What Is a Peace Dividend?

A peace dividend is an economic boost that a country will get from a peace that follows a war. In theory, at that time the government can afford to reduce defense spending and reallocate the money to domestic poli🌌cy pri🐼orities.

This assumes that the money recouped from defense spending is generally used for the good of society and human or 澳洲幸运5官方开奖结果体彩网:sustainable development—projects that involve new housing, e♒duca𓂃tion, and healthcare, for example.

A peace dividend also may refer to a rise in 澳洲幸运5官方开奖结果体彩网:market sentiment, which in turn sparks an increase in stock prices after a war ends or a major threat to national security🌼 h🍌as been eliminated.

Understanding a Peace Dividend

According to the Oxford English Dictionary, the phrase “peace dividend” was first used in Fortune magazine in 1968: “In Washington, the magic phrase is ‘the Peace Dividend’ ... .”

At the time, American policymakers were looking forward to the fall of 澳洲幸运5官方开奖结果体彩网:communism in Southeast Asia and the markets that would be opened for American corporations. They also assumed that the spending associated with the Vietnam War would be diverted into public projects once the war was over following the “澳洲幸运5官方开奖结果体彩网:guns and butter” theory&nbs🐽p;popularized by macrꦡoeconomists in the mid-20th century.

Richard Nixon, in his acceptance speech for the Republican nominat🐻ion for president of the United States in 1972, made both these points:

Unfortunately, the continued growth of U.S. ꦇinflation in the 1970s the money saved from the end of the military operation in Vietnam. But the idea that opening markets for U.S. interests would have economic benefits carried over to later presidents and became a rationale for winning the Cold War conflict.

In 1992, U.S. President George H.W. Bush to cut military spending after the West had witnessed the collapse of the Soviet Union and the U.S. had won a lightning military victory over Saddam Hussein in the first Gulf War. The resulting peace dividend was intended to cut military spending by over 3.3% after inflation and reallocate the money to domestic programs.

The field of Democrat contenders that year wanted to cut the defense budget even further, with Bill Clinton calling for $140 billion in savings “by trimming federal bureaucracy and slashing the military budget.” Clinton won the election, but his opportunity to realign the budget never produced any tangible results.

If there has been a peace dividend, it has been in the enormous growth of the world economy in the wake of globalization from 1991 to the present, especially inജ East Asia, Sout😼heast Asia, and Brazil.

Why a Peace Dividend Is Difficult to Realize

In theory, a peace dividend makes 🦩sense as a positive result of ending a war, but in practice, it is not easy for a peace dividend to become a reality🎀.

In the U.S., the buildup to both World War I and World War II created economic booms. When the U.S. entered World War I, it was in 澳洲幸运5官方开奖结果体彩网:recession, but “a 44-month economic boom ensued from 1914 to 1918, first as Europeans began purchasing U.S. goods for the war and later as the United States itself joined the battle.” The government also borrowed extensively to finance the war effort, which also stimulated the economy.

During the Vietnam era, increased military spending and government borrowing overheated the economy and led to 澳洲幸运5官方开奖结果体彩网:inflation, but prolonged defense spending also created entrenched economic interests that argued demobilization would kill jobs and industries. There are potential major gains from reduced defense spending, particularly over the long term; but in the short term, defense cuts typically lead to the unemployment or underemployment of labor, capital, and other resources.

In the 1980s, President Ronald Reagan’s defense spending, including the “star wars” missile system, was a break with the tradition of red🤪ucing spending after the end of a conflict. In the 2000s and 2010s, administrations from George W. Bush to Barack Obama maintained high levels of defense spending to fight the global war on terror. Then-President Donald Trump showed, despite his isolationist rhetoric, that his administration presided over the largest defense budgets in history.

As James Miller and Michael O’Hanlon claim, “In early December 2018, Trump went as far as to call current levels of U.S. defense spending ‘crazy,’ only to announce plans for a $750 billion defense budget just a week later.”

Trump returned to office in January 2025 and called for NATO allies to increase their defense spending. If the U.S. itself meets Trump’s target—5% of 澳洲幸运5官方开奖结果体彩网:gross domestic product (GDP)—then the annual defense budget could top $1 trillion.

In Western Europe, the transitional costs of the end of the Cold War, combined with the inadequacy of government responses, made most countries there worse, not better, off. Defense c🔜uts took place in an unplanned flurry, with little coordination between state and industry, or among governments.

Peace Dividends and Inequality

The 澳洲幸运5官方开奖结果体彩网:global financial crisis of 2008 also drew into question the validity of a peace dividend. After nearly two decades of global economic growth, the polit🅷ical and economic unity that was the foundation of a recurring peace dividend was shaken by populist movements. These populist movements have been seen around the world, from Tꦆrump in the U.S. to Marine Le Pen in France to Geert Wilders in the Netherlands to Narendra Modi in India.

Discontent among the people left behind, both those in 澳洲幸运5官方开奖结果体彩网:developed countries who live in rural areas and still 澳洲幸运5官方开奖结果体彩网:developing countries over the uneven distribution of goods secured duri💯ng the peace, promises more political instability and perhaps an end to the peace. As Sanjeev Gupta, Benedict Clements, Rina Bhattacharya, and Shamit Chakravarti have , the movement from peace to war can be very harmful to economic growth, although the stock mark🤡et of the country at war may not react immediately.

In the final analysis, the peace dividend, if it exists, has not been deposited or enjoyed. This is primarily best seen in the continuing global conflicts that the U.S. has been involved in over the past two decades. These include the war in Afghanistan, the crisis in Iraq, the rise of ISIS, and the civil war in Syria, all while 澳洲幸运5官方开奖结果体彩网:inequality in the country continues to widen.

The Bottom Line

A peace dividend is the hypo💦thetical boost to a country’s economy in the peace that follows a war. This assumes that the government can afford to reduce defense spending and reallocate the money to projects for the good of society and human or sustainable development.