The Effect of War on Economic Growth.

• Date: 01 January 2020
• Author: Thies, Clifford F.

With the collapse of the Soviet Union, it was thought that major wars had become obsolete (Mueller 1989) and perhaps regional conflicts might be brought under control (Cederman, Gleditsch, and Wueherpfennig 2017). But, while the level of violence declined, the number of wars in the world appears to have reached a new steady state. A world that was once organized by East-West rivalry is now characterized by ethno-religious conflicts, as well as by spontaneously arising transnational terrorist organizations and criminal gangs.

For various reasons, economists have become interested in investigating the causes and effects of war and other armed conflict (e.g., Coyne and Mathers 2011).

This article uses a consistent measurement of these forms of violence across space and time to conduct a rigorous quantitative analysis of the effect of war on economic growth.

Recent History of War

As shown in Figure 1, from the end of World War II to the early 1990s, there was an upward trend of armed conflict in the world. Many of these armed conflicts were wars of independence, some tinged by the struggle between communism and democracy that characterized the Cold War period. Examples of such wars include the French-Indochina War of 1946 to 1954 and the U.N.-North Korea War of 1950 to 1953.

Other such wars during the Cold War period include the Soviet invasions of Hungary in 1956 and of Czechoslovakia in 1968, the Romanian Revolution of 1989, and wars and other armed conflicts following dissolutions of the U.S.S.R. and of Yugoslavia. In Asia, the Chinese invasion of Tibet of 1950, the Cultural Revolution from 1966 to 1976, and communist insurgencies in various countries of southeast Asia marked the Cold War period.

In Africa, independence was achieved by many countries only following war or some other violent resistance to continued colonial rule. In Angola, the war of independence lasted from 1961 to 1974. This and similar wars in Mozambique and Guinea-Bissau were ended only following a military coup in Portugal. Subsequently, a civil war commenced in Angola that lasted until 2002, with the factions engaged in this civil war supported by outside countries from either the eastern or the western bloc. In Algeria, a war of independence lasted from 1954 to 1962. This war ended the vision of France for transforming its once vast colonial empire into so many overseas departments. (1) Other conflicts during the Cold War period included the suppression of dissidents by various non-democratic regimes and ethnic-based conflicts.

Following the dissolution of the Soviet Union, the number of ongoing wars fell. From a peak of 49, the number dipped to 24. Since then, the number of ongoing wars has fluctuated in the high 20s. In addition, the dominant kinds of wars shifted to conflicts related to ethnic and religious differences. Among these are civil wars, insurgencies, and other violence involving radical Islamic terrorism. During the past several years, the more significant conflicts have involved Afghanistan, Colombia, the Democratic Republic of Congo, Iraq, Mexico, Myanmar, Nigeria, Pakistan, Somalia, Sudan, Syria, and Yemen.

Quantifying War

Until recently, wars were treated as episodic events. But, with the development of data sets detailing the dates, belligerents, and possibly also the magnitudes of war and other armed conflicts, the causes and consequences of war were made amenable to quantitative analysis (e.g., Auvinen 1997, Ellingsen and Gleditsch 1997, Hegre et al. 2001, Zanger 2000).

One of the first such data sets is "Correlates of War" (Small and Singer 1982). With this data set, wars are treated as dichotomous, the defining criterion being at least 1,000 battle deaths over a 12-month period. This data set has been periodically updated. Its fourth edition covers the period 1816 to 2010 (Sarkees and Wayman 2010).

A second data set--compiled by the Uppsala Conflict Data Program (UCDP) and Peace Research Institute Oslo (PRIO)--lowered the threshold defining war to 25 battle deaths over the course of a year. This data set initially tracked wars in real time starting in 1989. Later, it was retrospectively backdated to 1946 (Gleditsch et al. 2002). This data set has likewise been periodically updated (e.g., Harbom, Melander and Wallensteen 2008).

Both of these data sets treat war as a dichotomous event, the first with a relatively high threshold and the second with a relatively low one. These thresholds can have very different meanings for countries depending on their size. In addition, advances in the medical treatment of wounded soldiers has significantly lowered the ratio of battle deaths to wounded for more advanced armies. Defining war as a dichotomous event according to the number of battle deaths should be considered problematic.

A data set that includes a judgment as to the magnitude of a war has been developed by the Center for Systemic Peace (Marshall and Elzinga-Marshall 2017), covering the period 1946 to 2017. Magnitude 6 and 7 wars roughly correspond to the wars included in the Correlates of War data set, and the lesser, Magnitude 1 to 5 wars and other armed conflicts roughly correspond to the other wars included in UCDP-PRIO data set. Among the Magnitude 7 wars is the U.S.-Vietnam War of 1964-73 (from the standpoint of Vietnam), and among the lesser wars and other armed conflicts are the sectarian conflict in Northern Ireland of 1969-94 and the insurgency in Honduras of 1981-86. These data are displayed in Figure 1, with the order of magnitude arrayed from greatest (Magnitude 6 and 7) to least (Magnitude 1).

From the same source, a data...