Klaipėdos universitetas

This paper discusses recent quantitative research on defence spending in interwar Lithuania, and provides a comparison between the burden of defence spending in Lithuania, Latvia, Estonia, Finland and Poland in 1924, 1938 and 1939, which are the only years with available data on the total expenditure in Lithuania. Although contemporary mainstream economic science does not consider the military sector as unproductive (it ‘produces’ security services), it still sees it as a burden to the economy, because defence spending decreases private consumption, along with private and public civil investment. Two indicators of this burden are discussed: the share of defence spending in total state spending, and the ratio of defence spending to gross national income (GNI) or gross domestic product (GDP). In recent research on defence spending in interwar Lithuania, only the size and changes in nominal expenditure have so far been measured, without taking into consideration changes in the purchasing power of the litas. The main findings of the application of the second indicator include the fact that among the Baltic countries (including Finland), the Latvian economy was most heavily burdened by defence spending in 1924–1925. On the eve of the Second World War, however, Lithuania became the leader.