Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit

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The peace dividend was an idea popularised by George Bush Sr. and Margaret Thatcher in the

wake of the collapse of the Soviet Union. The term was used to describe the economic benefits of reduced defence spending.

It meant different things to different people, to some it meant lower taxes,

but the most common interpretation was that government spending on social needs would increase

as defence spending was cut.

After the fall of the Berlin Wall, Western countries did indeed spend a lower and lower share

of their GDP on defence, which you can see in this chart.

And if we look at defence spending as a multiple of healthcare spending, we can see that in both the United

States and the UK, the peace dividend helped fund other popular spending priorities.

The trillions of dollars that had been spent on Cold War armies and weapons systems were

slowly being diverted to things like healthcare housing and schools.

In the 30 years since the fall of the Iron Curtain, Western democracies came to believe

that the era of global confrontation was in the past.

The new era, when security took a backseat to trade and economic growth, ended abruptly with Russia's

invasion of Ukraine last year. Of course, it's not just Russia. The US National Defense

Strategy released last year bluntly stated that China represents the most comprehensive

and serious challenge to US national security.

On top of that, the recent events in Israel and Gaza have the potential of turning into a larger

regional conflict. The threat of nuclear-armed Iran and North Korea continue to grow,

and instability in West Africa has reached a six-year high.

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