Peace, Security and Economic Growth

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April 28, 2020
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Peace, Security and Economic Growth

Peace, security and economic growth go hand in hand. The greatest immediate savings can be made in the consequential losses from violence. Here is where violence and conflict is like few other phenomena in terms of its sheer impact on economic activity – only financial crises or natural disasters can potentially equal its negative impact. However, unlike financial crises, which may profoundly disrupt the flow of economic activity in a modern capitalist economy, conflict and violence destroys society’s stock of physical capital.

Added to this, warfare has both an immediate and longer-term impact on human capital through lost skills, displacement, and trauma which may take years to recover from, if ever at all. Images of any major Syrian city in 2017 show the typical extent of damage in modern warfare; not only are private houses and businesses destroyed, but critical infrastructure including electricity, water supply, telecommunications, schools and health facilities have been turned to rubble.

While IEP’s model estimates the cost of the war to the Syrian economy is currently 67% of its GDP, the long-term costs will likely be much higher given it will take decades for the country to be rebuilt in the eventual conclusion of the conflict.

Economists are not new to the study of war. Many in the U.S. have argued that war is good for the economy, and those in Washington have seemed eager to believe them. Indeed, war is an ideal economics topic. It’s very expensive, and the numbers involved—money spent, weapons used, casualties—can be easily counted and crunched.

Simply the absence of violence and war is what researchers call “negative peace.” It’s only part of the picture. “Positive peace” is the presence of the structures, institutions, and attitudes that guarantee a sustainable social system and the freedom from all forms of violence. Measuring the absence of violence is easy enough, relative to its presence, but assessing all the nuances of a sustainable social system is considerably more difficult.

Brauer makes a compelling case for peace, security and economic growth. If, for example, two percent of global GDP is spent on weapons, there are certainly some who stand to gain from violence and war. But the majority of the economy does better in a setting of peace, and that violence is making things a lot harder for the other 98 percent. The trick is understanding how societies develop positive peace.

The Global Peace Index, released annually by IEP since 2007, ranks the world’s countries in order of peacefulness using 22 indicators of the absence of violence. Not surprisingly, IEP finds that Iceland, Denmark, and New Zealand were the most peaceful in 2013, while Iraq, Somalia, Syria, and Afghanistan were the least. The U.S. ranks 99 out of 162.

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With comprehensive and nearly global data on the absence of violence, it becomes possible to test for coinciding social structures. This gives us a picture of positive peace. After statistically analyzing the relationship between GPI scores and approximately 4,700 cross-country data sets, IEP has identified groups of indicators, like life expectancy or telephone lines per 100 people, that it considers the key economic, political, and cultural determinants of peacefulness.

IEP calls the resulting eight categories the “Pillars of Peace”: a well functioning government, equitable distribution of resources, free flow of information, a sound business environment, a high level of human capital (e.g., education and health), acceptance of the rights of others, low levels of corruption, and good relations with neighbors.

people have to consciously link their economic planning to peace planning. They also need to think about the political economy: people’s interests, incentives and values – especially those of powerful people – and the institutions through which different interests, incentives and values are mediated. This helps understand economic development changes are possible, and also what changes are possible for peace.

Examples of how Peace, Security and Economic Growth interact?

  • When Saudi Arabia ended its ban (this link will open in a new window) on Somali livestock imports, the level of maritime piracy fell. Why? Because clan leaders were able to tax the livestock trade, so no longer needed piracy as a source of income. It was a step towards peace.
  • In Peru, banks contribute to social peace by requiring borrowers to complete a conflict map as part of their loans process, so investing in the economy means investing in good relations.
  • Business people in Uganda helped improve relations between tribes by using trade to rebuild trust between them.
  • In Colombia, over 100 companies support progress towards peace by linking their own advertising to the peace campaign #SoyCapaz (#ICan).
  • There are many other ways in which businesses promote social harmony, for example by hiring workers from different gender and ethnic groups.
  • Mobile phone operators foster peace by bringing communications to remote areas in war-affected countries, and safe money transfer facilities.
  • For their part, governments and donors can help reduce the risk of youth radicalisation by investing in labour-intensive public projects. Western countries can help reduce violence in drug-producing and drug-transit countries by decriminalising the use of drugs.
  • And international organisations, such as the World Bank, can build infrastructure that improves the livelihoods for those who might otherwise fight, and involving them in the project design.

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