Military Spending in Guatemala: The Fiscal and Microeconomic Impact: 1969-1995 Thomas Scheetz

Table 3 is even more revealing. This table shows changes in the distribution of the Guatemalan central government budget among sectors. It must be remembered that the distribution of public spending is, without doubt, the clearest expression of a government's true policy priorities. Not even an analysis based on the evolution of real spending per sector would demonstrate the displacement of one category of spending by another, since spending in all sectors could increase in real terms in the context of a growing economy, even though spending in some sectors may increase more than others. Therefore, the displacement of social spending or public investment by expenditures in the defense sector can only be studied if we conceive of budgetary appropriations as a zero-sum game (there is never more than 100 percent to distribute: if one sector increases, another necessarily must decrease). While it cannot be said that one sector simply displaces another, it can be argued that one sector (e.g. defense) increases its share of the budget when other sectors (e.g. social spending) suffer a simultaneous retraction. Thus, only an examination of the budget distribution by percentage shows this displacement. (Table 3)

TABLE 3

Participation by sector in budget expenditures-Central Government of Guatemala (%)
Year Police Defense Health Education Other Social Spending* Total Social Spending Central Government Investment
1968
6.8
13.6
10.9
18.4
8.1
37.4
1.9
1969
6.2
10.7
11.2
18.2
0.4
29.9
0.5
1970
5.3
17.1
10.8
16.4
0.5
27.7
2.1
1971
5.4
11.5
10.8
17.0
0.7
28.5
2.2
1972
4.5
10
9.6
14.6
0.6
24.7
3.8
1973
4.5
8.9
9.7
16.2
1.0
27.0
3.3
1974
4.0
8.8
9.3
15.6
0.6
25.5
3.3
1975
4.7
12.4
12
16.0
5.5
33.6
2.6
1976
3.3
9.5
8.8
12.8
17.9
39.5
5.9
1977
3.2
11.9
10.1
12.8
16.0
38.9
4.2
1978
2.9
9.9
9.0
12.6
20.5
42.2
4.3
1979
4.0
10.6
8.9
12.0
16.5
37.4
4.5
1980
3.7
9.3
11.4
12.7
15.9
40.0
5.5
1981
3.2
11.9
8.8
11.5
12.8
33.1
7.2
1982
3.8
15.4
6.7
12.1
16.0
34.9
4.9
1983
4.5
17.7
7.0
12.6
17.3
37.0
3.5
1984
4.7
20.1
8.3
13.0
18.4
39.7
2.8
1985
4.8
21.0
7.3
12.5
19.8
39.6
2.0
1986
3.9
15.5
9.3
13.0
21.2
43.5
1.9
1987
4.4
14.8
9.6
18.7
9.2
37.5
2.1
1988
4.2
14.8
11.3
17.6
7.5
36.4
2.5
1989
3.5
13.6
10.2
17.0
8.2
35.4
3.1
1990
3.6
16.9
9.0
15.9
8.0
33.0
2.2
1991
2.5
10.2
7.0
12.3
5.9
25.2
1.5
1992
3.3
14.0
9.2
14.7
12.8
36.8
2.9
1993
3.4
12.0
9.2
17.0
16.1
42.3
1.1
1994
3.8
12.9
10.0
19.5
15.0
44.5
2.3

Source: see annex

*This includes housing, rural and urban development, labor and social pensions (the latter is the most significant), and excludes military and police pensions.

In the 26 years studied, defense spending displaced social spending five times (1970, 1977, 1981, 1985 and 1988). In each of these years, total social spending decreased, even though in some years not all categories (health, education and other social spending) decreased percentagewise. In the same period, public investment was displaced seven times (1975, 1977, 1982, 1983, 1984, 1985 and 1994). Second, in the years with the worst financial disequilibria (central government deficits between 1980 and 1985: see Table 4), the national defense budget rose from 9.3 percent to 21 percent of government spending, while health expenditures decreased from 11.4 percent to 7.3 percent. This was the period of the most severe displacement of social spending.

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