Peace dividend was a political slogan popularized by US President George H. W. Bush and UK Prime Minister Margaret Thatcher in the light of the 1988–1991 dissolution of the Soviet Union, that described the economic benefit of a decrease in defense spending. The term was frequently used at the end of the Cold War, when many Western nations significantly cut military spending such as Britain's 1990 Options for Change defence review. However, despite reductions in defense spending in both the West and the former Soviet Union, a peace dividend proved elusive both because demilitarization is itself costly and because militarization is more complicated than simple extraction of resources from an economy. The term is closely related to the guns versus butter model.
In theory 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. 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 scaling back in defense spending was mainly noticeable in Western Europe and in the Russian Federation. Although United States military spending rapidly fell between 1985 and 1993 and remained flat between 1993 and 1999, it 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 argued that US military spending was not due to security reasons, but rather a politically consensual mechanism to subsidize technological innovation via massive public military spending to benefit defense corporations and their partners. Therefore, asserts Chomsky, there is no interest in the US toward a peace dividend when peace arrives. On the contrary, the fall of the USSR allowed the US to look for new external wars to justify the desired military spending at home.
In practice Over time, from the beginning of the Cold War to the present, the defense aspect has played a smaller or larger part of society, fluctuating according to different conditions.
Europe European nations were sharply criticized by a December 2023 Wall Street Journal article for the lack of progress on arming themselves since Russia's invasion of Ukraine in 2022. Examples it gave were Denmark having no heavy artillery or air defence, France only having 90 howitzers, and Germany only having two days of ammunition stored. Noting that West Germany used to have 7,000 tanks, the article pointed out that now-unified Germany has only 200. Also, military production is low in volume. EU countries like Germany have long been reducing their military spending. With a NATO member's average spending in 1989 being 4% of GDP, the number of tanks and equipment have been slashed alongside spending. In 2014 that same spending had dropped to 1.4%. The Washington Post described Germany as having the most "stunning" turnaround after 2022. The peace dividend also affected the structure of Europe's militaries. Many European countries abolished conscription and moved to professional armies. 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 dependent some European countries were on Russian energy and raw materials. Germany had to scramble to build new LNG terminals. Another vulnerability is pipelines and other infrastructure running on the seabed, evidenced by the Nord Stream explosions. The Nord Stream incidents have highlighted similar threats to "critical infrastructure", such as against the energy network or the information network, like undersea cables. Some countries in Europe, such as Finland, did not abolish their conscription and bought many weapons from the disarming nations, such as M270 and Leopard tanks from the Netherlands. Thus, Finland is amongst the better armed nations in Europe today, while the Netherlands receive criticism for not having tanks any longer. However, even with these aspects, Finland also had its defense budget go under 2% in the post-Cold War period. Sweden abolished its conscription, but re-established it again after the Russian annexation of Crimea and has since the 2022 invasion reinforced it further. Bruegel estimates that the peace dividend has benefited Europe by 4,200 billion € over a 30-year period. The logic behind not spending money on threats like those outlined is that it is thought to spur economic growth by freeing up defense spending for other things. The Conversation states that the peace dividend helped finance the British welfare state, noting that "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." While the peace dividend was somewhat criticized earlier in the 1990s, with the war launched by Russia against Ukraine, the peace dividend came to the fore of societal discussion and countries' spending on preventing threats started to increase. Not everyone has criticized the peace dividend as a negative; according to one research paper: "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."
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