Garett Jones - Economist at George Mason University. Follow him on Twitter: @GarettJones
Classic examples: North vs. South Korea, or East vs. West
Germany. In both cases, large numbers of
U.S. troops were present in the countries that grew richer. Might that be part of a larger pattern? Have U.S. troops been a guarantor of good
rules of the game? Are U.S. troops a
good predictor--maybe even a cause--of long-term economic growth?
With Hudson Institute economist Tim Kane, I looked into this question. We found that countries with more U.S. troops
had faster economic growth, the relationship was not small, and it wasn't just
driven by post-war rebuilding. Amity
Shlaes did a great job summing up our work over
at Bloomberg.
How is this troops-growth story supposed to work? Kane and I have our own opinions -- troop
presence is a reasonable sign of higher medium-term security (compared to the no-troop
alternative) and U.S. military presence tends to spread U.S. institutions (an
improvement for most countries).
But research that follows up on our work shows that two particular
channels may be quite important: Trade and foreign
direct investment. More troops
predict more two-way trade between the U.S. and the host country; and more
troops predict more FDI from the US to the host country. The second channel is probably extremely
important for causing
economic growth in the host country. FDI often brings valuable corporate
skills to nations that need them.
Where security and better institutions exist, trade and FDI
are likely to follow. But there's
something else at work here: Mental proximity. We tend to interact with people we are close to, and we tend to learn more from people
we feel close to. And when U.S. troops are in a country,
Americans probably feel closer to that country.
The trade/troops study suggests that trade flows between
the U.S. and countries that host American troops are higher than you'd expect
based on the host's GDP, population, physical distance from the U.S., and other
factors.
Just as important: Foreign aid failed to predict trade. Kane and I found the same non-relationship between
foreign aid and economic growth. So
while the muddled debate continues over whether foreign aid helps poor
countries grow (summed up in Easterly's Elusive
Quest for Growth) there's real evidence that a solid U.S. military presence
predicts, and maybe even causes, long-lasting economic progress.
This article available online at:
http://www.theatlantic.com/business/archive/2012/05/the-gi-joe-stimulus-are-us-troops-good-for-growth/256659/
