State Security or Exploitation: A Theory of Military Involvement in the Economy

Why does the military in some countries get involved in the economy by running profit-making enterprises and what leads governments to permit such involvement? Running household appliance factories, transportation agencies, banks, hotels, etc., are indeed unrelated to national security and are far removed from the regular roles assigned to militaries. Such involvement has further implications for both politics and the economy. I argue that the process of military involvement in the economy functions as a survival strategy for leaders and a profit-making scheme for the military. Using original cross-national data on the emergence of military involvement in the economy, this research demonstrates that militaries are more likely to get involved in the economy when the military’s institutional interests are at risk and when the government has to rely on the military to maintain power. Leaders allow the military to benefit financially through economic activities in order to stay in power.