Military budgets, underdevelopment and dependency

Military expenditures are considered to be one of the causes of underdevelopment. This statement is not easy to prove. The article tries to explain that relatively small military expenditures might have large consequences, e.g. on external debt and scarcity of foreign exchange.The problem for Africa is not in the first place the amount of military expenses or external debt,but the low productivity rate which makes repayment difficult. Africa still remains dependent in different economic fields from industrialized countries.The African situation would improve by more stable regimes and a better internal organization of the state? so that natural resources and other activities will really benefit the country.

Because of their unstable situation, many African governments have found it necessary to spend more money on security. Both internal conflicts and conflicts between African states have been responsible for the increase of defence spending.
In this article we will try to analyse the link between military budgets and underdevelopment in Africa. Although the African armies are neither the most sophisticated nor the most expensive, they can influence development in different ways e.g. in the economic way or with regard to political stability. Arms supply gives the development problem an international dimension, which results in different forms of dependency.

EXTERNAL DEBT IN AFRICA
The financial situation of African countries is not improving. The total external debt of Africa amounted to $ 150 billion in 1986. In 1985 the African debt represented 425% of total exports and 80% of GNP. Since debt has to be paid through export revenues, it is clear that the end of the crises is not for tomorrow The United Nations, the World Bank and the International Monetary Fund have started different recovery programmes. Not all of them showed positive results. On one hand, by 1986, the financial flows to Africa had reduced. On the other hand, agricultural production increased by approximately 3% . Other programmes, such as financial support to farmers and diminishing budget deficits, have already proved their value.
Africa has official debts mainly to international organizations such as IMF and the World Bank. Cooperation between countries and those international institutions has not been beneficial, mostly because the funds were not used as planned in the programmes. A lot was spend on consumption and imported luxury goods and also capital export was high. This was known to the IMF, but nevertheless new credits were obtained.
Development planning can only work in the long term. The economic programmes of the IMF do not take this into account. They are only interested in a stable balance of payments. IMF programmes create recession on the national level. There is no evidence that the economic impact on the balance of payments, growth or inflation, savings and investments, has been more effective in countries with an IMF recovery programme. According to IMF specialists, a recession will not necessarily follow. Diminishing demand will decrease imports, which is good for the internal production provided that the money is available.
Long term programmes for Africa should increase investments. They are the only guarantee for a stable development in different economic fields. But, (foreign) investments depend on various elements such as political stability, investment facilities and external demand, import-export possibilities... Development programmes should take measures to improve those items for which African countries until today show very poor results.
IMF and the World Bank need means for a better control of their credits. Too often credits are not used for what they were intended. Afterwards, new demands for credits are proposed, and granted by the Bank and IMF, only increasing the amount of debts.
The problem of African external debt is not, in the first place, a problem of a high debt in absolute figures, but of debt compared to productivity and exports. Africa's debt of $ 150 billion is low compared to a total debt of third world countries of $ 1.190 billion. Their capability to decrease their debt is not obvious.

ARMS AND DEBT
Third World countries, in general, face such debts that they are not in a position to buy enormous amounts of weapons. There is a tendency to reduce arms' supplies to developing countries. Nevertheless, SIPRI estimates show that approx. 25% of the accumulated debt of the Third World is due to arms imports. With this in mind, the policy of international, financing institutions and banks is dubious. Normally, if one asks for a loan, some guarantees are required. A loan will be granted when refunding by means of the profits of the investments can be ensured. This is not the case for the military. Arms supplies are not productive and one can never refund loans by means of incomes from use of arms. Nevertheless, it appears that the IMF has very seldom opposed arms deals, although, they are not productive and significantly increase some countries' debts. For further details concerning debt and military expenditures, see

SIPRI Yearbook 1987
In some cases, those credits were easily obtained, e.g. for countries exporting raw materials. Those products were a guarantee for payment. This made it easier for countries with raw materials to built up a military power, in exchange with their production. But prices of raw materials evaluate differently than prices of finished goods as arms, and this exchange is not in the advantage of third world countries.
Debts had increased rapidly by the early 1980's. Re-adjustments of credits were necessary, not only to facilitate reimbursement, but also for the banks, to make sure that they will be paid and to allow countries to continue buying products from the industrial world. Without an agreement for repayment, the Third World would not be in a position to import goods, which would increase economic problems in the industrial world.
Most third world nations have not been able to find ways to recover the income they lost when oil prices collapsed and the debt crisis hit in1982. Several nations that continued large arms purchases in the following years could only do so by getting deep into debts, as did Egypt (owing almost $ 5 billion in US military credits and $ 5 billion for arms purchases elsewhere), Iraq (owing $ 7 billion to France and $ 5 billion to the USSR) and Syria (with a total civil and military debt to the USSR of $ 15 billion). (6) Debts and poor economic results have forced developing countries into new financial agreements with the IMF and other financial institutions. This offered the IMF the possibility of imposing their regulations which were usually not to the advantage of the third world country, causing unemployment and often changing import substitution into import-export facilities. Free traffic of goods is approved by the IMF, but it is not always to the advantage of poor countries.

THE MILITARY BUDGETS OF AFRICAN COUNTRffiS
Military expenses can be divided into two parts : 1. expenses which benefit not only to the military; 2. expenses directly related to arms supply.
In the first category, we consider expenses on education and training of military personnel. This will improve the educational level and thus provide an added value to the country. An other positive impact of the military on development is their effect on public works. Road construction, building of bridges, transport Developing nations have found surprisingly little restraint in obtaining credits for military purpose, although they concern non-productive investment.
facilities benefit not only to the military but also to the civil economy. In this respect we remember Germany after 1930 or South Africa, but also in other countries the military have worked on road construction in a positive sense. The military have also a positive influence on employment In developing countries, a government that is investing in defence can stimulate the private sector. Clothes, food, equipments have to be provided and this military investment will benefit to different civil supplies. This means a start for many small enterprises. If well planned, defence expenditures may have positive effects on the economy.
The situation is different for arms imports from abroad, which need foreign currency and will destabilise the trade balance.

DEPENDENCY
Developing countries are important customers of the arms industry. The objective purpose of arms supplies is to increase political independence of the new nations. The result is not always independence.
Depending on the military can take different forms. Usually buyer and seller are dependent on each other in one or other way, which is a normal situation. But in international arms-trade as for other trades, often, the principle prevails that the strong or rich ones get stronger and richer, the others get poorer.
Dependency can take different forms : some are discussed here (10).

Dependency of a Country Buying Arms from Only One Supplier
Developing countries are dependent on imports for arms supply. If one buys from different suppliers, the goods will not necessarily be compatible. The orders will be less important than in case of one supplier and therefore the unit price will be higher. Conditions of contract will be more easily arrived at, when there is only one supplying nation. Also the supplier will know the future requirements of his client and therefore, his planning will be easier and investment decisions made with less risk. Service to the client will be better and the training of military in the clients' country becomes more practicable. This is important for third world countries. The system of only one supplier will normally be cost saving. Dependency of the third world country is important in this system. In case of conflict, when supply of spare parts has to be assured, the developing country is dependent on the goodwill of the supplier. He decides whether trade the arms or not and so influences the outcome of the conflict

Arms Supply in exchange of Raw Materials Exports
Raw materials have been a source of income for developing countries for many years. Foreign investors extracted oil or other materials, they marketed them and hard currency came in. It was easy money, but developing countries soon became accustomed to it, whether it was used for consumable or luxury goods or investment. When oil prices rose in the early 1970's, the needs of third world countries were also higher and arms imports were proposed in exchange for raw materials. But, it is well known that prices of finished goods increase more rapidly than those of raw materials, and thus started the dependency of the Third World on industrialized countries. More raw materials or oil had to be sold in order to acquire more modem and sophisticated military equipment. Selling oil for arms means less income available for other economic activities. The raw materials are now used for non-economic purposes.
So the Western World becomes dependent on the Third World for its oil import and third world countries remain dependent on industrialized countries because of increasing prices for arms.

Economie and Military Dependency
In practice, military sales are not always separated from civil sales. Ulrich ALBECHT (11) gives a good example : German military equipment, given or cheaply sold to young nations, promotes German industry. An example is Iran. First, before any relations existed between both countries, a military assistance programme was set up. Later, a study was published about new contracts with Iran. The first financial aid of 22 million DM, a few years later, resulted in contracts of ten times this amount for supplies in the civil sector.
Development assistance as well as military aid can be a first step towards cooperation between states. This aid can be very profitable as shown in the above example. The State is the promotor of arms trade, but this has of course nothing to do with development assistance. In this case, dependency on military supply leads to dependency in other economic sectors.

Interdependence
For ROSECRANCE and STEIN interdependence means such a relationship between interests that a change in the position of one country is reflected in the position of others. Interdependence is a relationship which is costly to break.
Also the O.E.C.D. believes that interdependence will promote economic exchanges and better understanding. It will force countries to better cooperation. Henry KISSINGER puts it in the following way "A world whose security, well being and moral fulfillment demand interdependence : a world whose people are linked by technology and global communications, by the danger of nuclear war and by the world wide thrusts of human needs; a world in which traditional structures and tenets of diplomacy are being overwhelmed" (12).
From the point of view of Western States, interdependence means a good cooperation, a two-way circuit between North and South. If well used, it might benefit both parties.
For Samir AMIN (13) interdependence strategy can be interpreted as such a strategy of foreign policy, which aims at maintaining the international influence of major capitalist countries, in the conditions of an economic crisis they are facing. The Western strategy states that developing countries should refrain from all measures which would harm the economies of developed countries, because their stability is a precondition for the development and prosperity of the Third World.
Interdependence, if well used, could work to the advantage of both parties. But, as pointed out above, in a relation between a rich, developed country and a developing nation, usually the rich become richer, the poor become poorer. Self reliance might be an alternative.

ARMAMENT AND ECONOMIC DEVELOPMENT
For GALBRAITH (14), the influence of military industry is obvious in fast growing economies. Those economies need the military for its stability, employment effect and for the orders in the private sector. Rising military expenses will increase economic expansion, but also inflation. Diminishing expenses will create recession and deflation. This also is the case for other economic sectors as public works e.g. The military are important customers of the iron and steel industry. If we want to promote those industries, we should increase defense expenditures. These are classic means at increase government's disposal and they are still valid, under condition of absence of hyperinflation.
E. MANDEL (15) puts it in an other way. The role of the arms race is to secure a good investment for surplus capital, which, due to diminishing benefit rates, cannot be profitably invested in the civil sector. Arms race will not prevent recession for American or other capitalist economies, but it will prevent their excesses, like the crisis of 1929-1932. For the working class, arms race has other consequences, as Rosa LUXEMBOURG puts it : "Weapons are paid not only through tax on added value, but also through tax on the revenue of the workers".
Here the arms industry means a redistribution of national income, or, as marxists call it an increase of the exploitation of the "labour force". It is in fact a way to accelerate capital accumulation.
If arms production is partly paid by tax on revenue, it means that the net-revenue of the labour force will decrease more than with no arms industry. In the national income there has been a change at the expense of revenue from labour, but the total added value has increased and has accelerated capital accumulation.
Miles WOLPIN (16)  Prof. E. BENOIT's study is not in contradiction with WOLPIN's point of view.
We have mentioned before that also IMF, which advocates a liberal system, has seldom opposed to debts for arms trade.
It has to be pointed out that the military "product" is rather a military expense, representing a direct purchasing power for the military (40% of military expenses) without any compensation as productivity.
The question : "Is there a relation between defense expenditures and economics" has been studied more specifically for third world countries by Prof. E. BENOIT (17). His analyses of 44 developing countries, representing 80% of third world military expense, had to show whether a significant relation exists between defense expenditure and economic growth. Therefore, negative aspects of defense expenditure should be smaller than the positive aspects. It is, therefore, not enough to mention positive elements. He finds a positive correlation between defense expenditure and increase of the growth rate and vice versa. There is, however, no causal evidence between both. Countries with relatively high defense expenditures are also countries receiving large foreign aid.
This can also be the reason for fast economic growth. It is unlikely that investments, diverted from defense, would be used 100% beneficially to the economy. BENOIT thinks that a well planned and controlled defense limitation, combined with better coordination between defense planning and economic planning, would significantly increase economic growth.
BENOIT's study has been the first to link defense expenditure with economic growth. Some people have concluded that this link is a reality, referring to positive effects of construction works, education programmes, etc...
BENOIT himself is more cautious with his conclusions. He suggests that in countries without hyperinflation (+25%) and extreme defense expenditures, defense may have a positive result due to its stabilizing effects.
It has to be mentioned however, that many developing countries faced inflation rates of more than 25% and others, where inflation is lower today, have also been forced to diminish arms expenditures. The arms race of the 1970's has been so expensive that it certainly has not had any stabilizing effect.
WHYNES (18) using a sample of about 20 Third World nations found like BENOIT that in the area of economic growth there has been a strong correlation with defence spending. The defence sector absorbs an enormous quantity of resources which could have an alternative use in the civil sector. Analysing coups and military expenditures, WHYNES finds that in all cases there has been a rise in military expenditures after a coup.
Defense expenditures of third world countries have often been imposed by industrialized countries, which needed a market for their arms production. Many political leaders and economists in developing countries however believe there is no opposition betweenmilitarisation and economic development. The former director of the Indian Institute for Defense Studies and Analysis argued that heavy investments in the military sector are a precondition for economic growth. The Shah of Iran in different interviews in 1975 and 1976 expressed this opinion "It is not only compatible but essential. The one is worthless without the other. There is no economic power without military posture" and he added : "What is the use of having an advanced industry in a country which could be brought to its knees when faced with any small, asinine event?" (19).
As far as Iran is concerned, it certainly was a strong economy and the largest military power in the Middle East. This military build-up has -so we learntnot been enough to secure the economic system.

CONCLUSION
Third World debt has various consequences. One of them is the dependency on the Western World, providing the money. They have, through the IMF, imposed measures of which some will not necessarily promote development. Free trade, free import and export facilities benefit strong economies and not developing nations. Nevertheless, no steps were taken by IMF to oppose or diminish debt for arms supply. Developing nations have found surprisingly less restraint in obtaining credits for military purpose, although they concern non-productive investments.
African arms imports increased dramatically in the second half of the 1970's (see table 1). In addition, there were numerous conflicts deteriorating their economies. In the early 1980's, arms imports decreased, mainly, for economic reasons. A large proportion of the imports of African States was in the form of military aid. The military build-up of some states (Libya, Nigeria) was made possible by high oil-incomes. Generally, the only way for arms supply was by selling their raw materials. Natural wealth was sold for arms, instead of using it for national development. High debt burdens have often been aggravated by weapon purchase, first, because weapons are expensive, secondly, because scarce money was diverted to non-productive activities.
Arms supply did not increase political or economic independence of African states, although, this is exactly the aim of military development. Africa remains dependent on the Western world and arms trade has increased this dependency. In cases of conflict, the supplier decides about the outcome by providing or not providing arms and spare parts. Interdependence only brings a theoretical solution. Interdependence between a rich and a poor nation, will only make the rich richer, the poor poorer.
For the economy, military expenses can have a stabilizing effect. It often is a means for the government to promote private industries and to activate the national economy. There might be a positive relation between defense expenditure and economic growth, although BENOIT could not prove that one is caused by the other, certainly not in case of hyperinflation.
Military expenses withdraw raw materials from the civil to the military production, as such decreasing new possible revenues which would enable countries to pay their debts or start new productive investments.