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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.

Real or not?

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.[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 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,[2] has dramatically increased it after September 11, 2001 to fund conflicts like the War on Terror, War in Afghanistan and the War in Iraq.

Other uses

"Peace dividend" can also refer to the improved economy in Northern Ireland after the signing of the Good Friday Agreement.[3]

See also

  • Have one's cake and eat it too
  • Opportunity cost
  • Scarcity
  • Tax choice
  • There ain't no such thing as a free lunch
  • Trade-off


  1. Sanjeev Gupta, Benedict Clements, Rina Bhattacharya, and Shamit Chakravarti (2002), "The Elusive Peace Dividend" at Finance & Development, a quarterly magazine of the IMF.
  2. "U.S. military spending". National Priorities Project. 
  3. Saul, Jonathan (5 May 2008). "Northern Ireland looks to make peace dividend pay". Reuters. Thomson Reuters. Retrieved 22 October 2012. "Northern Ireland's authorities hope that era, which claimed over 3,600 lives and was known as The Troubles, is now closed, and they say they are already reaping a peace dividend. In the past 10 years, over 100,000 jobs have been created, and the unemployment rate now stands at around 4.2 percent, below the UK average of about 5.2 percent. Economic growth in Northern Ireland averaged around 2.9 to 3 percent from 1996 to 2007, which was above the United Kingdom's average of around 2.8 percent." 

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