Introduction

Critics of arms spending focus on the economic benefits of disarmament and the prospects of a peace dividend. There are, of course, other non-economic benefits of disarmament, namely, peace itself and the creation of a safer world. Defence and peace have a common feature in that both are public goods. My consumption of peace is not at the expense of your consumption of peace, and once provided, peace is available to everyone (known as non-rivalry and non-excludability).

A recent experience of major disarmament occurred with the end of the Cold War in 1991. The US and the former Soviet Union, and their associated military alliances (NATO, the Warsaw Pact), ended their Cold War arms race and made major reductions in their arms spending. The result was a new security environment with prospects of a peace dividend from reduced arms spending. Was such a peace dividend achieved? How large was it? And what were the problems in realizing a peace dividend (Gleditsch 1996)?

The economics of conflict: the case for disarmament and peace

The costs and consequences of conflict provide the mirror image of the case for disarmament and peace. Peace allows the successful development of capitalist market economies and other types of economy. A starting point for analysis requires consideration of the impact of wars on market economies. In peace time, these rely on the price mechanism to allocate scarce resources to promote beneficial trade and exchange both within and between nations. Voluntary trading is beneficial to both buyers and sellers, with markets promoting creative power reflected in the growth of output (i.e. more goods and services).

Wars use military force to reallocate resources from losers to winners (cf. theft). Wars arise where a nation uses military force to acquire resources owned by another nation (e.g., land, water, oil, minerals), or they might arise from national pride, or from prejudice, a desire for revenge or from mistakes. Conflict destroys markets, leading to chaos and disequilibrium with a focus on destructive power and society becoming worse off. Wars result in the death of and injuries to military and civilian personnel on both sides, as well as the destruction of military and civilian infrastructure and housing (roads, bridges, hospitals and schools) and the loss of freedoms for the defeated nation.