Peace dividend

While economies do undergo a recession after the end of a major conflict as the economy is forced to adjust and retool, a "peace dividend" refers to a potential long-term benefit as budgets for defense spending are assumed to be at least partially redirected to social programs and/or a decrease in taxation rates. The existence of a peace dividend in real economies is still debated, but some research points to its reality.[2]

A political discussion about the peace dividend resulting from the end of the Cold War involves a debate about which countries have actually scaled back military spending and which have not. The scale back in defense spending was mainly noticeable in Western Europe and in the Russian Federation. The United States, whose military spending was rapidly reducing between 1985 and 1993 and remained flat between 1993 and 1999,[3] increased strongly after the September 11 attacks, funding conflicts including the War on Terror, the War in Afghanistan and the War in Iraq.

US intellectual Noam Chomsky has on the contrary argued that US's oversized investment into military complex was not due to security reason, but rather a politically consensual mechanism to subsidize technological innovation via massive public military spending to the benefice of corporations of this industry and their partners.[4] There is therefore, in US, no interest toward a peace dividend when peace arrives. On contrary, the fall of the SSR allowed the US to look for new external wars[5] to justify the desired military spending at home.

EU countries like Germany has for a long while been reducing the military spending.[6] With a NATO average spending in 1989 being 4% of GDP. With the number of Tanks and equipment having been slashed alongside spending. In 2014 that same spending had dropped to 1.4%. With Washington Post describing the same Germany as mentioned above, as having the most "stunning" turn-around, in post-2022.[7] The peace dividend also affected the structure of Europe's militaries. Many European countries abolished conscription and moved to professional armies.[8] The peace dividend does not only show in the military sphere, but also in the economic. When the Russian 2022 invasion of Ukraine began, it was laid bare how unprepared and depended some European countries where on Russian energy and raw materials. Such as Gemany having to scramble to build new LNG terminals.[9] Another vurlnability is pipelines and other infrastructure running on the seabed, evidenced by the Nord Stream explosions.[10] The Nord Stream incidents have highlighted similar threats to "critical infrastructure", such as against the energy network or the information network, like undersea cabels.[11]

While some countries in Europe, such Finland, didn't abolish it's conscription and it bought many of the weapons of the disarming nations, such as buying M270 and Leopard tanks from the Netherlands.[12][13] Although, even though these aspects, Finland too had its defense budget go under 2% in the post-cold war period.[14] While Sweden abolished it's conscription and re-established it again after Russian annexation in Crimea and has since the 2022 invasion reinforced it further.

Brugel estimates that the peace dividen has benefited Europe by 4,200 billion € over a 30 year period.[15]

The logic behind not spending money on threats like these outlined, is thought to spur economic growth, by freeing up the spending onto other things.[16] The Conversation states that the peace dividend helped finance the British welfare state, stating; "The UK currently spends slightly over 2% of GDP on defence each year, amounting to some £45 billion in 2021, or about £660 per person. This has fallen substantially over time. In the mid-1950s, the UK spent almost 8% of GDP on defence. That fell to about 4% in 1980, 3% in 1990, and around 2% today. At the same time, spending on the health service has grown from around 3% of GDP in the mid-1950s to more than 7% on the eve of the pandemic."[17] While the peace dividend was criticized earlier in the 1990s, but only now with the a war launched by Russia, has the peace dividend come to the fore of societal discussion and countries spending on preventing threats, as outlined above, started to increase.[18][19][20] Not everyone has criticized the peace dividend as a negative; "This study found that the results varied according to national characteristics and regional environmental characteristics. However, peace dividends generally had a significant impact on national productivity." - according to one research paper[21]

According to Forbes, the US helped win the Cold War with a high defense spending. Defense spending has decreased since the end of the cold war, in comparison total federal spending. Stating; "This assessment proved to be accurate, as defense outlays as a share of total federal spending declined thereafter. The decade of the 1990s, in turn, was marked by above-average economic growth of more than 3.5% per annum, low inflation and a federal budget surplus by the end of the decade."[22]