By Ramesh Jaura
BERLIN | 24 January 2025 (IDN) — A new study reveals that financial resources play a significant role in determining the outcome of military conflicts. The comprehensive analysis of over 700 armed conflicts between 1977 and 2013 shows a clear causal effect of increased military spending on war outcomes, raising important questions about the future of warfare.
A sudden increase in government revenues, such as commodity sales, allows governments to ramp up their military spending and significantly enhance their chances of victory. The researchers say, for the first time, we can causally claim that countries win wars because of their financial resources.
The study’s results are highly relevant to today’s geopolitics. The indications are that “Russia’s warfare has significantly benefited from increased revenues due to rising oil and gas prices,” facilitating Moscow’s boost in military spending and strengthening of war capabilities.
At the same time, the study underscores the crucial role of Western financial aid in preventing Ukraine’s defeat. The withdrawal of such aid would significantly impede Ukraine’s ability to defend itself successfully, making the role of Western powers more important than ever.
“The effect is substantial: if one party to the conflict increases its military spending by 10 per cent of GDP, the likelihood of military success rises by 32 percentage points,” notes the analysis.
“Our research shows how financial flows can shift the balance of power in interstate conflicts,” explains Moritz Schularick, president of the Kiel Institute for the World Economy (ifWKiel) and co-author of the study ‘Who Wins Wars?
The authors calculated this effect by examining varying revenues from commodity sales during 700 wars between 1977 and 2013. They distinguish between three possible outcomes: victory, draw, and defeat.
When government revenues from commodity sales increase by 10 per cent of GDP, the respective conflict party’s likelihood of ending the war in the next higher category—such as a draw instead of a defeat or a victory instead of a draw—increases by 3.2 percentage points.
Relevant to today’s geopolitics
Empirically, only one-tenth of windfall gains flow to the military. The authors demonstrate that if military spending increases by 10 per cent of GDP, the chances of a conflict party ending the war in the subsequent higher category increase by 32 percentage points. It does not matter where the additional funds come from, whether from rising commodity gains or financial aid.
The study’s results are highly relevant to today’s geopolitics. The indications are that Russia’s warfare has significantly benefited from increased revenues due to rising oil and gas prices, enabling Moscow to boost its military spending and strengthen its war capabilities. At the same time, the study highlights that Western financial aid to Ukraine is urgently needed to prevent its defeat. However, withdrawing such aid would greatly hinder Ukraine’s ability to defend itself successfully.
A striking example from the past is the conflict between Libya and Chad in the 1980s. Due to high oil prices, Libya demonstrated its military superiority and achieved decisive victories. However, when oil prices collapsed, the country lost the financial resources needed to continue its warfare and was eventually defeated. This case illustrates how dependent military success is on fiscal resources.
“Economic strength is a decisive factor in the history of conflicts and the international security policies of the present,” says co-author Jonathan Federle, researcher at the Kiel Institute. Positive inflows can boost military capabilities just as much as negative ones can diminish them. Our study shows how closely economic strength and the army effectiveness are intertwined.”
Read the complete study: “Who Wins Wars?” [IDN-InDepthNews]
Image source: Pixabay
