Capital centralization, protectionism and increasing military expenditures: A SVAR/BVAR analysis

Giulia Chiara and Stefano Lucarelli

No 1_2026, STOREPapers from Associazione Italiana per la Storia dell'Economia Politica - StorEP

Abstract: This paper formalizes and empirically tests the causal transmission mechanism linking international capital centralization, macro-financial imbalances, protectionism, and systemic military escalation. We challenge the orthodox view of globalization as a self-stabilizing framework for peace, conceptualizing contemporary geoeconomic fragmentation through a theoretical framework stemming from the debate on global imbalances and the analytical revival of the Marxian tendential law of capital centralization. Integrating Structural Vector Autoregression (SVAR) and Bayesian Vector Autoregression (BVAR) models on historical time-series data (1998–2024), we estimate the dynamic interactions between net control, net international investment positions, a protectionism index, and military expenditure metrics across both a bilateral U.S.-China framework and an aggregated creditor-debtor group model. The empirical results confirm a statistically significant multi-stage causal sequence: an increase in capital centralization widens gaps in net international investment positions, prompting debtors to deploy protectionist measures to mitigate further capital centralization. Conversely, these protectionist shocks induce persistent, long-term positive impacts on the military expenditure of creditor states. Econometric evidence demonstrates that trade conflicts and rearmament are endogenous structural symptoms of the systemic motion of capital rather than exogenous diplomatic failures.

Keywords: Capital centralization; Protectionism; Military expenditure; SVAR and BVAR models (search for similar items in EconPapers)
JEL-codes: B51 C32 F51 P16 (search for similar items in EconPapers)
Date: 2026-10
New Economics Papers: this item is included in nep-cna and nep-ets
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