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Economic Impact of Naval Forward Presence: Benefits, Linkage and Future Prospects as Modified by Trends in Globalization

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Technical rept.

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The study extends the analysis of the economic benefits of naval forward presence undertaken by the Naval Postgraduate School in two previous studies QDR97 and FY 2000. The first of those studies developed an operational methodology for quantifying these benefits. Drawing on that methodology, significant economic benefits were found associated with naval operations in the Arabian Gulf The second study expanded the QDR97 effort in several important directions. First, event analysis was introduced to link naval activity with price movements in key commodity, exchange, and share markets. Second, several additional cases, one not directly involving oil, were developed to assess the generality of our findings. The findings of the first study were confirmed with naval forward presencecrisis response shown to produce extensive economic benefits for the US economy in each of the cases examined. The current study places the two previous ones in a larger context Here the linkages between naval forward presencecrisis response and oil prices are examined in the context of changes in the global economy and the various dimensions of globalization. An operational procedure is developed to measure the various facets of globalization and track their movements over time. The magnitude of oil price shocks effect on domestic economies is shown to depend critically on the global environment in which they occur. In all, the three studies paint a similar picture-that of naval forward presence playing an increasingly important role in stabilizing the economies of the advanced industrial nations. Other parts of the world benefit also, although trends in globalization suggest the economic gains that accrue from naval forward presence are of a lower magnitude.

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  • Military Forces and Organizations
  • Military Operations, Strategy and Tactics

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