The relationship between a country’s economic characteristics and its fragility and susceptibility to conflict is complex and mutually reinforcing (See Holden and Pagel 2012). Collier (2009) identify three related causal paths: opportunity (or ‘greed’), grievance, and feasibility. This framework is generally considered to be useful for conceptualising the relationship between fragility and economic development. However, there is a lack of consensus as to which is the most influential factor during various phases of conflict at the macro, meso and micro levels. , Moving beyond distinguishing between these causal factors Collier & Hoeffler (2002), Keen (2001) and Cramer 2002 emphasise the importance of considering how they interact with one another. In particular how greed might emerge from grievances and how the greedy may manipulate the grievances of others.
This section focuses on the three main strands in the literature: the influence of economic development on fragility and the susceptibility to violent conflict; the mutually reinforcing nature of continued fragility/conflict and its associated economic characteristics; and the effects of a legacy of conflict/fragility on economic development. Of course, the fluid nature of fragility and conflict cannot be adequately captured by this structure.
Susceptibility to conflict
Some of the key debates regarding the relationship between macro-level economic development and susceptibility to conflict focus on:
- levels of per capita income and economic growth;
- different types of economic growth;
- the mitigating and exacerbating characteristics of trade;
- the overarching role that gender plays in this relationship.
Much of the work on economic development and conflict is driven by Collier and Hoeffler’s work associating high per capita incomes and economic growth with a reduced likelihood of conflict (2003). An analysis of a global sample of civil wars between 1965 and 2004 corroborates this. Collier et al (2009) find that economic growth for conflict-affected countries averaged -0.5 per cent in the five years before the onset of conflict, relative to 2 per cent in peaceful countries. However, these findings do not explain the causal mechanisms at play in contexts where conflict occurred during periods of general growth, or where pockets of fragility prevail in countries with high growth rates, as is the case in Sri Lanka (Ganegodage and Rambaldi 2014) and Nigeria, respectively.
Miguel et al. (2004) find that economic growth has a strong negative relation to civil conflict. They use rainfall as an instrumental variable for economic growth to examine the relationship between economic growth and conflict for 41 African countries between 1981 and 1999. The authors argue that rainfall is an important determinant of economic shocks, and thus GDP growth, in the countries studied because they remain largely dependent on rain-fed agriculture. Ciccone (2011) critiques this approach, arguing that annual changes in rainfall should not be used for two reasons: because of their mean-reverting nature, and because the relationship between rainfall shocks and economic growth loses significance in the countries studied after 1999.
Dal Bó and Dal Bó (2011) also challenge the conclusions of Miguel et al. (2004), suggesting that not all economic growth reduces conflict. Different types of economic shocks can have divergent impacts. They theorise that while positive shocks to labour intensive economic activities can decrease social conflict, positive shocks to capital intensive activities can increase it. This theory is supported by Dube and Vargas’s investigation into the conflict effects of global price shocks on coffee (labour intensive) and oil (non-labour intensive) in Colombia (2013). They find more inclusive growth in labour intensive commodities: reducing grievances; increasing the opportunity cost of engaging in violence; and making it less feasible for warring factions to recruit. Growth in non-labour intensive commodities, however, may produce narrow growth and exacerbate inequalities, creating opportunities for appropriation, and providing financing that makes war more feasible.
These findings suggest that attention should be paid to the different mechanisms through which economic growth influences conflict risk. Blattman and Annan (2014), however, challenge the findings of all four of these studies, suggesting that there are limits to testing theories of individual behaviour with macro-level data. Income shocks could also affect conflict and crime by lowering police and military capacity, by affecting the recruitment strategies and incentives of armed groups, or by inducing migration or increasing tension over limited resources, such as water.
While there is debate over its impact on fragility and conflict, openness to trade has been identified as one way in which economic shocks can be exacerbated or mitigated. Hegre et al. (2002) find suggestive evidence that trade has beneficial effects on growth and political stability. They find economic openness to be associated with higher growth, and although this growth may increase income inequality, this inequality is not associated with civil war. However, Brückner and Ciccone (2010) show that negative global commodity price shocks were associated with increased likelihood of conflict.
Gender has emerged as a prominent factor in sustaining economic growth, reducing poverty and increasing development effectiveness (Fennel 2009). Gender equality and the empowerment of women are important for a number of reasons— fairness, equality of opportunity, and economic well-being. Increasing efficiency and achieving the full potential of men and women alike is a precursor to prosperity (World Bank 2007). Studies have found that there is a relationship between the physical security of women and the relative peacefulness of states (Hudson et al. 2008:35), and that there is a correlation between levels of conflict and gender inequality (Hudson et al. 2012; Institute for Economics and Peace 2013).
The issues and theories related to meso-level economic characteristics and conflict risk cover the:
- adverse effects of corruption and mismanagement, particularly with regards to natural resource management;
- role of the financial sector and of foreign direct investment (FDI) in mitigating or exacerbating conflict risk.
Ballentine and Haufler (2009) argue that corruption and mismanagement in business, particularly in relation to natural resources and large infrastructure projects, can exacerbate conflict risk. Contracting processes provide opportunities for mismanagement in a way that enriches a few at the expense of many, creating severe divisions. Similarly, the creation of modern industry can exacerbate existing grievances among competing groups by creating new winners and losers. Putzel and Di John (2012) link these issues to political settlements, claiming that where informal, sometimes illegal, activities provide opportunities for violent entrepreneurs to build and sustain power; this may result in an unconsolidated elite bargain, making the state very fragile.
The role of extractive resources in fuelling and financing conflict is highlighted by the UNEP et al. (2013), which gives the examples of the Democratic Republic of the Congo’s untapped mineral reserves and Afghanistan’s mineral deposits. Resource rich countries have been found to be at a higher risk of civil war and of encountering greater impediments to achieving both an early resolution of conflict and a peace that holds (Pally 2003 in UNDP 2008). Ross (2003) finds that civil wars are influenced by three characteristics of natural resources: lootability, obstructability and legality. While these authors do not debate the relationship between natural resources and conflict, they illustrate a need for more focus on the interaction between different types of natural resources and the context.
Ganesan and Vines (2004) find that whilst the nexus between resources, revenues, and civil war is critically important, a missing element of greed vs. grievance theory is the role that governments of resource-rich states play. They specify three ways in which elite capture by government can exacerbate conflict:
- control over resources gives such governments a strong incentive to maintain power, even at the expense of public welfare and the rights of the population (“Predatory Autocracies” e.g. the government of Angola which was largely dependent on oil during the latter years of its war with UNITA).
- unaccountable governments with large revenue streams at their disposal have multiple opportunities to divert funds for illegal purposes (e.g. the Liberian government under Charles Taylor).
- actions of third-party governments seeking to profit from resource-rich neighbours (e.g. the intervention of the Ugandan and Rwandan governments in the conflict in DRC, a conflict that itself has been impelled by competition for lucrative resources).
Barma et al. (2012) propose a two dimensional typology to help development practitioners identify a resource-dependent country’s political economy trajectory. First is the degree to which, over time, policy stability and bargains can be enforced and deviations sanctioned. Second is the overall political inclusiveness of prevailing state-society relations, including a sense of whether collectivist or clientelist welfare is privileged over purely elite interests.
Addison et al. (2001) focus specifically on the relationship between a country’s financial sector and the occurrence and resolution of conflict. Narrow development, which is at the root of conflict, is often financed in a way that exacerbates grievances. They identify three processes through which this occurs:
- in agrarian societies with high income- and land- inequality, agrarian elites may use their control within the financial system to further leverage their existing wealth, exacerbating inequalities.
- state banking systems may be used to finance private accumulation rather than investment, leading to economic decline and potentially conflict if the bank collapses under bad loans.
- weak financial regulation may facilitate the accumulation of wealth by means of fraud, destroying savings and living standards and increasing the risk of conflict.
Evidence on the relationship between FDI and conflict remains inconclusive (EC 2009). While Polachek et al. (2012) find that trade and FDI complement each other in reducing conflict risk, Gissinger and Gleditsch (1999) point out that despite its positive effects on economic welfare, FDI can generate grievances through its adverse effects on distribution and political unrest in poor countries. Alternatively, Barbieri and Reuveny (2005) find that FDI in the least developed countries reduces the duration of civil wars but not the likelihood of their onset. These opposing arguments might be reconciled by the recognition that overcoming state fragility and building strong institutions, as well as developing regulation to promote quality investments, are important to capture the economic and conflict-reducing benefits of FDI. Massa and te Velde (2011) suggest that development finance institutions can play a role in catalysing FDI that is beneficial in fragile contexts, providing important demonstration effects for other investors with regards to investment in higher-risk context (Dalberg Global Development Advisors 2010).
The literature on the influence of microeconomic characteristics on conflict risk focuses on the:
- mechanisms through which economic development might affect conflict (opportunity, grievance, feasibility);
- role of economic inclusion irrespective of average economic conditions.
Growth can stimulate job creation, which reduces grievances and incentives to engage in conflict (Collier, et al. 2009). In Afghanistan and Pakistan, the US Department of State (2010) described job creation as key to undermining the appeal of extremists in the short-term and necessary for sustainable economic growth in the long-term.
However, micro-level assumptions connecting unemployment to increased conflict risk (Berman et al. 2011) are debated. Using survey data from Afghanistan, Iraq and the Philippines, Berman et al. (2011) find no evidence that employed young men are less likely to participate in political violence. They suggest two plausible explanations: as local economic conditions deteriorate, government allies are able to gather intelligence at a lower cost; and that efforts to enhance security tend to damage the economy. Other studies of criminal and revolutionary organisations, such as Levitt and Venkatesh (2000), cast further doubt on the opportunity-cost approach, suggesting that status and future prospects for future riches and power, rather than wages, are the primary economic motivations. Mercy Corps’ (2015) research on the key drivers of youth’s propensity toward political violence in Sub-Saharan Africa finds that in most countries an individual’s employment status has very little effect on participation in, or willingness to participate in violence. Other factors related to government institutions and poverty levels were more important and relevant across contexts.
Growth may determine government popularity, influencing grievances and the willingness of the population to sympathise with a particular side (Collier, et al. 2009). Institutional breakdown and a failure of the social contract are often associated with poverty and growth failure (Murshed & Tadjoeddin, 2009). Alternatively, Fearon and Laitin (2003) claim that low or falling national income can weaken or signal weak central government, hindering the ability of governments and their militaries to repress insurgencies. Each of these mechanisms generally make it easier for armed militia groups to recruit fighters (Miguel, et al. 2004), making conflict feasible.
Collier et al. (2009) argue that financial and military feasibility is the key determinant of whether a rebellion will occur. Specifically, they argue that natural resources, when predated by rebels, can finance the escalation and sustainability of rebellion. However, they also acknowledge that the presence of natural resources might provide motivation for rebels to capture the rents both during and after a conflict, or that grievances in resource-rich countries may be stronger if the governments of these countries do not need to tax their citizens as much and are therefore less responsive.
This research faces strong criticism. Nathan (2005) identifies multiple empirical, methodological and theoretical issues in its analysis including the use of inappropriate proxies; unsubstantiated explanations of results; incomplete, inaccurate and biased data; and theoretical and analytical flaws. Similarly, Cramer (2002) criticises the feasibility argument, arguing that the method of paying for a war should not be confused with its cause; natural resources played a crucial role in the eastern DRC conflict, but the conflict’s origins had connections to the aftermath of the Rwandan war and genocide, as well as the collapse of Mobutu’s domination of Zaire. The interaction between financial incentives and long-standing ethnic, political and regional tensions also play a role. Klare (2001) argues that grievances as a result of governments exploiting resources occupied by a particular indigenous group are most likely to occur in developing countries with few sources of wealth, and weak and divided governments that are perceived as corrupt.
Lack of inclusion in growth is considered a risk to conflict, particularly where there are horizontal inequalities related to regional or ethnic disadvantage (Stewart 2010). Horizontal inequalities may motivate not only deprived groups, but also relatively privileged groups who wish to protect their share of resources. Ostby (2008) confirms this hypothesis through an analysis across 55 countries from 1986-2003. She finds that countries with severe economic and social horizontal inequalities, measured by average household assets and average years of education, faced a significantly higher probability of conflict. Horizontal inequalities between ethnic groups can also promote ethno-nationalist conflict. Ethnic groups determined to be either affluent or poor relative to the national average are both more likely to engage in conflict (Cederman et al. 2011).
The theories presented on the origins of conflict and how they relate to economic development remain incomplete and untested. Blattman and Miguel (2010) point out that the literature rarely considers alternatives to purely rational theories. Cramer (2002) debates the usefulness of analysis resulting from rational choice theories of armed conflict, arguing that they ignore a range of social, cultural and historical factors and violate the complexity of individual motivations. Nathan (2005) specifically criticises the influential work of Collier and Hoeffler for failing to adequately address politics and history.
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