The Economics of Conflict Program consists of two projects. The Economics of Civil War, Crime and Violence project was begun in 1998 and ended in 2005. The current Post-Conflict Transitions Project (launched in 2005) is described here first, followed by an introduction to the earlier project. Post-Conflict Transitions: Political Institutions, Development and a Domestic Civil Peace (2005 - present) Civil war is among the most destructive social phenomena. In addition to direct costs in the form of battle deaths and allocation of resources to military activities, the Economics of Civil War project shows that wars are followed by diseases, poor growth, social fractionalization, environmental damage (such as illicit logging and landmine contamination), and a high risk of renewed warfare. The Post-Conflict Transitions project advances our understanding of post-conflict development by identifying the obstacles to progress and some of the conditions under which post-conflict societies succeed. The first priority in promoting development of war-torn and fragile states is the avoidance of further destructive conflict. Toward this goal, many of the papers this project identify policy prescriptions that foster economic growth, promote sustainable democratization and encourage institutional reform. The implicit assumption in this approach is that advances in these areas can promote the civil peace. For example, many of the papers argue that economic growth can promote civil peace by creating new wealth that can be used on public goods, increasing healthcare, literacy and education, promoting the accumulation of human capital and thereby increasing the opportunity cost of conflict and decreasing the incentive to rebel. Advances in democratization can increase the effectiveness of governance and increase minority representation in the political system thereby providing a forum for the legitimate voicing of grievance and decreasing disenfranchisement. Institutional reform can increase government efficiency and transparency in the provision of public goods and provide protections for human and property rights that increase the credibility of states at risk, reducing uncertainty and the accompanying risk of civil war. The output of this project consists of more than 25 papers compiled by three research components: the World Bank Development Economics Research Group (WB), the Center for the Study of African Economies ( CSAE) and the International Peace Research Institute of Oslo ( PRIO ). The WB component concentrates on the survivability of post-conflict states given the nature of the previous conflict and the conflict settlement. One important aspect of the conflict resolution and settlement process is the demobilization of fighting forces on both sides, e.g. are rebels livelihood secured through amnesty provisions made by the government? are cease-fire agreements credible? is there a significant increase in violent crime after the secession of hostilities (an indication that fighters have not been assimilated back into the productive economy of the state)? In addition, the political economy of post-conflict decision-making is addressed by the WB component, focusing on market imperfections in post-conflict electoral politics. Finally, the WB component identifies the macroeconomic – especially monetary – policy that is found to be most conducive to growth for post-conflict states. The CSAE component identifies the conditions under which political institutions fail to deliver public goods, including environments of insecure property rights, incomplete or corrupt taxation, opaque or non-credible regulation and systems that exclude key interests or fail to constrain executive power. Some or all of these failures are more likely to occur when party identification follows ethnic/religious/regional lines; when policy preferences sharply diverge; when illiteracy and low human capital discourage political participation and challenge the efficiency of the bureaucratic machinery of the state (undermining public good provision); when easily expropriated natural resources or similar rents are large and/or when traditional and modern bases for legitimate rule are in conflict. By identifying these causes for institutional failure, the CSAE component identifies the underlying mechanism of how states fail to perform their functions as providers of public goods and suggest remedies for these pervasive maladies. The PRIO component focuses on the factors that favor consensus building in post-conflict states. These social factors (ethnic fractionalization and polarization) and institutional choices made in democratizing countries (majoritarian vs. consociational systems) often determine the amount of democratization that can be accomplished and can ultimately determine the success of the state. Related to these issues of social organization is the concept of credible government. Credible government (the perception that political competition and political institutions provide assurance that government actions will not swing arbitrarily against any particular group) is a necessary condition for political progress through consensus building. As papers from each component in this project are completed, they will be added to the “ Working Papers” and “ Sub-Topics” section of this website. The Economics of Civil War, Crime and Violence (1999 - 2005)
The twentieth century saw the tremendous growth of international economic and political networks and technological improvements that have raised the economic and human opportunity costs of war to intolerable levels. To many of us, war may seem irrational in the 21st century. However, we have all been impressed by television images of slaughters in Rwanda, massive ethnic cleansing in Kosovo, anarchy and looting in Sierra Leone and the Congo, and deepening criminal violence in many countries in Latin America, Africa, and Asia. At the same time, such images coming from developing nations are sharply contrasted to the economic prosperity, consumer capitalism, and political pluralism of the industrialized West. Violence is a key reason for the broadening chasm between developed and developing countries. It has created fundamentally different expectations of social and political life in North and South. Young people in several poor countries are now being socialized in social systems created by war. These systems give rise to greater poverty and inequality, which in turn increase crime and violence. As a result, we have witnessed the tripling of homicides in Sub-Saharan Africa in the 1980s and during the 1990s we saw an explosion of civil wars, during which civilian war-related deaths as a percentage of all war-related deaths increased to 90% (as opposed to only 50% in the 18th century). In the 1990s, violence created approximately 13 million refugees and 38 million internally displaced persons world-wide. Moreover, these enormous social costs have been born disproportionately by the developing world. Why should the World Bank care about conflict and violence? And what could the Bank do to make the situation better? The answer to the first question is straightforward: it has become increasingly clear to economists that large-scale political and criminal violence threatens to relegate several countries and regions of the developing world to a perpetual trap of poverty and slow or negative economic growth. This implies that economic institutions such as the World Bank will eventually have to develop policies to reverse that economic deterioration. It is therefore crucial to try to arrest the surge of violence before it happens as well as to understand the economic causes and consequences of violence so as to develop effective post-conflict economic policies. The answer to the second question is that the Bank is in a preeminent position to guide research and policymaking on the economics of violence. The Bank has an expertise in organizing, commissioning, and executing socio-economic research and in implementing the findings of such research in the developing world. Further, the tools of economic and quantitative analysis available to the Bank’s economists and to associated researchers in academic institutions can be very useful in creating a comprehensive theoretical and empirical framework within which to understand the calculus of violent and criminal behavior. In short, the Bank should care about violence in the developing world and it can do something about it. Briefly, the Economics of Civil War, Crime and Violence project aimed to answer three broad questions:
What economic and political factors increase the risk of civil war, terrorism, and violent crime?
What sets of policies are conducive to reducing these risks in developing countries?
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