1 (March 1979): 123-56.
9. See Chelliah, “Trends in Taxation,” 282, 291-293; and Raja J. Chelliah, Hassel Bass, and Margaret Kelly, “Tax Ratios and Tax Effort in Developing Countries, 1969-1971,” IMF Staff Papers 22, 2 (March 1975): 197-240.
10. The export ratio is more appropriate than an import ratio or the sum of exports plus imports as a percentage of GNP when the foreign trade variable is intended to reflect the size of the base that is amenable to corporate income or export taxation. If it is more feasible, administratively and politically, to tax large exporters than it is to tax other domestic producers, the tax ratio will be higher where the export ratio is higher. See Bahl, “A Regression Approach,” 587.
11. Space limitations do not permit a summary of the estimation of predicted revenue extraction. See Lewis W. Snider, “Political Strength, Economic Structure, and the Debt Servicing Potential of Developing Countries,” Comparative Political Studies 20, 4 (January 1988): 455-88.
12. The countries the World Bank classifies as “highly indebted” are Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Cote dTvoire, Jamaica, Mexico, Morocco, Nigeria, Peru, Philippines, Uruguay, Venezuela, and Yugoslavia. The other countries are: Algeria, Egypt, Ghana, India, Indonesia, Israel, Liberia, Malaysia, Pakistan, South Africa, South Korea, Sudan, Tanzania, Thailand, Turkey, Uganda, Zaire, and Zambia.
13. For example, the HICs’ ratio of direct taxes to trade taxes as a percentage of total revenue is significantly lower-both empirically and statistically-than the ratio of other highly indebted developing countries. This suggests the HICs’ tax structure is more narrowly based and more regressive than the other debtor countries in this study.
14. Some countries, such as the Philippines and Peru, are facing serious internal security threats. However, the kind of hardware required to deal with internal insurgencies seldom requires expensive imported weapons such as main battle tanks, sophisticated fighter aircraft, elaborate air defense systems or major surface vessels. Acquisition of these classes of weapons can dramatically increase military budgets and the amount spent on arms imports. In this study, the average size of the military budget for countries not facing an external threat is 13.5 percent of central government expenditures-about half the average budget share of the Third World debtors facing an external threat (25%).
15. For a discussion of the statistical problems attending a cross-sectional pooled time series design, see Lewis W. Snider, “The Political Dimensions of Military Spending,” Contemporary Southeast Asia 11, 4 (March 1990): 301.
16. The dependent variable is total external public and publicly guaranteed debt as a percentage of exports of goods and services. Data are from the World Bank, World Debt Tables, various editions. Government deficit and government consumption are expressed as percentages of central government expenditures, the source of which is the World Bank, World Tables 1987 (4th ed.). Arms imports as a percentage of total imports, arms exports as a percentage of total exports, and military expenditures as a percent of central government expenditures are from the Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers (Washington, D.C., various years). The main source for value of military production is Michael Brzoska and Thomas Ohlson, eds. Arms Production in the Third World (London & Philadelphia: Taylor and Francis, 1986), appendix 1. Military production data expressed in constant dollars were converted into current dollars and divided by the current value of GDP. Interest rates on commercial sovereign loans are measured by the London Interbank Offer Rate (LIBOR) on U.S. dollar deposits. This is the rate of interbank transactions and reflects the banks’ cost of raising funds. Data on the LIBOR are from the International Monetary Fund (IMF), International Financial Statistics (Washington, D.C., various years).
17. The mobilization ratio is the ratio of the percentage of government revenue from direct taxes, divided by the percentage of central government revenue from trade taxes. Data are from the IMF, Government Financial Statistics, various years. The growth rate is the rate of change in current GDP. The source for this variable is the World Bank, World Tables 1989, 5th ed. (Washington, D.C., 1989). Debt service is represented by the ratio of total debt service divided by the value of exports of goods and services; see World Bank, World Debt Tables, various editions.
18. Some of the causal variables are expressed in natural logarithms because their distributions are highly skewed. For example, countries such as Argentina and Bolivia have very low mobilization ratios while others, such as Israel and South Africa, have very high ratios. The extreme ends of the distribution of such highly skewed variables must be compressed. Log transformations pull the extreme values closer to the mean without changing the relative distance of the observations from one another. The result is a more symmetrical distribution, which means it resembles more closely a normal distribution. That in turn helps meet the statistical assumptions upon which the regression model is based.
19. This is the total number of IMF-supported stabilization programs a country concluded with the IMF between 1953 and 1974. Additional programs it adopted in subsequent years are added to that cumulative total. Data are from the IMF Annual Report of the Executive Directors (various years) and from Peter Korner, Gero Maass, Thomas Siebold, and Rainer Tetzlaff, The IMF and the Debt Crisis: A Guide to the Third World's Dilemma (London: Zed Books, 1984), appendix 2.
20. Income distribution is operationalized as the percentage of disposable household income held by the wealthiest 10 percent of the population. See World Bank, World Development Report, World Development Indicators, Table 30 (Washington, D.C., various years). Since many data are missing from this series, estimated values were generated by analysis of covariance where the income data were regressed on measures of per capita income, type of regime, level of industrialization, distribution of tax burden and level of development. This accounted for 90 percent of the variation in the original data. A comparison of estimated values for cases where the actual figures were available showed only slight differences between the two series.
21. The measurement of capital flight follows the method explained in John Cuddington, “Capital Flight: Estimates, Issues, and Explanations,” Studies in International Finance, no. 58 (Princeton, N.J.: Department of Economics, Princeton University, 1986). It is defined as net short-term capital outflows of the nonbank private sector plus recorded errors and omissions. Capital flight is essentially a short-run, “hot money” phenomenon so that a large number of capital flight transactions are hidden from the authorities and will only appear residually as errors and omissions in the balance of payments statistics. Data for this variable are from the IMF, Balance of Payments Statistics (various years).