Tapping the peace dividend



There were hopes when the Cold War came to an end that reductions in arms expenditure, in both developed and developing countries, would release large sums for investment in development. This has still to happen.

Global military spending has fallen sharply - from a peak of US$ 995 000 million in 1987 to US$ 767 000 million in 1994 (at constant 1991 prices). This cut, an average of 4 percent a year over the period, yielded a saving of US$ 935 000 million. But little of it has been spent on human or sustainable development. The United States and the countries of the former Soviet Union have led the way in reducing spending, but in the former most of the savings have gone to reduce the overall budget deficit and national debt, while in the latter they have been largely swallowed up in economic crisis.

The potential for tapping the peace dividend, however, remains. Military spending still places a large burden on the world's resources and is equal to the total income of almost half the world's people. The 1994 Human Development Report estimated that a further 12 percent reduction would release enough money to provide safe drinking water and primary health care (including the immunization of children) for the entire world population, eliminate severe undernutrition and cut moderate undernutrition by half. An earlier report estimated that continuing to reduce military spending by a further 3-4 percent a year while earmarking one-quarter of the savings for aid, would raise official development assistance to meet the UN target of 0.7 percent of GNP and still leave a substantial amount to spare for use at home.

Considerable scope also exists for tapping the peace dividend by cutting military expenditure in developing countries. Their spending rose by 7.5 percent a year between 1960 and 1987, almost three times as fast as in developed countries, while their share in global expenditure more than doubled from 7 percent to 15 percent. So far they have undertaken little disarmament.

The establishment of a Global Demilitarization Fund under international jurisdiction has been proposed by Oscar Arias, the former President of Costa Rica and winner of the 1987 Nobel Peace Prize. He suggests using a proportion of the peace dividend to achieve further cuts in expenditures. All countries would commit themselves to reducing military spending by at least 3 percent a year: developed ones would give perhaps one-fifth, and developing countries perhaps one-tenth, of their savings to the Fund. This would then be used to reward the efforts primarily, but not exclusively, of developing countries to disarm and demobilize.


World military spending

World military spending in 1992 (US$ 815 000 million) equalled the income of 49 percent of the world's people


Global military expenditure and the peace divided

Total military spending in developing countries, 1992

Source: Human Development Report, 1994


A global tax for development

As official aid shrinks, development experts are proposing new ways of raising the money to fund development. These could be less dependent on the changing priorities of donor countries and their governments. Many envisage new forms of international taxation.

A global income tax has been proposed, as has a world tax on the use of such shared resources as the oceans (for fishing, transport or mining seabed minerals), the Antarctic (for mining) or space (for communications satellites). There are also various proposals for pollution taxes, particularly on emissions of carbon dioxide, the main contributor to global warming: some countries already have domestic carbon taxes in place.

Professor James Tobin

Professor James Tobin , winner of the 1981 Nobel Prize for Economic Sciences, has proposed a worldwide tax on international currency transactions, which now amount to US$ 1 000 000 million a day. A levy of just 0.5 percent on each transaction would raise over US$ 1 500 000 million a year. He says that such a tax would slow down speculative movements of capital, while not being heavy enough to deter commodity trade or serious international capital commitments. The proceeds would be devoted to international purposes and placed at the disposal of international institutions.