Peace dividend

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The peace dividend is a political slogan popularized by US President George H.W. Bush and UK Prime Minister Margaret Thatcher in the early 1990s, purporting to describe the economic benefit of a decrease in defense spending. It is used primarily in discussions relating to the guns versus butter theory. The term was frequently used at the end of the Cold War, when many Western nations significantly cut military spending.

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 economic growth. The existence of a peace dividend in real economies is still debated, but some research points to its reality^[1].

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 defence spending was mainly noticeable in Western Europe and originally in the Russian Federation. The United States, which substantially reduced its military spending after the Cold War, has dramatically increased it after September 11 in response to conflicts like the War on Terror and the War in Iraq.

While European observers have criticized the US for not scaling back its defence spending, US politicians and commentators have accused Europe of freeriding on their defence budget.

"Peace dividend" can also refer to the improved economy in Northern Ireland after the signing of the Good Friday Agreement.

[edit] Notes

1. ^ Sanjeev Gupta, Benedict Clements, Rina Bhattacharya, and Shamit Chakravarti, "The Elusive Peace Dividend", http://www.imf.org/external/pubs/ft/fandd/2002/12/gupta.htm