Quick Bites | The End of the Peace Dividend

Following the collapse of the Berlin Wall in 1989 and the disintegration of the Soviet Union in 1991, there were celebrations in the West that we had won the Cold War, and that a “Peace Dividend” was now available. We could trade guns for butter, and the era of reducing defence spending in favour of social security commenced. But now we see a reversal ahead.

The world is entering a new era with perhaps 2024 marking that inflexion point.

Source: The Economist 


Russia invaded Ukraine and threatens other nearby countries such as Georgia, Lithuania and Poland. China seeks to intimidate Taiwan and attempts to coerce its neighbours into controlling the China Sea. North Korea is constantly belligerent towards South Korea and Japan. Iran uses proxies Hamas, Hezbollah and the Houthis to create crises in the Middle East, and now one of the world’s most important trade arteries in the Red Sea is becoming too risky to navigate. Many North African countries are failed states, with hundreds of thousands if not millions of refugees on the move, seeking to escape zones of conflict and gain entry into Europe.

Source: The Economist 


UK Defense Secretary Grant Shapps said recently:

“Now is the time for all allied and democratic nations across the world to ensure their defence spending is growing… the era of the peace dividend is over. In five years’ time, we could be looking at multiple theaters involving Russia, China, Iran and North Korea.”

“We find ourselves at the dawn of a new era… The Berlin Wall is a distant memory and we have come full circle, moving from a post-war to a pre-war world. An age of idealism has been replaced by a period of hard-headed realism. Today, our adversaries are busily rebuilding their barriers. Old enemies are reanimated. New foes are taking shape. Battle lines are being redrawn. The tanks are literally on Europe’s Ukrainian lawn. And the foundations of the world order are being shaken to their core… We stand at this crossroads – whether to surrender to a sea of troubles, or do everything we can to deter the danger. I believe that, in reality, it’s no choice at all. To guarantee our freedoms, we must be prepared.”

Source: The Economist 


The call for increases in defence spending comes at a time when many Western economies are under pressure from giant debt loads and higher interest rates. Over the past few decades, most Western and European countries have cut back even further due to budget deficits and a reliance on the US security umbrella. Shifting funds away from areas like health, education and infrastructure – or implementing higher taxes and spending cuts – won’t be popular. Whether Joe Biden or Donald Trump wins in November, American military spending is likely to rise at a fast rate no matter who is in office. The same should be true for Australia.



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