Austerity and Military Expenditures in Developing Countries: The Case of Venezuela

Abstract

In times of economic austerity, governments faced with declining revenues and political restraints on increasing taxes, must resort to major budgetary cutbacks. However, relatively little is known about how the governments of developing countries make expenditure decisions, or perhaps more importantly, how they trade off between consumption and investment or between functional categories of expenditures. Some sectors are often thought to be more vulnerable than others to reductions; social sectors are usually considered more and defense sectors less susceptible. An analysis of Venezuelan military expenditures over the 1950- 1983 period confirms the fact that a high level of stability exists in the country's pattern of defense expenditures and that during the country's current period of austerity, defense expenditures are likely to be cutback less than other functional expenditures such as health, education and economic development.