Literature on the relationship between macroeconomic characteristics and fragility during periods of continued conflict is centred on:
- how economic conditions influence the duration of conflict;
- the growth effects of conflict;
- the mechanisms through which conflict influences growth;
- the sector-specific effects of conflict.
Average economic growth rates tend to be low in FCAS, and particularly in conflict situations. While GDP grew at an average of 4.6 per cent in other low-income countries in 2007, it averaged only 2.6 per cent in those countries defined as fragile (OECD 2009). Data from 1960-2000 suggests that longer conflicts are associated with conditions of low initial per capita income, high inequality, and a moderate degree of ethnic division; while shorter conflicts are associated with a decline in the prices of primary commodity exports and external military intervention on the side of the rebels (Collier et al. 2004).
A number of studies attempt to estimate the effect of conflict on economic growth. Collier and Hoeffler (2007) estimate that each year of conflict slows down per capita GDP growth by 2.2 per cent, with an additional 18 per cent of GDP on military spending during and after a war. Gates et al. (2012) produce a number of stimulations showing how conflict depresses GDP per capita. Polachek and Sevastianova (2010) find that the effect of conflict on growth is greater for high-intensity (measured by fatalities) conflict as well as for non-democracies, low-income countries and countries in Africa. Their findings further suggest that conflict depresses growth more significantly in the short term, as economies recover from the adverse effects in the long run. Imai and Weinstein (2000) find that wide-spread civil wars cost five times more than narrowly fought internal conflicts.
Collier (1999) suggests that mechanisms through which civil wars hurt the economy include the:
- destruction of resources;
- disruption of social order;
- diversion of public expenditure;
- discouragement of saving and investment; and the
- shifting of assets out of country.
If governments resort to inflation to raise revenue, as documented in the DRC (IMF 2001), the macroeconomic environment may further decline during civil war. Of course, this can further exacerbate post-conflict economic conditions (Adam 2008). Informal employment has been found to be a key livelihood source amongst urban populations in Kinshasa, DRC (Iyenda 2005), Afghanistan (Beall and Schutte 2006), and Sudan (Pantuliano et al. 2011).
Collier (1999) also shows that various sectors of the economy are differentially impacted by conflict. He argues that capital -intensive sectors, (manufacturing, construction etc.), tend to contract at a faster rate than GDP as whole, whereas labour-intensive sectors (subsistence agriculture), tend to expand. However others find that the agriculture sector also suffers during periods of conflict. Analysing conflict and food production trends in Sub-Saharan Africa over the period 1970-93, Messer et al. (1998) find that in 13 of 14 countries experiencing conflict, food production was lower during war years. Kimenyi et al. (2014) also identify adverse impacts of conflict on agriculture in Mali and Nigeria, including a reduction on human mobility, displaced labour; and access to input supplies and markets for sale to consumers.
Buchanan-Smith and Fadul (2008) find that the conflict in Darfur had a negative impact on traders including disrupted supplies, damaged market infrastructure and trader networks, and inflated transaction and transport costs. Increased government taxation in response to the contracting economy created incentives to trade illegally and businesses additionally faced ‘informal taxes’ to militias. As a result, an estimated 20-30 per cent of urban traders went out of business, livestock and cash crop trade contracted and the ethnic concentration of traders intensified.
Key debates on the relationship between meso-level economic characteristics and conflict include:
- how conflict constrains business activity;
- how the war economy can provide benefit to certain powerful interests;
- the ways in which business can contribute to peacebuilding;
- the context-specificity of the relationship.
FCAS tend to be poor environments for business operation, accounting for 20 of 25 of the worst countries in the world for ‘doing business’ (Peschka 2011). While the average cost of starting a business is 61 per cent of per capita GDP in other low-income countries and 26 per cent of GDP in middle-income countries, this figure rises to 184 per cent in conflict-affected countries in Africa (World Bank 2011). Collier and Duponchel (2010) argue that the most important impact of civil war violence on firms and employment is the disruption of production through the flight of employees; the unreliability of transport; and the fear of looting. Other challenges for business start-up and survival include infrastructural damage, though this may be limited if infrastructure in initially underdeveloped Collier and Duponchel (2010); market contraction; a lack of formal state protection; and extortion, illicit taxation and theft (Mallett and Slater 2012). The financial sector and who has access to finance can play a key factor in the length of a war (Addison et al. 2001).
Despite these adverse impacts, certain powerful economic interests benefit from profitable opportunities provided by conflict (Ballentine and Haufler 2009), which can influence the duration of conflict (Collier and Hoeffler 2002). Using country case studies, including Afghanistan, DRC, Nigeria, OPT and Somalia, Banfield et al. (2006) find that business responses to violent conflict are often mixed. Keen (2009) similarly points out that different kinds of business have different interests in peace. He notes that businesses with an interest in peace are those hindered by inhibited production and reduced local demand caused by war, which include most kinds of industrial and agricultural production and services.
However, some businesses, potentially those involved in the exploitation of low-technology and high value commodities that remain extractable during conflict, are deemed indifferent to peace. A minority of businesses, perhaps with access to means of violence, are more profitable during conflict and may therefore have an interest in preventing the re-establishment of state authority and being hostile to peace. These businesses may make higher profits from opportunities in food trading at times of artificially high food prices, arms trading, drug trading, and natural resource exploitation Keen (2009).
Since 1990 at least eighteen violent conflicts have been fuelled by the exploitation of natural resources, with at least forty percent of all intrastate conflicts having a link to natural resources over the last sixty years (UNEP 2009). The exploitation of natural resources and related environmental stresses play a role in phases of the conflict cycle (at a national and sub-national level), from contributing to the outbreak (e.g. Sudan, Liberia and Sierra Leone) and perpetuation of violence (e.g. Afghanistan, DRC, Somalia), to undermining prospects for peace. In Nigeria, the oil sector accounts for approximately 95 per cent of export earnings and over 80 per cent of federal government revenue, but for nearly two decades the Niger Delta oilfields have faced insurgency and conflict (Frances et al. 2011) with unemployment and underemployment rates higher than in any other part of Nigeria. Frances et al. (2011) identify multiple factors working against stability:
- structural factors the ways in which society, government, and the political economy work to make the region vulnerable to instability);
- driving factors (grievances that emerge from the structural factors) and;
- provocating factors (which exacerbate latent conflict by sparking violence and crime, often for profit).
The contribution of business to peacebuilding is another focus within the literature (see Ford 2015). Jyoti et al. (2006) suggest that the private sector can help build peace because it is able to mobilise resources, it is crucial to economic development, and it is ‘neutral. Although this concept of neutrality is contested by Keen (2009), Lyon et al. (2006) show how the marketplace in southern Nigeria can be a ‘mediation space’ facilitating reconciliation between disputing groups who must work together to secure livelihoods
Recognition that the ways in which businesses are intertwined with, and adapt to, conflict dynamics are complex (International Alert 2006a; 2006b) underscore debates around the contribution of business to peacebuilding. Yusuf (2006: 490) illustrates the conflicting roles of trade in Somalia which adapted to periods of chronic and the lack of effective government, stating:
‘While feeding into conflict and containing some elements of coercion, trade also contributes to the mending of broken ties and the removal of barriers between conflicting parties. Business interactions can create a culture of interdependency and reciprocity that underpin networks of cooperation in all aspects of business.’
Nenova and Harford (2004) argue that Somali entrepreneurs compensated for the lack of effective government regulation by ‘importing governance’ from foreign institutions; using clans and other local networks to assist with contract enforcement, payment and fund transmission; and simplifying transactions. In Afghanistan, while transport merchants backed the Taliban, they also frequently undermined its economic blockade of Hazarajat by keeping trading networks open (Goodhand 2004).
Understanding the structure of the political economy of a given context is therefore seen as crucial to identifying the mechanisms through which particular economic factors interact with conflict (Humphreys and Weinstein 2009). (Goodhand 2004) illustrates how Afghanistan’s drug economy has varying impacts on peacebuilding in different regions based on differences in power relations and models of extraction; strengthening centre-periphery political relationships in the north and enabling the Taliban to generate political capital in the south.
Literature on the micro-level consequences of conflict focus mainly on the:
- harmful consequences of conflict on the economic lives of individuals and households;
- resulting coping strategies employed by individuals and households;
- ways in which outcomes are heterogeneous within the affected population.
Mallett and Slater (2012) provide a detailed summary of the literature surrounding the processes by which conflict affects the economic lives of individuals, including the harmful depletion of physical capital, through infrastructural depletion and asset loss, as well as human capital. Blattman (2010) suggests that the extent of damage to physical capital depends on the nature and extent of the war, contrasting the limited effects of civil war in Ethiopia to the widespread losses experienced in Liberia. Evidence from northern Uganda suggests that conflict directly caused losses of cattle, homes and assets (Annan et al. 2006), and indirectly led to reductions in per capita expenditure due to increased perceptions of risk (Rockmore 2011). Research from the DRC also finds a reduction in household asset ownership and worsening living conditions for conflict-affected households (Pellillo 2012). As violence adversely impacts the kinds of assets a household can draw on (Lautze and Raven-Roberts 2006), it also affects the types of strategies they can employ to manage risk.
Human capital depletion – increased mortality and disability rates- results in a diminished labour stock (Blattman (2010); Mallett and Slater (2012), while also depressing the rate of human capital formation. Adverse effects include those on child health outcomes, such as height-for-age, which are correlated with productivity, wages and long-run growth (Deloach and Lamanna 2011), as well as its strong negative association with educational outcomes (Justino 2011). Even minor shocks to educational access can lead to long-lasting detrimental effects on human capital formation, with girls and secondary education affected disproportionately (Justino 2011).
Mallett and Slater (2012) highlight coping strategies including: risk minimisation (cultivating low risk, low value crops); risk avoidance (migrating to urban areas); risk spreading (diversifying income sources); and at times increasing engagement with markets (seeking arbitrage opportunities in and around Internally Displaced Persons Camps). In Darfur, Sri Lanka and the Occupied Palestinian Territories (OPT), farmers were found to minimise risk during conflict by avoiding the danger of open fields or extended periods away from home, and instead cultivating small plots of less labour-intensive crops (Jaspars and O’Callaghan 2010). Paradoxically, the decision to reduce mobility has been found to increase risk exposure for certain groups. Abdelnour et al. (2008) show that in Juba, men’s decisions to discontinue dangerous travel to collect firewood made households more dependent on income generated by women, whose activities exposed them to physical abuse and sexual violence. Some evidence suggests that young people opting to join insurgency groups do so with the hope to better provide for their families, as Seddon and Hussein (2002) illustrate in Nepal.
On the topic of risk avoidance, which often involves migration, Jacobsen (2002) argues that the livelihood strategies followed by displaced people depend on three types of resources: arable land, local resources and assets; transnational resources, such as capital or information; and resources from international assistance. Abdelnour et al. (2008) investigate how livelihood strategies differed before and after conflict for IDPs in Lobonok Camp in Juba. They make a link between changes in livelihood and grievance, finding that in an area of Darfur, the drastic change in the livelihoods of displaced people resulting from relocation to a camp caused feelings of injustice, loss, trauma and marginalisation.
Risk spreading through the diversification of income and consumption sources is another documented household coping strategy Mallett and Slater (2012). Jaspars and O’Callaghan (2010) found that IDPs in Darfur and in Sri Lanka resorted to small-scale income generating activities including brick making, collecting wood, domestic work, petty trade and wage labour during conflict. Families additionally spread themselves over a number of locations to pursue different activities and access an array of livelihood options. Some evidence suggests that social networks provide an important means for spreading risk during conflict, for example, travelling to markets in groups (Haver 2009). However, social networks and group cohesion may exclude some at the same time as they benefit others. Jacobsen (2002) argues that within-group clan affiliations were simultaneously important for livelihood support in camps in northern Kenya, and exacerbated tensions between groups attempting to protect or access common resources.
Studies from Somalia (Alinovi et al. 2007), DRC (Raeymaekers 2006), OPT (O’Callaghan et al. 2009), and IDP camps in northern Kenya (Jacobsen 2002) indicate the importance of access to markets for the sale and purchase of goods to sustain livelihoods. However, greater market engagement or changing livelihoods is also associated with risks. Tyler (2008) notes that women in Somalia turn to riskier livelihoods including rubbish collection and prostitution, whereas Jacobsen et al. (2001) observe that displaced persons in Khartoum engage in illegal practices such as brewing and prostitution.
Women are considered to be amongst the most vulnerable to negative impacts of war (see Human Security Centre 2005; Byrne 1996; Goldstein 2001). They are vulnerable directly, as fatalities and casualties, and indirectly through the breakdown of family and community structures – including as a result of men rejecting their wives if they have been raped, or being cast out of communities (or even killed) to restore honour (see Byrne 1996; Krug et al. 2001). In particular, women and girls are far more vulnerable to sexual assault and predation than men (HSR 2005). Bastick et al. (2007) observe that beyond the immediate effects of sexual violence, armed conflict can also have more indirect and long-term consequences, which persist once the conflict is over. Perpetuation of a tolerance of sexual abuse against women and girls is potentially fostered by unemployment, poverty and social exclusion as well as child witnesses to violence becoming more susceptible to the use of violence in their own relationships as adults (see Abrahams and Jewkes 2005; Kishor and Johnson 2005).
Brück and Schindler (2007) take a gendered focus, identifying three channels through which mass violent conflict affects households:
- boundaries may become permeable as members may die;
- livelihood earnings can become constrained
- intra-household relations and gender roles change with the allocation of tasks, particularly when women become the head of a household.
In post-war settings, female-headed households were found to comprise 30 percent or more of all households (El-Bushra 2003). Research by UN Women (2012) corroborates these findings, providing evidence that the percentage of female-headed households often increases during conflict. Paradoxically, at the same time as women become more vulnerable and dependent, their household and community welfare can increase because of greater participation in the labour force. This result is dependent on the type of work in which women engage. A key gap in the data on female headed households highlighted in this study is the poor quality of household survey data, which prevents quantitative econometric analyses comparable with other conflict literature.
Anderlini (2006) finds indicative data that households often increase in size following conflict. However, she highlights that this discussion almost entirely revolves around female-headed households, although even less is known about single male headed households, which may be worse off, as women tend to have better coping mechanisms.
There is a wide body of literature (Friedemann-Sánchez 2006; Petesch 2011) which aims to identify the drivers of progressive shifts in gender norms regarding women’s economic empowerment and their use and control of productive assets (Domingo et al. 2013). However, there are potential safety concerns of women being pushed into the economy when perceptions and acceptance of, revised gender roles remain unchanged (Petesch 2012). The literature review undertaken by Domingo et al. (2013) identified three potential opportunities for women during conflict: increased access to and control of assets; improved income-generating opportunities; and the introduction of formal policy and legal reforms.
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