Costa Rica abolished its army in 1949 and thereafter enjoyed the best per-capita GDP growth in the region

In 1948, Costa Rica weathered a civil war, and in 1949, they abolished their military. Since then, Costa Rica has emerged as the Central American success story, more politically stable and richer than its neighbors.

In a research paper, researchers from the Universidad de Costa Rica Observatorio de Desarrollo deploy 'synthetic control estimates' to try to see how much of Costa Rica's growth can be attributed to eliminating military spending: they find that between 1950-2010, annual growth increased from 1.42% to 2.28%, leading to a doubling in per-capita GDP every 30 years instead of every 39, and that this freed up capital for national spending on development goals that have provided long-run advantages to the country and its people.

Some confounding factors to note: Costa Rica received a lot of US aid during the 'dirty wars' where the CIA was bent on overthrowing democratically elected socialist governments in the region. Much like West Berlin, Costa Rica was meant to serve as a beacon of the benefits of 'free market' systems, and to attain this showroom status, the US government spent lavishly to show how great things were under small government.

Also: while Costa Rica doesn't have an army, it has had rural police forces that wore paramilitary uniforms, carried automatic weapons, slept in barracks, etc -- think 'National Guard on high alert.' This isn't an army per se, but it's also not what we think of when we think of 'police.'

This article estimates the causal long-term developmental effects of Costa Rica’s constitutional abolishment of its army in 1949 after the 1948 civil war.

This is done by performing synthetic control estimates and analyzing the political history of Costa Rica in the 1940s and 1950s. We find that upon the abolishment of the army, Costa Rica’s annual average per capita GDP growth increased from 1.42% to 2.28% in the 1950-2010 period relative to a counterfactual Costa Rica that did not abolish its army. This implies that Costa Rica doubled its per capita GDP every 30 years rather than every 49. These estimates are robust to different model specifications and we show that this shock is exclusive to Costa Rica in Latin America. Furthermore, we provide evidence that the positive effects associated with this increase in the per capita GDP growth rates have endured over time; namely because the abolition of the army granted a political and institutional context that allowed the country to devote more resources to public spending, which in turn contributed to its long run development. Our case study findings are evidence that committing
to peace and democracy pays off in the long run.

A farewell to arms: The Long run developmental effects of Costa Rica’s army abolishment [Alejandro Abarca and Suráyabi Ramírez/Universidad de Costa Rica]

(Image: Kansas Photo, CC-BY)