ABSTRACT

The purpose of this study was to investigate the effects of military expenditure on the economics growth of Cameroon. As specific objectives the study had to investigate the effect of gross domestic fixed capital formation and life expectancy on the economic growth of Cameroon. For this to be accomplished relevant literature was reviewed and necessary theories stated. The area of study is Cameroon and the data used are mainly secondary data of GDP population and military expenditure, life expectancy, gross domestic fixed capital formation gotten from World Development Indicators (WDI). The method of analysis used is the ordinary least square method done through the SPSS software. The results showed that military expenditure has a negative effect on the economic growth of Cameroon. Life expectancy has a positive effect on the economic growth of Cameroon. Gross domestic fixed capital formation has a positive effect on the economic growth of Cameroon. And for any policy recommendation intending to improve the economic growth, the government is advised to put a keen eye on the level of finances it spends on the military.The results showed that military expenditure has a negative effect on the economic growth of Cameroon. Human Capital has a positive effect on the economic growth of Cameroon. Physical capital has a positive effect on the economic growth of Cameroon.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Most of the less developed countries (LDCs) and developing countries (DCs) have suffered military or civil conflicts since 1990s. These conflicts sometimes take place within states rather than between them, but it also causes equal or more human suffering, economic dislocation, and wasted development opportunities. As a result, a significant portion of national budgets are incurred on military spending mostly on the basis of threat perception of political masters of nation states. The justification of much of the growth of military expenditure is usually explained in terms of the need to maintain national security, law and order, internal disturbances, etc. As per SIPRI estimates of 202, global military expenditure in 2022 was US $2240 billion, around 2.2 per cent of world GDP. At times, it seems illogical diverting scarce resources particularly in LDCs and DCs towards military expenditure at the cost of unattended basic human needs. ( Trochim, 2016)

Ever increasing size of military expenditure as proportion of national budgets and vested interested of arms industry have led to renewed debate over whether the increase of the military expenditure enhances or deteriorates economic growth and welfare. This phenomenon attracted the attention of researchers to examine short term and long term implication of military expenses on the economy. Empirically, there is no consensus about the impact of military expenditure on economic growth and causal linkages have also not been established explicitly. One of the reasons is the heterogeneity in the approaches of estimation and variation in sample sizes of data used in drawing evidences of linkages between military expenditure and economic growth. Mostly empirical results are mixed and hence it is difficult to argue convincingly about the extent and direction of relationship. In economics, military expenditure and economic growth linkages have been examined through a number of channels. Many researchers have argued that increase in military expenditure can have positive effects on an economy through an expansion of aggregate demand in Keynesian framework. Increase in military expenditures can boost economic growth of an economy through the Keynesian multiplier mechanism especially in the period of mass unemployment. Therefore, it is important for the government to manage and to increase aggregate demand. On the other side, many researchers have argued that military expenditure affect negatively through a crowding out of investment as theorized by classical macroeconomists. (Donnelly, 2012)

There are research on the subject indicating towards tradeoff hypothesis between military expenditures and alternative productive investments. In this context, there are also evidences of detrimental effects of military expenditures on growth. One of these is the diversion of scarce resources from domestic capital formation, education, health, infrastructure, etc which are expected to be more growth oriented. Furthermore, military expenditure can cause balance of payments problems and inflationary pressures on the economy which might retard growth.

The early modern expansion of European states started to challenge other regimes all over the world, made possible by their military and naval supremacy as well as later on the industrial prowess. The age of total war in their nineteenth and twentieth centuries finally pushed these states to adopt more and more efficient fiscal systems and enabled some of them to dedicate more than half of their GDP to the war effort during the world wars. Comparatively, even though military spending was regularly the biggest item in the budget for most states before the twentieth century, it still represented only a modest amount of their GDP. The cold war period again saw high relative spending levels, due to the enduring rivalry between the west and communist bloc. Finally, the collapse of the Soviet Union alleviated some of these tensions and lowered the aggregate military spending in the world. But now, newer security challenges such as terrorism and various interstate rivalries have again pushed the world towards growing overall military spending.

Today, the main concern about the issue of military expenditures is that, the world is continuing to devote large amounts on the military sector. Hirnissa and Bacharom (2009) claimed that higher military expenditure tend to be associated with higher economic growth and also as protection to maintain the peace of the world. However the public belief on this issue is that, expenditures will lead to war. In addition, higher taxation is needed to finance higher military expenditures, thus, reducing economic growth in the long run. This difference in the argument has led to different opinions on whether military expenditure has positive or negative effects on economic growth.  Hassa (2013) emphasized four arguments about the effect channels. However the causal relationship between these variables is also important to reach a general conclusion about the structure of countries as well as the effect channels.

In the early 1970s, Emil Benoit shocked development economists by presenting positive cross-country correlations between military spending rates and economic growth rates in LDCs. This existence of positive effects of military spending on economic growth as conjectured by Beniot still cannot be ruled out. However, the recent econometric evidence points to the conclusion that these positive effects, if they exist, are small relative to the negative effects and that, overall, military expenditure has a weak but adverse impact on economic growth in developing countries. Some studies uncover evidence of positive effects of military expenditure on economic growth through human capital formation and technological spin-off effects. While models that allow military expenditure to affect growth through multiple channels find that, military spending may stimulate growth through some channels, it retards it through others and the net effect is negative. The most important negative effect is that military spending reduces national saving rates, thereby reducing rates of capital accumulation.

Developing countries have enough problems without either the waste of resources constituted by military expenditure, or the social and economic destruction brought about by warfare. One of the strongest empirical influences on military expenditure reflect either neighbourhood arms races or the patronage demands of potentially powerful military establishments. Both of these problems are potentially addressable. One of the other major influences on military expenditure in developing countries is internal rebellion. Where there are civil wars (like in the case of Cameroon now), military spending is greatly elevated. Further, there is evidence that governments set their defence expenditure at levels designed to deter such rebellions.

The study found that for the average country, a doubling of military expenditure reduced the growth rate for a period, eventually leading to a reduction in the level of income by 20%. For developing countries, the adverse effects of a given level of military expenditure on income are probably even more costly than for the global average. In developed countries, such expenditure may in part be concealed routes for providing subsidies to high-tech firms, hence the term “military-industrial complex”. In the poorer developing countries, military equipment is imported, rather than produced domestically and so does not offer any side benefits to technical progress

Looking at the cost of war, the most common form of war in developing countries is civil wars. Whereas international warfare is often brief, civil wars last a long time (typically around seven years). A recent analysis by Collier, P.  (2006) finds that such wars are getting longer, they now appear to continue for around three times as long as civil wars prior to 1980. During a war, economic growth rate is typically reduced by about 2%. The losses can sometimes continue even until post-war; for example people may continue to move their wealth out of the country due to perceived high risks of further conflict. Such perceptions would often not be misplaced. There is also new evidence that the cost of civil war spills over the whole region in the form of reduced growth rates. One route for this might be increased perceptions of risk on the part of investors. Another might be regional reductions in demand following from the fall in income in the country that is directly affected. In summary, even where military expenditure is not associated with conflict, it is a drag on development. Active military conflict can lock a country into a sustained phase of economic contraction.

The most obvious is that high military expenditure is sometimes a response to active warfare. We find that if a country is at international war, it spends around an additional 1.8%. Hence one direct explanation for military expenditure is whatsoever that causes war.

There are also large differences between military spending among countries that are at peace. We find that one important influence on spending is if there is a past history of international war. Countries that have such a history spend around 1.3% of GDP more than countries that do not have. Possibly, this reflects an assessment of the higher risk of future conflicts. However, it may also reflect inertia or political interests i.e. once a country has built a large military, as happening during war, there are internal forces maintaining the level of government expenditure. Such persistence would not be surprising; it is indeed common in other areas of public expenditure.

The extent to which past war raises military expenditure, it also reflects fear of neighbours or aggressive intentions towards them. We might therefore expect that the level of military expenditure chosen by government would, to an extent be influenced by the level chosen by its neighbours. That is, the average level of spending of neighbouring countries significantly influences the level chosen by government. This can be interpreted in various ways, the most obvious of which is that of a neighbourhood arms race. For most countries, the most serious external threats come from their neighbours and so the appropriate level of deterrence is set by the behaviour of neighbours.

 A different interpretation of the same phenomena is that regional expenditure is set by regional norms of behaviour, in a form of emulation. If the neighbours are spending a particular share of national income on defence, then the chiefs of the military or minister of defence have a relatively easy case to argue with the minister of finance, that their own country should spend approximately at the same level. Whatever the interpretation, the consequence of this regional spill over is that military expenditure is in effect a regional public bad. Each time one country raise its military spending, there will be a ripple effect across the region. Further, as neighbours respond to the initial increase, the country that increased its military spending may itself respond with further increases (the classical process of arms race). It is estimated that the typical multiplier from an initial increase in spending in one country to the new neighbourhood equilibrium may involve both the country and its neighbours having increased the level of spending by around three times the initial increase.

The above motivations for military expenditure have either been to fight a war or to deter it. However, these are not the only motivations for military spending. As with other forms of public expenditure, military expenditure has beneficiaries. In developed countries, these beneficiaries are largely industrial companies that produce military hardware. Developing countries largely import such hardware and so the domestic beneficiaries are predominantly military employees. We might therefore expect that where military employees have a greater influence over government decisions, the government will be persuaded to choose a higher level of military expenditure. This is a natural tendency because contrarily, if professors were in charge of government, they would probably increase expenditures upon universities. Civil war is an important impediment to development both directly and through its effect on military expenditure. It is therefore important to determine what actions are important in conflict prevention. While this is usually seen as a purely political matter, empirically the major determinants of the risk of civil war are often economic. This problem is discussed in detail in the next section and subsequent chapters

1.2 Statement of the Problem

The military industrial complex composed of a state’s armed forces, the government, suppliers of weapon systems and services and academic institutions that conduct research on weapon systems and designs- absorbs vast amounts of funding that could otherwise be spent on human security, including the achievements of The Millennium Development Goals. Furthermore, funds reserved for development initiatives are increasingly spent on emergency relief and rehabilitation operations to clean up after violent conflict.Given the numerous crisis facing the planet- economic, environmental, food, water, health, energy- it is imperative to shift money wasted on excessive military spending to human needs and rights. These challenges militarism by calling on governments to stop spending disproportionate financial, technological and human resources on militaries and demands governments to invest in peace. While many states promote themselves as advocates for international peace, justice and security and claim to promote international disarmament, the same states are often leaders in the international arms trade which contributes to fuelling conflicts, human rights violations and disrupting peace processes.

While military expenditures continue to be excessive, investment in conflict resolutions, peace building and development lags far behind. Since the end of the cold war, militarism has been growing in response to an increasingly unstable world, propelling the world even further into tension and war. Armed conflicts and the constant threat of war and terrorism have become both the cause of and response to this growing military expenditure. War and the threat of war destroy lives, infrastructure and well-being creating a culture of fear, violence and instability. This impedes development by upsetting social programmes, education, transportation, business and tourism which prevents economic stability, mental well- being and sustainable livelihood. The manufacture and use of weapons also prevent sustainable ecological development and preservation, creating unequal access to resources and further impeding poverty reduction initiatives (like in the case of Cameroon right now).