Warfare-Welfare Expenditure Substitutions in Latin America, 1953-87

The use of any resource has an opportunity cost in the alternative instances that are foregone; it is a common thesis though that some burdens are more burdensome than others. Frequently, the net effect of defense spending calls for a careful investigation. In the relevant literature, the suspected trade-off between military spending and social needs is not entirely inexplicable. This study presents an overall view and an empirical testing of the alleged trade-off between defense and other public needs (health, education, social security, and public works) in nineteen Latin American nations during the period 1953-87. Via three alternative econometric specifications based on time-series data, we conclude that, overwhelmingly, military expenses crowd out the potential allocations for social upgrading. We, also, find a positive link only in the defense-public works spending. In its majority, therefore, the warfare-welfare (guns vs. butter) trade-off in that region of the world is confirmed. The pattern of these 35 years strongly suggests that Latin American arms buying is based, as it has traditionally been, on perceived service needs, motives of national or personal sovereignty, and occasionally on the potential for conflicts with neighbors rather than on any other threat of aggression.