Where's the Peace Dividend?

"But any war is harvest to governments, however ruinous it may be to a nation. It serves to keep up deceitful expectations which prevent a people looking into defects and abuses of government"
Thomas Paine-Rights of Man (1792)

By Philip Demont | 1990-04-01 12:00:00

As the Cold War begins to fade into history, Paine's sentiments take on fresh meaning. For 45 years, the superpowers have hidden behind the veil of "the enemy threat" in order to justify increased spending on armaments. Instead ofcallmg government to account for neglected social priorities, the public too often raised the flag in a "my country right or wrong" show of patriotism. But, as Gorbachev forces the West to reassess its military posture, analysts are taking a new look at long-festering problems.

These days the air is thick with visions of drastic military cuts. The Soviet Union has said it would like to halve its defence expenditures by 1995. Likewise, the Bushadministration is talking reluctantly about cutting $180 billion from its projected military spending

THE PEACE DIVIDEND, the buzzword for reduced weapons expenditures, could force governments to stop ignoring vital but long-festering problems. Many of the roads and sewer systems in the United States are fast becoming unusable. Right now, nearly 16 per cent of the country's bridges are defective. In the Soviet Union, the newly freed press is highlighting severe environmental and social problems. Even Canada is staring at lakes filled with acid rain and growing poverty, all ofwhich could benefit from redirected government spending.

But, even as groups begin to line up at the doorsteps of governments with their hands out, a note of realism, or perhaps cynicism, is creeping back into the euphoria surrounding the end of the cold war.

The cold waler of analysis is indicating that the budgetary savings from reduced arms spending may be not as large as anticipated. As well, whether the government can solve all existing social ills with redirected military money is under fire.

STRUCTURAL IMPEDIMENTS are a major hindrance. Byzantine accounting procedures often gave military budgets a smoke and mirrors quality. For example, the large dollar amount that the Bush administration may cut from its military expenditures may refer to future expenditures, not present spending. Other fiscal trickery, such as altering the inflation rate built into departmental spending projections, can cut arms expenditures on paper without actually chopping a dime.

But bureaucratic tricks may not be the only cause of stubbornly high defence spending. Regional conflicts, such as in southeast Asia, continue to shift the 5 of military sotuernc;ion away from the superpowers' nuclear rivalry. Third world armies are likely to absorb more military resources than in the past. India, for instance, Ihas increased the budget of its armed forces by 72 per cent, to $8.8 billion (US) in 1988, up from $5.1 billion (US) in 1980. The government sees a bigger military as a way to add to the country's status as a regional superpower. Worse still, historical animosity between India and Pakistan is likely to lead to more defence spending by Pakistan, fearful of losing more ground militarily.

COMMERCIAL IMPERATIVES can buoy arms spending. The reliance of business on a healthy military industry indicates severe downsizing in the arms sector may lead to dislocation in other industries.

In 1988, NATO spent $403 million on military arms, according to figures from SIPRI Yearbook. In many of these countries, the importance of the military sector exceeds these expenditure numbers. For example, in the United States, between 1/3 to 1/2 of the money spent on industrial research and development are related to military spending. Reducing the amount spent on arms also lowers the level of high-tech research, at least for the time being.

In Canada, important commercial sectors, such as the aerospace industry, rely upon military dollars and contracts for development work. Cutting such monies will insure these industries suffer. Already members of the Aerospace Industries Association of Canada, an industry lobby group, are scrambling to find new commercial applications for their technology. But, as the economy moves into a slow-growth period, finding untried markets for their wares may be tough.

Many of these problems are the arms industry's own fault. Reliance on government largesse is tricky, especially in times of shifts in the political winds.

IN ONE SENSE, the woes of North America's weapons producers are welcome news to a peace community tired of government coddling of "arms merchants." But, such sentiments aside, the fact remains that, for many companies, which make money supplying the military machine, and, for many workers, the coming years may be full of hardship. As a result, political pressure will begin to build to keep arms spending at a high level. In areas such as Prince Edward Island, which sees its Summerside armed forces base closing after the last federal budget, the call already has been heard to keep the base open for regional development reasons.

Other political dilemmas may occur because of lower defence spending. For Canada, lower arms expenditures might remove the rationale for supporting high-tech sectors of the economy. In the darkest days of the Cold War, Ottawa could hide the subsidization of technologically advanced industries behind the "national interest" excuse. Now, in the era of free markets, the government may face more resistance to using taxpayers' cash to support industrialists whose products do not serve the Canadian good.

BUT MANY WOULD ARGUE that Ottawa and Washington should be using savings from lower military spending on socially important projects anyway. Urfortunately, however, often what shonld be isn't what is.

The commitment of the Canadian and American governments to lower the federal debt may insure that large portions of the realized savings are siphoned off to repay old borrowing, not fund new programs. The United States debt approached $241 billion in 1989, largely due to higher defence spending. It is likely, and perhaps even desirable, that part of the windfall from lower military expenditures be applied against the national debt. Such a move could, for example, lead to lower interest rates which would, in turn, reduce the debt service payments of third world countries.

But, even if the savings are less than expected, no one should be discouraged. The ideological walls, and arms budgets, have staited tumbling down. Even the Soviet bogeyman is not enough to keep Western defence spending at its present level.

At least a portion of the savings from lower military budgets is likely to find its way into other projects. Ottawa and Washington both realize they face tough social and economic problems which cannot wait for solutions.

What people should guard against, however, is light-headed thinking. Creating too ideal a vision about what could be, may lead to extreme disappointment when reality intrudes. Then cynicism, not government impediments, becomes the biggest obstacle to progress. After all, the public has to guard against trading in one set of Paine's "deceitful expectations" for another.

Philip DeMont is a writer speciaLizing in financial reporting.