The Portuguese Military Expenditure from a Historical Perspective

ABSTRACT

Over a period of more than a century and a half (1852–2019), military expenditure in Portugal reached its highest values in the contexts of the Great War (1914–1918) and the Colonial War (1961–1974). In almost every year between these two conflicts, military expenditure was the most important sector within the structure of the Portuguese State. However, with the end of the Colonial War and Portugal’s entry into Democracy, there was a clear shift in this pattern. Since 1975, military expenditure has ceased to be the most important sector of the Portuguese State, and currently plays only a very reduced role, while social spending has today supplanted it as the most significant sector. Through the estimation of a dynamic model, it proved possible to identify some of the positive and negative effects of military spending on the Portuguese economy during the period 1874–2018. These results are a possibility that is supported by the theoretical framework.

KEYWORDS:

• Military expenditure
• Portugal
• Colonial War
• Great War
• economic growth

Acknowledgments

I am grateful for the financial support that I received in the form of national funds made available by FCT (Fundação para a Ciência e a Tecnologia), Portugal (Project UIDB/SOC/04521/2020). I also wish to thank Professors Nuno Valério, Álvaro Garrido, António Portugal Duarte and Pedro Bação for the extraordinary support that they gave me, and I am similarly grateful to Professor Christos Kollias and two anonymous referees for their important comments and suggestions.

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes

1. It should be noted that Decree-Law No. 25,299, of 6 May 1935, determined that, from 1936 onwards, the financial year of the central government would correspond to the calendar year (Diário do Governo [Official Journal of the Government] 1935a). Until then, for public accounting purposes, the financial year had begun on 1 July of each calendar year and ended on 30 June of the following calendar year. This means that, until 1936, the public revenues and expenditures of a particular financial year spanned two distinct calendar years.

2. I am grateful to an anonymous referee for advising me to extend the time horizon to the present day.

3. During this period, the Portuguese nation consisted of the metropolis and its colonies. The metropolis was mainland Portugal and the nearby islands (Madeira and the Azores). The colonies were Cape Verde, Guinea (Portuguese Guinea), São Tomé and Príncipe, Angola, Mozambique, Macao, Timor (Portuguese Timor) and the Portuguese State of India (this latter colony only until 1961). Since 1974, the Portuguese nation has consisted only of the European mainland and the islands of Madeira and the Azores. During the same period, the country was also governed by a series of different regimes: 1) Constitutional Monarchy (1820–1910); 2) First Republic (1910–1926); 3) Military Dictatorship (1926–1933); 4) Second Republic, also known as Estado Novo [New State] (1933–1974); 5) Third Republic, also known as Portuguese Democracy (since 1974).

4. Table A1 in the Appendix contains a summary of the main military conflicts in which Portugal has participated directly from the second half of the nineteenth century until the present day. Once again, I thank an anonymous referee for this suggestion.

5. This surrender of ships actually happened. The statistics published by Pires (2011, 182) show that, between 27 September 1916 and 20 February 1917, Portugal ceded a total of 44 ships to Great Britain in exchange for various payments.

6. CEP was the Corpo Expedicionário Português [Portuguese Expeditionary Force], the main Portuguese military force sent to Flanders to fight against Germany, alongside the armies of the allied nations. CAPI was the Corpo de Artilharia Pesada Independente [Portuguese Independent Heavy Artillery Corps].

7. These plans (1953–1974) were ‘guiding charters of the Portuguese nation’ that marked the Portuguese economic policy, having been designed to stimulate economic growth by using (public and private) investment as a key tool. Despite the context of the Colonial War, the Third Development Plan (1968–1973) was the one which brought the largest investments. See Ferraz (2020).

8. For example, in 1966, the ‘Transaction Tax’ (the predecessor of the current VAT) was created. Between 1971 and 1974 (the last years of the war), this was the tax that most contributed to the higher rates of Portuguese tax collection. See Valério (2006) and Ferraz (2015).

9. Portugal recorded some of the most positive results in this extremely favourable international conjuncture. According to Ferraz (2020), the Portuguese performance is explained by the following factors: ‘1) the relative liberalisation and integration of the Portuguese economy into the world economy [which] resulted in its increased openness; 2) Portuguese economic policy was geared towards the promotion of economic growth, with the Portuguese economy undergoing a strong process of industrialisation’. It was precisely during this period that Portugal began to sign a series of different agreements and to join several international institutions, at the same time as it was implementing its own Development Plans.

10. According to information presented by the Portuguese government at the NATO summit held in July 2018, Portugal’s medium-term goal is, however, to reach the target of 2% of GDP by 2024. See Público (2018).

11. This fact is explained by two reasons: 1) the constant accumulation of debt by the Portuguese State; 2) a significant part of the debt did not have a pre-established amortisation period (Mata 1993, 37, 85 and 88).

12. On 17 January 1970, Marcello Caetano – the President of the Council of Ministers (or prime minister, and consequently the principal figure of the Estado Novo regime) between 1968 and 1974 – publicly recognised the need to implement a profound reform in Education in Portugal (Caetano 1970, 94–95), which did in fact happen in the following years.

13. In the second half of the 1970s, there was also a fall in the share of the economic affairs sector; it should be noted that the change in the political regime brought an end to the Development Plans, and consequently to medium to long-term economic planning (Ferraz 2020).

14. Several initiatives were taken in the second half of the 1970s. Four important examples: 1) Increase in pensions and the creation of the Christmas bonus (Diário do Governo 1974); 2) Establishment of unemployment benefits for most workers (Diário do Governo 1975); 3) Establishment of a minimum (universal) social protection scheme, including the provision of a (non-contributory) social pension and a family allowance (Diário do Governo [Official Journal of the Government] 1979a). Another important development was the creation of the National Health Service, which guaranteed access to healthcare for all citizens (Diário do Governo [Official Journal of the Government] 1979b). According to Tanzi and Schuknecht (2000, 16), this was precisely ‘the period when the basic social security system acquired some of the characteristics of the welfare state’ and represented the ‘heyday of Keynesianism’.

15. The period from 1983 to 1992 is also quite notable. Portugal officially joined the European Economic Community (EEC) in 1986. Despite the evident progress that existed during the ‘Golden Age’ in terms of economic convergence, the level of Portuguese development was still much lower than that of most of its European partners. Therefore, until the beginning of the 1990s, Portugal received a significant volume of EEC funds to modernise its productive sector (Pires 2017). These resources were fundamental for enhancing economic convergence.

16. A synthesis relating to ARDL models can be found, for example, in Hill, Griffiths, and Lim (2017) and Menegaki (2019).

17. I am grateful to the anonymous reviewers for their suggestions, which helped me to improve the growth model.

18. In brief, this procedure can be described as follows: 1) OLS estimation of the model of interest; 2) an auxiliary regression to generate an estimate of the error variance; 3) weighted least squares, using as the weighting the reciprocal of the estimated variance. For more information, see Gretl (2017).

19. Military operations carried out in Africa in order to absorb territories that were previously distinct from Angola, Guinea and Mozambique (Portuguese colonies).

20. After the implantation of the Republic, on 5 October 1910, there was an uprising in the city of Porto, led by a military faction seeking to restore the monarchy in Portugal.

21. After the implantation of the Military Dictatorship, on 28 May 1926, there was an uprising in the city of Lisbon led by some military forces in support of democracy.

22. The occupation occurred in two stages: 1) Invasion of Dadra and Nagar-Haveli (Portuguese territories in Western India) in 1954 by Pro-India forces; 2) Occupation of Goa, Daman and Diu (Portuguese India) in 1961.

23. 1680 has been identified as the probable date of construction of this Portuguese fort in the African settlement of Oiudah (a dependency of the Portuguese colony of São Tomé and Principe). After achieving independence in 1960, Dahomey (now the Republic of Benin) decided to invade Oiudah and occupied the Portuguese fort.

Additional information

Funding

This work was supported by the Fundação para a Ciência e a Tecnologia [Project UID/SOC/04521/2020].