Ever since Adam Smith entitled his book The Wealth of Nations, economists have tried to explain why some countries are so much richer than others. One important channel, discussed in Acemoglu and Robinson's new book Why Nations Fail, is that outsiders come in and impose new rules of the game. Sometimes they impose good rules, sometimes bad.
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).