Mahan in a New Millennium

Abstract: In 1890, the American naval officer and scholar Alfred Thayer Mahan formulated as a theory that seapower brings prosperity. This thesis in War Science tests whether Mahan’s theory remains valid in the modern day. A multi-disciplinary approach is taken, wherein a financial event study method is employed for hypothesis testing. Prosperity is the product of many factors that interact in complex systems. Consequently, isolating the positive contribution of seapower is difficult. Its influence is therefore inferred from its absence, in the form of failure to protect shipment of a key commodity. By the logic of the operationalisation, insufficient seapower results in attacks on shipping. Information of attacks is promptly reflected in asset prices on intensively traded financial markets. A negative change in a stock market index represents a reduction in the value of the traded assets. This in turn implies a negative contribution to national prosperity. Specifically, attacks on supertankers are used as empirical data. The ensuing impact is measured in first order effects on oil prices and second order effects on stock market returns. A strong correlation is found between attacks on supertankers and oil price shocks. A sufficiently strong impact is found on stock market returns to allow for arguing that Mahan’s theory retains validity. Given recent developments in major power relations, Mahanian postulates may be more in fashion now than in the previous century. The findings complement previous research on the benefits from seapower, naval presence and maritime security. In addition to general policy implications from exhibiting the significance of seapower, an elaboration on the current security situation’s ramifications for small states. Thereby it situates seapower in its grand strategic context.