Module XIV·Article V·~3 min read
Economics of Conflicts and Civil Wars
The Political Economy of Security and Sanctions
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Economics of conflicts and civil wars
Civil wars are one of the main sources of suffering and destruction in the modern world. The political economy of conflicts analyzes the economic causes and consequences of internal armed conflicts: why they begin, how they are financed, why they are so difficult to end.
Trends in conflicts
After World War II, interstate wars became rare (though they did not disappear). Civil wars, on the contrary, are the main form of organized violence. The peak occurred in the early 1990s (after the collapse of the USSR and the Cold War); then a decrease, but since the 2010s—a new rise (Syria, Yemen, Libya, Ukraine). Civil wars are concentrated in poor countries: Sub-Saharan Africa, the Middle East, South Asia. Wealthy countries have almost not seen civil wars in recent decades.
Economic causes
Poverty. The link between poverty and conflict is persistent. Low GDP per capita is one of the best predictors of civil war. Mechanisms: low opportunity cost of rebel activity (nothing to lose), weak state, frustration.
Economic downturn. Recessions and shocks (falling prices for export goods, droughts) provoke conflicts. Unemployment and falling incomes create a reservoir of recruits for armed groups.
Resources. The "resource curse" includes an increased risk of conflict. Oil, diamonds, minerals are "trophies" worth fighting for. They also finance rebels (blood diamonds in Sierra Leone, opium in Afghanistan).
Inequality. Horizontal inequality—inequality between groups (ethnic, regional, religious)—is more strongly associated with conflict than vertical (between individuals). Group deprivation mobilizes people for collective violence.
"Greed vs grievance"
Paul Collier and his co-authors proposed a juxtaposition of two explanations for conflicts:
"Greed". Rebel activity is an economic activity. Rebel leaders seek to seize resources and power. War is a way of enrichment for military entrepreneurs. Ideology is a cover for material interests.
"Grievance". Conflict arises from real grievances: discrimination, repression, historical traumas. People revolt against injustice, not for profit.
Empirically, Collier found that economic factors (poverty, dependence on resources, low education) predict conflict better than indicators of grievances (inequality, discrimination). This is a provocative conclusion, disputed by many researchers. Probably, both factors are important. Grievances create motivation; opportunities (weak state, resources for financing) determine whether discontent turns into armed conflict.
Economics of waging war
Civil wars require resources: weapons, fighters, food, fuel. Sources of financing:
Control over resources. Rebels seize mines, oil fields, agricultural land. Selling resources (often smuggled) finances the war.
Taxation of the population. Controlled territories are subject to "taxes"—often forced levies. The population is caught between a rock and a hard place.
External support. Foreign states finance proxy forces. The Cold War turned many civil wars into proxy conflicts between the US and USSR.
Diaspora. Emigrant communities finance conflicts in their homeland. Irish, Tamil, Eritrean diasporas supported rebels.
Criminal activity. Drugs, kidnappings, smuggling are sources of income. The line between rebel activity and organized crime becomes blurred.
Economic consequences
Civil wars are devastating for the economy:
Destruction of capital. Infrastructure, buildings, equipment are destroyed. Restoration takes decades.
Human capital. Death, injury, flight of educated population. A generation without education. Psychological traumas.
Institutional collapse. State institutions are destroyed. Corruption and violence become the norm. Restoring institutions is an extremely difficult task.
Conflict trap. Poverty leads to conflict; conflict leads to poverty. Countries fall into a trap from which it is difficult to escape.
Ending conflicts
Why do civil wars last so long and are so difficult to end?
The problem of credible commitments. The parties do not trust each other. Even if they desire peace—how to guarantee that the opponent will not violate the agreement? Disarmament makes one vulnerable. This is a "security dilemma" within the country.
Profitability of war. Some actors benefit from the continuation of the conflict: military commanders, arms dealers, criminal elements. "War economies" create interests for prolonging war.
The role of intermediaries. International guarantors (peacekeepers, external powers) can provide credible commitments. Studies show that peacekeeping missions increase the chances of lasting peace.
The political economy of conflicts shows that war is not irrational madness, but the result of rational calculations in a situation of specific incentives and constraints. Understanding these calculations is the key to preventing and ending conflicts.
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