The Peace Dividend

Although conventional wisdom suggests that reducing military spending may improve a country’s economic growth performance, empirical studies have produced ambiguous results. This paper extends a standard growth model and estimates it using techniques that exploit both cross-section and time-series dimensions of available data to obtain consistent estimates of the growth-retarding effects of military spending via its adverse impact on capital formation and resource allocation. Model simulations suggest that a substantial long-run “Peace Dividend”--in the form of higher capacity output--may result from: (i) markedly lower military expenditure levels achieved in most regions during the late 1980s; and (ii) further military spending cuts that would be possible in the future if a global peace could be secured.

From a cold war peak of some $1000 billion per annum, world military expenditure has declined by about 40% since 1990, reaching its lowest level for thirty years. With such significant decline in global public expenditure committments to the defence sector, a substantial and lasting peace dividend was anticipated. Most governments believed that market forces, left more or less to their own devices, would deal effectively with this major exogenous shock and generate sufficient new economic activity to allow increased public expenditure on health, education and welfare. The approach of this book is to challenge the fundamental but flawed belief that a substantial and lasting peace dividend could be secured through market solution alone. The principal assertion is that market adjustment by itself cannot deliver such a dividend.The book focuses on the major aspects of the economic, business and security consequences of post Cold War defence expenditure reduction. Key problems obstructing optimal market response are identified and possible remedial action by government and others is considered.

This book tracks the progress of 12 countries on five continents in moving resources from defense to civilian activity in the 1990s. Based on intensive research, it addresses each country with an impressive standard of scholarship.

The end of the Cold War has ushered in significant changes in worldwide military spending. This paper finds that the easing of (1) international tensions, (2) regional tensions, and (3) the existence of IMF-supported programs are related to lower military spending and a higher share of nonmilitary spending in total government outlays. These factors account for up to 66 percent, 26 percent, and 11 percent of the decline in military spending, respectively. Furthermore, fiscal adjustment has implied a larger cut in military spending of countries with IMF-supported programs.

With the collapse of the Soviet Union in 1992, American citizens were promised a ""peace dividend"", i.e. less money for war, more for peace and a good life for all. The U.S. military under misguided leadership has attacked eight countries since then. The defense budget has exploded, buying a lot of junk that doesn't work and military hardware we don't need. This is not pocket change. The fraudulent wars and waste by the military amounts to no less than $4.82 trillion! This is money U.S. citizens paid as taxes in good faith, trusting their leaders were telling them the truth. They weren't. They lied to us! The $4.82 trillion was taken under fraudulent terms, and squandered. Our ""peace dividend"" is now due and payable. This equates to $14,952 for each and every living U.S. citizen. A family of four will get a refund of over $59,800. This short book explains how we can get our money back and put America back on a path of peace and prosperity for future generations.