Wars throughout the world today inflict enormous human, social and economic costs on both combatants and non-combatants alike, and weaken the processes of development in afflicted regions. Yet in spite of extensive acknowledgment of these straightforward facts, surprisingly little economic analysis has examined the various economic impacts of war and what could be done to alleviate these effects. This essay seeks to work towards counterbalancing this gap in the economic literature. To do this the essay provides an outline of the routes wherein war inflicts human, development and economic costs, before presenting a typology of wars together with a review of the literature indicating the relationship between war and underdevelopment.
War – and particularly civil war – is generally understood to be one of the primary causes of economic underdevelopment and human suffering (Keen, 2006). Yet despite this general understanding, economic analyses of developing countries at war remain comparatively rare. This paper begins to look at this under-examined area.
Throughout every year of the four decades of the Cold War – while the global forces of communism and capitalism brought the superpowers towards nuclear stalemate – nations throughout the ‘Third World’ were involved in armed conflict of some kind. Between the 1950s and the 1990s, some fifteen million deaths were brought about by wars in developing countries. Such wars included global conflicts, government violence against citizens and civil war. (Hughes & Pupavac, 2005)
With the end of the Cold War, regions throughout the world formerly afflicted with conflict linked to the East-West alignment turned dramatically towards peace. Yet while conflicts linked to the Cold War rivalry lessened from the 1980s onwards, new wars emerged, different from the anti-colonial resistance and national emancipation movements that had marked the conflicts seen in developing countries during the Cold War. (Allen, 2000).
These wars were situated almost entirely in developing countries. From 1989 to 1995, there were between 31 and 54 globally documented struggles occurring each year, and an average of 15 major wars happening at any one time. (Roberts & Hite, 2007)
Of these conflicts, a number were older ideological struggles that continued in a unique manner, like the one in Afghanistan; others were long-lasting separatist struggles, such as those in Sri Lanka and Eritrea. Meanwhile, the Central American conflicts came to an end in a troubled deadlock; though some continuation was seen in Mexico. Territorial and ethnic conflicts exploded in Eastern Europe, predominantly in the former Yugoslavia and the marginal Russian territories. Lastly, a disturbing number of African countries (such as Sierra Leone, Somalia, the Congo and Rwanda) turned out to be involved in armed disagreement, contributing to the long-running civil wars in Angola and Ethiopia, while diminishing any confidence emerging from the settlements in Mozambique, Uganda and South Africa. (Duffield, 2002)
That war is expensive in terms of human lives and economic and social development is, to some extent, a truism; a fact of which people are reminded every day by the radio, the television and the press. War is widely condemned at the highest levels, with international gatherings frequently emphasising the responsibility of those involved in conflicts (and others throughout the world) to protect non-combatants. (Duffield, 2005)
Yet despite this understanding, the exact machinery through which war devastates the lives and economic and social development of combatants and non-combatants, and whether or not such effects could be counterbalanced or stopped, is not accurately understood. (Keen, 2006).
The relationship between war and underdevelopment
There exist a variety of published works by historians on the economic costs and benefits (such as technological and organizational development) of military action in industrial nations. Yet modern development economists have not provided similar documentation of the economic impact of wars in developing nations. For example, war and its end results were not discussed by the UNDP in the first Human Development Report of 1990 as a reason for an absence of human development. (Duffield, 2005)
This is in spite of the fact that the disturbances caused by war were a primary characteristic of at least half the most damaging factors hindering human development. Seven years later, the 1997 Human Development Report offered a dedicated evaluation of the causes of poverty, yet it again failed to present any in-depth deliberation on countries at war. Similarly, the World Bank’s ‘Poverty Reduction Strategy’ offers little that directly addresses the particular needs of countries at war. (Roberts ; Hite, 2007)
Against this it is emblematic that eight of the ten countries with the lowest Human Development Index – Eritrea, Niger, Rwanda, Mozambique, Sierra Leone, Ethiopia, Mali and Guinea – have endured severe civil wars in recent years. Fully half of the fifty countries categorised by the UN as ‘least developed’ have endured major armed conflicts in the last two decades. Eight out of the ten nations with the highest infant death rates and the lowest per capita incomes have recently endured conflict of some kind. (Stewart ; Fitzgerald, 2005)
In essence, very little research has investigated how different economic policies might prove beneficial for both governments and donors during times of war. As a telling example, the World Bank program for Mozambique during a long conflict in that country was intended to give a structure for more efficient utilisation of resources, provided that the security situation improved. (Duffield, 2005)
This essay attempts to take a step forward into conquering this neglect. Three fundamental assumptions underpin the particular case put forward here: first, as it can be assumed that conflict is strongly connected with poverty and underdevelopment, it can also be assumed that such conflict related poverty and underdevelopment will continue in the near future, given that there is little reason to believe that armed conflict in developing countries will stop or even lessen in coming decades; second, any policies aimed at decreasing the human and economic price of conflict require greater understanding of the mechanisms through which economies operate at the time of conflict; and third, understanding economic behaviours and motivations during times of conflict is necessary in order for policy makers to develop strategies to decrease war.
A typology of countries at war
In this particular discussion, war is characterized as methodical physical violence and killing conducted for political purposes; that is, to acquire or maintain political power (Stewart ; Fitzgerald: 7). This power is fundamentally mirrored in the organisation of the state, either that comprised within the region or as a detached entity. As part of this general definition of war, particular groups also chase economic objectives: as shall be shown below, such aims could in fact provide grounds for extending conflicts beyond stated political objectives and practical political settlements. (Roberts, ; Hite, 2007)
War – or armed conflict more generally – is not an homogeneous occurrence. Wars differ greatly in enormity, in manner, according to whether they are inter- or intra-national, according to the nature and degree of foreign interference and according to the technological capabilities of the belligerent forces. One thing that can be stated, however, is that civil wars have a propensity to lessen the power of the state over the national territory and to result in communal breakdown.
An economic analysis of the human cost associated with war
The human costs of war cannot be assessed via a simple calculation of battle deaths and injuries. Rather, such an assessment must be drawn indirectly from the loss of livelihood resultant from the displacement of economy and society brought about by the conflict. In the majority of conflicts civilian deaths are far larger than military losses; this points to the significance of roundabout casualties, that is, those fatalities not directly stemming from physical violence, but which could be attributed to the lack of accessibility of food and health resources, which could in turn result in widespread deaths and debilitation (Allen, 2000).
The costs of war as entitlement losses (and gains)
It can be suggested that the economic and social costs of conflict can be separated into two categories: instantaneous costs associated with human suffering, and long term development costs more associated with state and national development. This separation seems rather striking, echoing as it does the discussion of external interference in conflict circumstances, which more often than not detaches ‘humanitarian assistance’ from ‘development cooperation’. (Roberts ; Hite, 2007)
What should be stressed is that this separation is to some extent deceptive, since human costs, such as a deterioration in nutrition and education, contribute to the costs of development, while development costs, like that of the annihilation of infrastructure or the lessening of exports, in turn contribute to the causes of human affliction.
From the standpoint of vulnerable groups, it would appear even more lucid to begin from the conception that the human costs of conflict (aside from the direct deaths and injuries from fighting) stem from the annihilation of entitlements.
Entitlements relate to a variety of types of command over property, through which individuals are able to gain access to indispensable goods and services like water, health services, food or education. The term was notably put into practice by Keen in his investigation of famines, during which inadequate (or loss of obtainable) entitlements prevented vulnerable groups from gaining sufficient food supplies. (Keen, 2006). This notion of entitlement pertains to all types of lawful income from employment, transfers and assets, and distinguishes unequivocally between direct entitlements obtained (for example) by farming, and market entitlements, obtained by means of financial dealings on the market.
Keen argued that entitlement stoppage typically emerges from the loss of employment or from a rise in the price of food in relation to financial incomes, rather than from a collective failure of food accessibility as such. As useful as such a classification is, it should be noted that Keen’s investigation dealt primarily with peacetime, during which the rule of law reigns.
The vulnerability of the economy at war
The economic consequences of war stem from an interaction between the particular type of war and the economy in which it takes place; this interaction defines the ‘vulnerability’ of the country. The criteria which appear to be most essential in defining a country’s vulnerability are: the percentage of the population at or close to the poverty line and the average income level; the extent to which the populace can subsist on its own resources, and particularly the underprivileged; the dependence of the economy on indispensable imports; and the elasticity of the production structure. (Roberts ; Hite, 2007)
Changes in economic behaviour in wartime
Multifaceted exchanges occur within an economy during times of war. Critically, it is important to distinguish between the direct economic impact of the clash on the one hand, and the impact of the recompensing behaviours of economic players as part of their efforts to restrain or counterbalance the depressing influences of the war, on the other (Allen, 2000). In this, all conflicts have definite direct consequences, yet these also lead to other effects as they make their way through the economy. These effects involve the loss of output as people transferred from their place of work (seen when people participate in the fighting and / or are killed), and the obliteration of capital (like that of large industry plants) by means of bombing or arson.
Other consequences also include the interruption of transport because of physical damage; the loss of trust between different economic players, in turn decreasing transactions in the market; the disorder and uncertainty brought to international markets owing to border closing or embargoes; and the distraction of limited foreign exchanges thanks to the subversion of social and economic activities to military activities. (Picciotto, 2006). We might add the obvious faction of increased risk (uncertainty and direct action) that will make economic activities with a longer time-horizons less profitable owing to the increased risk premium. This can be extreme, if people do not know what will happen the very next day.
These effects all tend to lessen aggregate levels of output. Reduced agricultural yield and interrupted internal and international markets unfavourably influence exports; similarly, labour markets also tend to experience some distortion, since inexperienced men of prime working age are predominantly affected by brutal deaths and military employment; at the same time skilled labour is most likely to depart the state.
The consequences for poor households
Underprivileged households are seriously affected by the varying nature of the wartime economy, not least because household composition itself is changed by the war. Essentially adult men join and participate in the army in which they are either transferred to a different place or are killed, and as a result women tend to have greater responsibilities passed to them, often becoming the head of household as well as the chief provider. In this case, the opportunities for women as well as younger members of the family could also contribute to the undermining of traditional values as a result of the war. (Duffield, 2005)
Both public and market entitlements decline on average during times of war, affecting underprivileged households to a greater extent than their more privileged neighbours. Market entitlements decline as a consequence of reduced employment and lowered salaries, following production losses and mounting inflation.
These losses of entitlements could turn life-threatening if the prices of food rise. In such an environment direct entitlements (continuation of production for the group) could increase as citizens move away from the market, yet this could only take place if they gain access to land and their security situation does not worsen.
Public entitlements related to social services (including fundamental demands like that of water) are generally anticipated to fall as total levels of government spending are reduced and the share of welfare within this fails. Civic entitlements provided by NGOs or the community could emerge and function to counterbalance the fall in other entitlements – when civil society remains effective – but in situations where society itself falls to pieces, they could also be piercingly abridged. The intensity of change in extra-legal entitlements is expected to mount significantly during times of war; this could include considerable acquisitions for some, and losses for others. (White ; Cliffe, 2000)
These losses in entitlements afterwards influence the economy itself in several ways. Household attempts to hoard must be taken into account as a means of self-defence, yet one that typically results in a distraction of goods and capital away from expenditure and manufacture. Meanwhile, the displacement of small-scale peasant and artisan manufacture results in food loss as well as a loss in export earnings. In such a case, a reduction of the supply of primary inputs for the remaining part of the economy would occur, as well as a reduction of household expenditure levels.
In conclusion, the abridged capability of government and civil society to carry social services like that of education and health could in turn ensure deteriorating support for
social organisations, and in turn increase the dependence on and identification with the extended family and direct ethnic group. (Goodhand, 2006 )
Accordingly, the welfare of the majority of the households in situations of war is expected to worsen significantly, with declining entitlements of nearly all kinds. Health situations depreciate as immunisation levels drop, resistance levels decline due to poor nutrition, the supply of water breaks down, and people are transferred and concentrated geographically. Such situations are also conducive to harmful psychological effects, not just from the traumas brought upon by the war itself but also from compulsory relocation and family division. While for the majority of the households the net effects are expected to be negative, the extent of the decline is greatly dependent on the survival methods households have available to them, and on their resourcefulness and compliance. (Picciotto, 2006).
The development costs of war
War undoubtedly diminishes the potential for economic growth and social development in developing countries caught in conflict situations (Cooper et al., 2002). In essence, this reduction in potential for development comes about through the destruction of the established capital of the nation as well as the reduction of opportunities for prospective investment. In terms of ‘capital’, what must be taken into account is not only fruitful capacity – in terms of natural resources, plant and equipment – but also capital in the human context of health and skills, trade and industry and social infrastructure, and the less concrete communal assets like that of organisational capital (for instance, government capability) as well as social capital in terms of tradition and trust.
The development outlay of war is far larger than the devastation connected with natural disasters (Allen, 2000). Two issues underpin this difference. Firstly, natural disasters – hurricanes, earthquakes and floods – tend to wipe out different forms of infrastructure, yet they impart less of an impact on productive capability and leave human capital (except for those killed) undamaged.
Second, natural disasters have a propensity to be of comparatively short length, allowing investment to rapidly recuperate; in this they could even have a constructive multiplier effect on the economy in totality (Stewart ; Fitzgerald: 7). In marked contrast however, war devastates all kinds of capital and the doubt it brings about fundamentally diminishes investment confidence.
Such output losses can also contribute to development costs, since they decrease the investing capability of the economy even with an unaffected investment ratio. Civil wars in developing countries are particularly destructive when it comes to organisational and social capital. In contrast, industrial societies have seen the majority (or even all) forms of their capital stock toughened during conflict (White ; Cliffe, 2000)
During times of conflict the demolition of physical capital, in terms of machinery, infrastructure and plant capital, more often than not takes place (Roberts ; Hite, 2007). Dams, factories, energy plants, hospitals, clinics, schools, roads and railways are often destroyed. The degree is greatly dependent on the manner of war.
During times of war, human resources are also destabilised by the deterioration of people’s nutrition and health (Keen, 2006). Feeding into society more generally, such deterioration leads to a diminution of organisational capital. The degenerating infrastructure and the departure of experienced citizens and foreigners all contributes to making government and other forms of administrative machinery less efficient.
The obliteration of accessible capital is always expected to be compounded by cutbacks in new investments, particularly with respect to human and physical capital. Governments have a propensity to slash investment as a product of the common reductions in communal resources, and the particular expense demands of war.
Capital available for economic as well as social infrastructure also has the tendency to be the most badly impacted during cuts because of war, as it is a time for cuts because of necessary amendments made to the economy (Stewart & Fitzgerald: 7-25). Aid agencies might also trim aid in general – and investment-aid in particular – since more often than not it is assumed that there is little point in investing in infrastructure if it is prone to be ruined, and aid efforts are predisposed to move away or avoid backing up productive investment in the direction of relief (particularly food aid) and military support. Private investors – whether local or foreign – often reduce their investments because of disheartened expectations and fears regarding the economy and profitability. (Hughes & Pupavac, 2005)
Investment in health and education also has the tendency to be reduced, and nutritional scarcity in turn has a significant effect on the development of children and their long-run productivity. This suggests that the situation in relation to social and organisational capital is in essence multifaceted.
Given the economic and developmental costs of war, one of the more logical arguments that might be put forward is the development of feasible policies which could mitigate the consequences brought about by conflict. Feasible policies might work to facilitate the alleviation of the impact of war.
Such policies could include strategies to compensate for the costs of war, thereby counterbalancing the phenomenon of underdevelopment; these could include interventions like the provision of food and relief to sustain social services, as well as interventions to mitigate long-term costs by working to maintain infrastructure. There are no easy solutions; yet the economic examination of wars could in turn help in the devising of policies to lessen the developmental costs linked with wars.
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