The Peace Dividend

The peace dividend is generally referred to as the economic benefits derived from the end of the Cold War. The Cold War officially ended in 1991 when the Soviet Union collapsed, ending nearly fifty years of military competition between the two superpowers (USSR versus USA). The immense resources spent on the arms race between the two superpowers were supposed to be re-diverted for peaceful purpose such as economic development. What benefits have we seen so far? How should we view the benefits? Let me try to examine some major consequences.

As you know, the quickest reaction must have come from the stock market due to optimism about the end of the Cold War. Coupled with the commercialization of the Internet, a huge bubble began to develop that eventually burst in 2000. This is known as the dot-com, information technology, or simply the Internet bubble. It is difficult to see the benefits derived from the stock market because millions of small players had lost money to a tiny fraction of big players who were responsible for creating the bubble in the first place.

The biggest benefit is perhaps the reduction of nuclear weapons targeted at each other between the two superpowers. In the late 1980s, they possessed a total of more than 70,000 nuclear warheads, enough to destroy the whole world several times over. Nowadays, this number has been drastically cut down to about 20,000. Although a nuclear holocaust still looms, the large reduction of nuclear weapons on both sides represents the single most obvious improvement from the insane peak levels during the last years of the Cold War.

No other country has benefited from the peace dividend more than Germany. The Soviet collapse made German re-unification possible. Its population now exceeds 80 million, the largest in Europe after Russia. Although billions of dollars were spent to absorb the eastern part, former West Germany ended up gaining more land and a large labor force that it desperately needed for industrial growth. One subtle benefit is that a reunited Germany regained its confidence shattered after being defeated in the Second World War. Together with France, both countries were able to push ahead with monetary union in Europe, to form a eurozone with membership consisting of 17 countries.

Another group of states benefiting from the peace dividend is the former European satellites of the USSR such as Lithuania, Hungary, Poland, Czechoslovakia, and so on. After the departure of Soviet forces, they have gradually moved to embrace market economies. Some of them have joined NATO and the European Union, benefiting from close association with other democracies in Europe.

Some former European satellites such as Yugoslavia, Romania and Albania went through a turbulent transition due to ethnic conflicts exploding after the communist regimes collapsed. Yugoslavia finally disintegrated along ethnic fault lines, giving birth to a few more independent states.

Within the USSR, a number of states split away and became independent such as Ukraine, Georgia and Belarus. These countries have survived mostly on their own, but under heavy influence, perhaps continuous dependence on neighboring Russia.

Cuba has probably suffered most after the Soviet Union imploded. Cuba used to be a Soviet client state receiving all kinds of aids. Fortunately, new friends such as Venezuela and China have come to offer some relief to the Cuban economy.

The US came out an obvious winner of the Cold War, and could not help trumpet the strength of its market system. Due to the Internet boom, the US economy went through a period of high growth and high employment during the 1990s. As a result, a large federal surplus was accumulated at the end of the decade amounting to $530 billion, which is unheard of for many years in recent history.

Overall, the peace dividend is more apparent for the US and Europe than anywhere else. On the other hand, there is a much bigger force that has begun to change the world. This force is known as globalization. Globalization cannot go far without the personal computer, the Internet and the cell phone. Now, could Internet have spread this far if the Cold War was still raging and the Soviet empire remained closed and isolated? I doubt it. Therefore, the Internet can be regarded partly as a peace dividend derived from the end of the Cold War.

It is widely known that many commercial technologies in the US originated from military research. The most obvious ones are nuclear power, aircraft/space technology, global positioning system (GPS), and the Internet that was first used to connect the supercomputers in military research. Should they be considered peace dividends as well? Why not, as long as the civilian sector benefits from them for peaceful purpose.

I’ve also read a story about the US military being one of the first to adopt solar power. In the Iraq war for instance, everything is in tight supply except plenty of sun. Without solar power, all army units must rely on fuels continuously supplied by truck convoys that are easy targets of roadside bombs. Adopting solar energy is a life and death decision rather than a commercial one. As a result, solar power is used wherever possible for the maintenance of army units and bases. In addition, some type of military vehicles and boats are being developed to run on solar or hybrid power. When the military solar technologies later cross the line into the civilian sector, they will become peace dividends as well.

(July 2011)

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