The peace dividend is an approach to national budgeting where funding for military purposes is reduced in the interests of decreasing taxes or increasing funding to social services. Proponents of the peace dividend argue that it provides economic benefits, keeping nations strong in periods of peace. Various nations have adopted this tactic, or the reverse, arguing that increases to military spending keep nations safer and promote the development of new technology with potential civilian applications.
Military spending tends to increase during times of war, often taking money away from social programs. The economy may boom as a result of increased demand for military materiel and other supplies, but when the nation returns to peacetime, economic slumps can occur as people readjust. By setting up a peace dividend, where money is routed back into social programs, nations can address concerns about wavering economies by promoting social programs and supporting the population.
This concept is closely linked with the concept known as the guns versus butter theory. Under this theory, a very simplified model of government spending, people presuppose that the government can either spend money on military matters or on the development of goods. If the government allocates too much to the military, goods production will suffer and the populace may experience hardships. Conversely, spending too much on goods and not enough on the military may leave a country vulnerable to attack.
Military spending is a controversial topic worldwide. Some organizations concerned with social justice believe that it is excessive and have argued for a peace dividend, reallocating funds to serve the general public. Military budgeting can be complex, and it is made more difficult to understand by the need for security, leading to obscurity when it comes to disclosures about how, when, and where funds are used by the military. The presence of nebulous budgets for unknown purposes, often utilizing unclear amounts of money, makes some economists, as well as activists, uneasy.
People also argue that the peace dividend, by promoting economic strength and providing social services to more citizens, can have the effect of also protecting national security. Happy citizens with access to goods and services tend to be less likely to engage in unrest. In nations where social services are failing, unrest is common and it can sometimes be violent as people engage in protests, sabotage, and other activities in an attempt to address social and economic disparities.