Security is a paramount development issue for two reasons. First, insecurity, due to crime, war, or the violation of economic and non-economic rights, creates and perpetuates poverty traps: it is both a cause of and is caused by economic underdevelopment. And second, the poorest are most vulnerable to the hazards of insecurity. For example, at present civil wars directly affect or threaten more than a billion poor people. One in every five people in Sub-Saharan Africa is directly affected by civil war. The devastation of war afflicts most heavily women, children, and uneducated men, groups that already have the greatest incidence of persistent poverty.
Our understanding of insecurity has expanded and changed in the last ten years, particularly for crime, terrorism, and civil war
For example, the role of social cleavages was considered as a primary cause of conflict and crime until recent research underlined the role of economic motivations. Research has also revealed that crime and civil war are persistent phenomena: one of the best predictors of future conflict is past conflict; one of the best predictors of future crime rates is past crime rates. Crime and conflict require sustained policy attention.
As our understanding of conflict improves with better data on political violence, crime and terrorism, questions on the intensity and type of conflict come to the fore
Development is surely related to other pressing and related security issues that accompany failed and fragile states: terrorism, drug and human trafficking. The security of personal, property, and contract rights is a well-known prerequisite for economic growth. Although this is clear, the policy prescriptions are often complex. For instance, does conflict resolution entail tradeoffs between current objectives (stopping the violence) and future objectives (sustaining peace and encouraging development)? Or regarding drug trafficking, does the policy of prohibition and criminalization lead to even worse problems for developing countries? Moreover, we need a better understanding of how governments provide security in all forms to their citizens.
What we know
The risk of civil war is sensitive to the opportunity cost of peace and the means of potential rebels to strike at the resources of their government
Three World Bank research projects have examined the economic effects and causes of civil conflict. This research has confirmed a significant economic incentive for conflict: in countries where the cost of rebellion is low, civil war is most likely, suggesting that stagnant growth and pervasive poverty reduce the reservation wages of potential soldiers and rebels. Also, reliance on primary commodity exports is significantly related to conflict. Commodity exports can be a ready source of cash for combatant groups, they are less sensitive to the depredations of war than other sectors of the economy, and the rights to them are often associated with control of the government.
Diasporas can also be a potential source of finance for combatants, decreasing the cost of conflict. Delving deeper, recent research suggests that inequality coupled with ethnic polarization (i.e., horizontal inequalities) can contribute to conflict.
Fragility of the state contributes to insecurity and can lead to conflict
Many of the countries affected by conflict are fragile, but not all countries that are fragile are affected by conflict. Weak governance, low capacity, and poor institutions reflect state fragility. Lack of state legitimacy is an important ingredient of state fragility. Lack of legitimacy weakens the state’s revenue-raising capacity, and thereby the state-society contract. As a result, many of the most vulnerable countries often face a fragility trap: their people have no expectations that the state will deliver goods and services, and then the state fails to provide goods and services because it lacks the capacity, the resources, or the willingness to do so.
To prevent conflict relapse, post-conflict assistance must include efforts to improve government’s capacity to make credible commitments. This can be important for both the effective provision of public goods and social services, and to guarantee that rebel demobilization and integration into new national armies is successful.
In some of these environments, elections, and democratic progress can actually reduce the likelihood of peace and stability, as they can serve as catalysts for civil conflict. Democracy can help to bring legitimacy to states, but it is not a sufficient condition to ensure stability.
Outside interventions can mitigate the risk of civil war
Research shows that aid flows must be sensitive to the absorptive capacity of post-conflict countries, and require an integrated approach. In light of this, the World Bank has developed new tools for post-conflict financing including pre-arrears clearance grants, a post-conflict IDA window and multi-donor trust funds.
Interventions through aid should be stabilizing and consistent
Aid often rushes in to post-conflict countries and then falls dramatically after only two or three years, creating volatility and vacuums in government budgeting when governments are most vulnerable. Aid guaranteed for longer periods and with less dramatic phase-outs can be more effective.
Also, worries about “Dutch disease” and post-conflict inflation are often unfounded, suggesting that monetary controls on government spending of aid to avoid inflation are unwarranted. In fact, research suggests that aid can assist in monetary reconstruction and stability.
Peacebuilding effectiveness requires international and regional cooperation
In addition to aid, the international community can contribute to peace through security interventions. Research indicates that vulnerability to civil wars is persistent and often dependent upon neighbor fragility. Also, instability in neighboring states and international efforts to forcefully establish a political regime can actually be destabilizing.
Our understanding of the geographical nature of conflict continues to grow as the Bank supports research efforts to code and track conflicts with geospatial references. The ending of civil wars, especially ethnic wars, may require more explicit commitments by politically mandated international and regional bodies, including military presence for peace-keeping. Finally, evidence suggests that demobilization, reintegration, and security sector reform must be carefully managed and timed to avoid conflict relapse.
Economic diversification and good governance of natural resources can create space for growth
Sustained economic growth can dramatically reduce the risk of conflict. To promote growth, donors can assist countries at risk in diversifying away from dependence on primary commodities and toward labor-intensive, processed and manufactured goods. The international community can also contribute to this growth by promoting transparency in relations with fragile states with respect to mineral resources and through carefully tailoring of the nature and composition of aid.
Current research on peace and development
While all developing countries, by definition, face the challenge of poverty reduction, fragile and post-conflict states face the dual challenges of poverty reduction and potential relapses or downward spirals into the conflict trap. Ongoing research in this area focuses on political governance and democratization, peacebuilding through peace agreements and powersharing, and effective macroeconomic policy for fragile and post-conflict states.
This continuing research effort brings together policy makers from developing countries and distinguished researchers in the topics described above. As a result, the research is informed by the needs of practitioners, and policy maker’s benefit from the buy-in associated with early involvement in the research process. Case studies exploring the research themes in the context of policymakers’ specific country experiences further increase participation and ownership for the countries involved.
What we know about terrorism
Terrorism is as old as war, but it was only with the attacks of September 2001 in New York and Washington, March 2004 in Madrid, and July 2005 in London that it became a central concern of many governments in the rich countries of the West. This concern prompted policy makers to focus on the potential links to development of both terrorism and the response to terrorism, quickly revealing important lacunae in the literature. To what extent is terrorism related to development? If development is a determinant of terrorism, what are the relative weights of the economic, political, and social aspects of development? And what is the development impact of different responses to terrorism? These crucial questions have been addressed by a recent Bank research effort. Four principal conclusions emerge.
The economic effects of terrorism on rich countries are relatively small and fleeting, but they can be substantial in small, poor countries
Among recent terrorist acts, the 9/11 attacks had the largest economic consequences. But even they were fleeting and leading to a small drop (in percentage terms) in national income ($90 billion over a period in which the U.S. economy generated $10 trillion worth of goods and services). Growth dropped briefly but quickly returned to its pre-attack path.
Poor countries are also frequent targets of terrorist activity. The available evidence indicates that the costs of terrorism are much greater in small, poor countries. Why the difference between large rich and small poor countries? The reasons are intuitive: large, diversified economies are better able to shift resources to less affected sectors. Moreover, rich countries tend to have institutions able to respond to shocks adroitly and with ample information.
International terrorism is nurtured in poor, non-democratic countries with few economic links with the rest of the world
It is analytically useful to distinguish between source countries of international terrorism and target countries. The evidence indicates that source countries tend to be poor, politically oppressive, and weakly linked with the rest of the world. Target countries, on the other hand, tend to enjoy economic success and to be more democratic and politically open.
Although these results are intuitive in view of recent terrorist attacks in rich countries, they emerge from estimates based on thousands of terrorist episodes recorded in the data.
It is also useful to separate aggregate (national or regional) characteristics from household and individual characteristics related to terrorist agents. The evidence indicates that terrorists are driven not by personal poverty, but by the political and economic climate of the countries from which they come. Why should the social environment be more important than individual income? Why are terrorist organizations more common in countries with difficult political climates? The answer may lay in the challenges of constructing a terrorist organization. Even though terrorism is not a purely ideological phenomenon, terrorist organizations depend on ideologically-motivated, educated recruits. Close monitoring by terrorist leaders of their “employees” is not possible. Ideological commitment and education helps solve part of this contracting problem.
Although the policy response to terrorism has been costly, expenditures have gone largely to security functions and not to development. This may not be wise in the long run
The incremental increases in U.S. government expenditures that can be traced to 9/11 amount to $19-$26 billion per year, most of which has gone to domestic security, or $69-96 billion if the military operations in Afghanistan and Iraq are included. Of these expenditures, only $2-4 billion represent incremental annual spending on development assistance. Moreover, the evidence does not suggest that wealthy countries have increased assistance to offset the costs of terrorism for the poor countries that have been victimized by terror.
The structure and modus operandi of terrorist organizations vary considerably. They depend on the quality of government institutions, their degree of popular support, the sources and magnitude of funding they receive, and their degree of internal cohesion. This observation underscores the need for a specifically designed tactical response to fight terrorist organizations. This tactical approach—focused on the incentives of the marginal actor and the structural weaknesses of the terrorist organization—is likely to be the most successful in the short run. In the long run, however, terrorist organizations would keep re-appearing and in different shapes unless their fundamental causes are removed. This is where a development response becomes relevant.
What we know about crime
With crime an endemic and growing feature of many developing countries and a significant hurdle to poverty reduction in middle-income and fast-growing poor countries, a large body of research on crime has uncovered important new insights.
Economic equality and growth tend to reduce violent crime
Even controlling for illicit drug activity, and cultural and demographic characteristics of countries, economic factors appear to drive homicides and especially robberies. Income inequality and slow economic growth significantly increase the rates of violent crime. In contrast, controlling for these other features of countries, education has no significant impact on violent crime.
Crime is persistent and a source of poverty traps
We know that crime discourages economic activity—firms’ expenditures on security exceed 15 percent of their variable costs in some countries. Research has also shown that crime is persistent, even in countries that mitigate its economic causes.
Trust in the community reduces violent crime
Research has tested the arguments that social capital of various kinds can reduce crime. One kind of social capital—individuals’ trust of others in their community—was found to reduce crime, controlling for the natural possibility that crime itself should reduce social capital.
Civil war and terrorism engender common crime
Research has shown that the incidence of homicides and robberies is highest, and has grown the fastest, in countries affected by civil war or terrorism. Common violent crime is often a legacy of these large-scale social ills. The interdependence of all manifestations of conflict is an important issue to be studied in the future.
Economic policies are key to fighting crime
The recent research on crime does not undercut the importance of effective law enforcement in fighting crime. It emphasizes, however, the key role of social and economic factors. Where public policy allows inequality and low growth to persist, or where it encourages the breakdown of trust in communities, crime will proliferate and crime-fighting policies that rely on law enforcement will be both more expensive and less likely to succeed.
What we know about drug trafficking
Societies have long grappled with the production, consumption and distribution of psycho-active drugs. Unfortunately, they have typically done so without a sober evaluation of the costs and benefits of different policy responses. More so than usual, the interplay of deep-seated ideological stances and entrenched economic interests seem to have dictated government policy responses to the drug trade.
Currently, most governments have proscribed the trade and consumption of psycho-active drugs. Some have invested enormous resources to enforce these prohibitions. For instance, the United States spends about $40 billion annually on the war on drugs and has one in every four prisoners in jail for drug-related offenses. Despite these efforts, the drug trade continues to flourish and drug consumption shows no signs of slowing.
Recent research has explored the effectiveness, costs, and consequences of the current policy stance of criminalization of drug trafficking. The research emphasizes the developing country perspective, without losing sight of how policy is motivated and engendered in rich countries.
What are the key issues that arise in thinking about the development effects of drug policy choices? The first is assessing, using whatever evidence is available, the effects of current anti-drug policies imposed by wealthy nations on the economic development and political stability of developing countries. The second one is identifying the mechanisms through which these policy choices influence development. And the third is estimating the domestic costs and benefits in wealthy countries of particular policy alternatives (against which development consequences can be compared).
What main lessons can we draw from this research?
- The effectiveness of prohibition and drug criminalization in actually reducing consumption and production of drugs is questionable.
- While the war on drugs does not seem to have achieved its intended objectives, it has triggered a long train of unintended negative consequences. The most harmful of the unintended consequences of the prohibition of the drug trade are violence and organized crime. Particularly (but not only) in developing countries, organized crime can unleash significant social instability by inducing violence, insurgency, and corruption.
- The evidence on the social costs of different approaches to the drug problem, and the lack of evidence regarding their relative social benefits, argues for modulated drug policies that emphasize policies with lower social costs (regulation, education, and treatment) and de-emphasize those with higher social costs (prohibition and criminalization).
Norman Loayza, firstname.lastname@example.org, 202-473-3855
Gary Milante, email@example.com, 202-458-8801
Most World Bank research documents cited in this summary are available through the World Bank’s research archives at http://econ.worldbank.org/docsearch or the Bankwide archives at http://www-wds.worldbank.org/. The word “processed” describes informally reproduced works that may not be commonly available through library systems.
1. Information on the research program on the economics of conflicts and findings available at http://go.worldbank.org/84GRAQ0KY0.
2. P. Collier, A. Hoeffler, and D. Roehner. 2009. “Beyond Greed and Grievance: Feasibility and Civil War.” Oxford Economic Papers 61.
3. World Bank. 2003. Breaking the Conflict Trap: Civil War and Development Policy. Policy Research Report. Washington, DC: World Bank and Oxford University Press.
I. Elbadawi and N. Sambanis. 2000. “External Intervention and the Duration of Civil Wars.” Policy Research Working Paper 2433, World Bank, Washington, DC.
4. J. G. Montalvo and M. Reynal-Querol. 2007. “Ethnic Polarization and the Duration of Civil Wars.” Policy Research Working Paper 4192, World Bank, Washington, DC.
G. Østby. 2007. “Horizontal Inequalities, Political Environment, and Civil Conflict: Evidence from 55 Developing Countries.” Policy Research Working Paper 4193, World Bank, Washington, DC.
5. P. Keefer. 2007. “Insurgency and Credible Commitments in Autocracies and Democracies.” Policy Research Working Paper 4185, World Bank, Washington, DC.
6. P. Collier, A. Hoeffler and M. Söderbom. 2008. “Post-Conflict Risks.” Journal of Peace Research 45(4): 461–78.
G. Milante. 2007. “A Kleptocrats’ Survival Guide: Autocratic Longevity in the Face of Civil Conflict.” Policy Research Working Paper 4186, World Bank, Washington, DC.
7. P. Keefer. 2009 “Foreign Assistance and Political Market Imperfections in Post-conflict Countries.” Development Research Group, World Bank, Washington, DC, processed.
8. I. Elbadawi, L. Kaltani and K. Schmidt-Hebbel. 2007. “Post-Conflict Aid, Real Exchange Rate Adjustment and Catch-up Growth.” Policy Research Working Paper 4187, World Bank, Washington, DC.
9. C. Adam, P. Collier and V. Davies. 2008. “Post-Conflict Monetary Reconstruction.” World Bank Economic Review 22(1): 87–112.
10. C. Raleigh. 2007. “Civil War Risk in Democratic and Non-Democratic Neighborhoods.” Policy Research Paper 4260, World Bank, Washington, DC.
H. Hegre, L. Siljeholm, and N.P. Gleditsch. 2007. “Democratic Jihad: Military Intervention and Democracy.” Policy Research Working Paper 4242, World Bank, Washington, DC.
11. See the Armed Conflict and Location Event Database at www.acleddata.com
12. N.W. Doyle and N. Sambanis. 2000. “International Peace Building: A Theoretical Quantitative Analysis.” American Political Science Review 94(4): 779–901.
N. Sambanis. 2007. “Short Term and Long Term Effects of United Nations Peacekeeping.” Policy Research Working Paper 4207, World Bank, Washington, DC.
13. K. Glassmyer and N. Sambanis. 2008. “Rebel Military Integration and Civil War Termination.” Journal of Peace Research 45(3): 365–84.
I. De Soysa and E. Neumayer. 2007. “Disarming Fears of Diversity: Ethnic Heterogeneity and State Militarization: 1988 to 2002.” Policy Research Working Paper 4221, World Bank, Washington, DC.
14. World Bank. 2003. Breaking the Conflict Trap: Civil War and Development Policy. Policy Research Report. Washington D.C.: World Bank and Oxford University Press.
15. The research effort was funded by the President’s Contingency Fund. Its findings are summarized in P. Keefer and N. Loayza, eds. 2008. Terrorism, Economic Development, and Political Openness. Cambridge University Press.
16. P. Fajnzylber, D. Lederman, and N. Loayza. 2002. “Inequality and Violent Crime.” Journal of Law and Economics 45(1): 1–40.
P. Fajnzylber, D. Lederman, and N. Loayza. 2002. “What Causes Violent Crime.” European Economic Review 46(7): 1323–57.
For within-country evidence, see G. Demombynes and B. Özler. 2005. “Crime and Local Inequality in South Africa.” Journal of Development Economics 76(2): 265–92.
17. P. Fajnzylber, D. Lederman, and N. Loayza. 2002. “What Causes Violent Crime.” European Economic Review 46(7): 1323–57.
18. D. Lederman, N. Loayza, and A. M. Menéndez. 2002. “Violent Crime: Does Social Capital Matter?” Economic Development and Cultural Change 50(3): 509–39.
19. The research is summarized in P. Keefer and N. Loayza, eds. Forthcoming. Innocent Bystanders: Developing Countries and the War on Drugs. Palgrave Macmillan Press.