Guns and Roses: Hard Power, Soft Power and Economic Growth

Abstract

Growth remains the holy grail of economics. Although our understanding of long-term growth dynamics has advanced considerably, the question of why some countries grow faster than others continues to be a critical area of empirical inquiry. This paper represents the first comprehensive attempt in literature to examine the relationship between hard power, soft power and economic growth across a broad panel of countries. Although previous research has explored the connection between military power and economic growth, the findings regarding this relationship remain inconclusive. Additionally, there is a notable gap in literature concerning the economic effects of soft power. To address this gap, we utilise the multidimensional Global Soft Power Index (GSPI) developed by Cevik and Padilha and apply a range of econometric methodologies to ensure a robust and granular analysis. Our findings indicate that soft power, as measured by the GSPI, exerts a statistically significant and positive impact on long-term economic growth. In contrast, military spending appears to have no significant effect and is negatively correlated with growth. Importantly, the economic influence of soft power is more pronounced in developing countries than in advanced economies. Disaggregating the GSPI reveals that certain dimensions—Commercial Prowess, Culture, Digital Footprint and Global Reach—have a stronger effect on growth than others, such as Education and Institutions, likely reflecting the slower-moving nature of the latter components. Overall, the results highlight the critical role of soft power in shaping growth trajectories, particularly in contexts where traditional growth drivers are less entrenched.