This paper builds on existing studies to expand understanding of the effects of unemployment on the foreign policies of countries around the world. It has often been proposed that political leaders may attempt to distract attention from domestic problems by provoking external conflict. Empirical tests have often focused on the association of high unemployment with belligerent, militarised foreign policy. The extant literature appears to share a common assumption that such diversionary foreign policy occurs only in large, powerful democracies. The purpose of this paper is to test these assumptions using the latest available data and appropriate statistical techniques. In particular, I test the effect of unemployment on interstate conflict and on levels of defence expenditure. I find that diversionary conflict is common to all states, and that democracies are actually less prone to such behaviour than non-democracies.