The great power dilemma: The trade‐off between defense and growth in great Britain, 1830–1980

Abstract

This study investigates the relationship between British economic performance and various macroeconomic factors during the rise and fall of Great Britain as a great power from 1830 to 1980. It has generated a number of interesting findings. First, Britain's military spending is found to have a direct yet negative impact on its economic output Second, this negative effect appears to be moderate as compared to the stronger positive effect of investment Third, the results reveal that the effects of various factors on Britain's economy underwent a structural change during this long period of time. The most notable one is military spending. It suggests that in the nineteenth century when Britain was on the rise and strong, its military spending did not appear to hinder its economic performance. However, the trade‐off effects emerged in the twentieth century to hurt Britain's economy, contributing to Britain's relative decline in the post‐war era.