Why nations fail: defense spending, fighting commitment and, inter-nations-prosperity-poverty-gap

Abstract

Both the increasing defense spending and the widening divergence between rich and poor countries are of great concerns. This paper attempts to explain the two concepts in a unify theory framework. In the view of conflict economics, a nation’s defense spending can be seen as the fighting commitment of distributive effort in the global economy while other is the productive effort. The development of global economy needs the productive efforts from almost every nation, and the distribution of the aggregate output is determined in large degree by the fighting commitment of each nation. The numerical simulation of the model gives a reasonable explanation of the patterns of the divergence/convergence of prosperity-poverty gap between nations, the fact which is evidenced by many empirical analyses. (1) Given the initial wealth ratio between nations fixed, there is a critical value of fighting decisiveness, when the actual value is larger than the critical value, it is more likely to result in Matthew effect; otherwise the gap would gradually be shortened. (2) Given the fighting decisiveness fixed, there is a critical value of initial wealth ratio, when the actual value is larger than the critical value, it is more likely to result in Matthew effect; otherwise, the gap would gradually be shortened. The study gives a new perspective to explain and handle the increasingly defense spending and the prosperity-poverty gap between nations.

Keywords:

• Defense spending
• Productive effort
• Fighting commitment
• Inter-Nations-Prosperity-Poverty-Gap

JEL Codes:

• D72
• D74
• P16

Acknowledgments

The insightful comments of an anonymous referee on an earlier version are gratefully acknowledged. I am also grateful to Professor Kollias, the Editor for his encouragement. The usual disclaimer applies. To honorable Professor Jianshe Zhou, Professor Li Zeng, Professor Zhoulai Lu, etc. who opened the new age of defense economics in China and delivered their courage and love to me.

Notes

¹ Here the plunder specifically means that oneself does not produce, but obtain productive gains from the other side through fighting effort, not plunder through by illegal violent ways.