The political economy of civil wars

What lessons for policy?

Much of the academic debate on the economic causes of contemporary armed conflict has become polarized around the greed versus grievance dichotomy, juxtaposing “loot-seeking” with “justice-seeking” rebellion, and, more generally, the significance of economic as opposed to socio-political drivers of civil war.(1) Policy perspectives have been significantly shaped by the controversial “greed theory”, which posits that economic resources are pursued by rebels not simply to sustain war, but rather that war is pursued to obtain resources. The so-called “resource wars” in Angola, Sierra Leone and Democratic Republic of Congo (DRC), which were fueled by diamonds and other valuable resources, are often-cited examples.(2)

There is growing recognition, however, of the analytical limits of the greed theory and, consequently, policy mechanisms based on its prescriptions.(3) Qualitative analysis of different armed conflicts suggests that combatant self-enrichment motives and opportunities for insurgent mobilization created by the access to lucrative resources, smuggling routes, and capture of informal economies are, in fact, seldom the primary, let alone the sole cause of contemporary conflicts. They do, however, significantly complicate and prolong hostilities, and in some cases create serious impediments to peaceful settlements. Importantly, these factors interact to varying degrees with long-standing socio-economic and political grievances, inter-ethnic disputes, and security dilemmas, brought about by weak and unaccountable governments. This suggests that policies for conflict management need to be based on comprehensive approaches, which not only account for the complex interrelationship between economic and political dynamics but also incorporate the political economy of both rebellion and state failure.(4)


Different resources – different conflicts?

An important source of these findings comes from innovative research by Philippe Le Billon and Michael Ross, who have analyzed the varied impacts that different natural resources have on the type (separatist or non-separatist) and duration of armed conflicts.(5) Their research suggests that important consequences for conflict might arise from the mode of resource exploitation and, thus, who benefits from them, as well as the way that proceeds are managed by the state. One of the findings is that "lootable" resources, such as alluvial diamonds, illegal narcotics, and coltan, are more likely to be implicated in non-separatist insurgencies, as they are easily accessible and exploitable by would-be rebels and thus generate direct benefits for them and the local population. By contrast, "unlootable" resources, such as oil, gas, and deep-shaft mineral deposits, tend to be associated with separatist conflicts, particularly if located in ethnically distinct areas. As benefits accrue primarily to the central government, popular grievances may be fueled if revenues are inequitably distributed by corrupt or repressive regimes, while the social and environmental burden is carried by the local population.

The “political economy of extraction”6 may also shed light on an often-cited paradox: why were diamonds a source of wealth in Botswana but a source of instability in Sierra Leone? The answer to this question may be two-fold. First, the alluvial diamonds found in riverbeds in West Africa provided easy loot for would-be rebels, while the deep-shaft, kimberlite diamonds in Botswana require heavy equipment and substantive capital in order to be mined. Secondly, however, the diamond sector in Sierra Leone was highly unregulated and corrupt, creating few revenues for development purposes, while in Botswana, the government’s control over – and wise management of – the revenues ensured that diamonds became a blessing rather than a curse.



Findings from conflicts, lessons for policy

Resource control regimes: Given the importance of resource and financial flows to combatants in sustaining many of today's armed conflicts, current international efforts addressing the political economy of conflict focus primarily on global resource control regimes. These include UN commodity sanctions, the Kimberley Process certification scheme for diamonds, and interdiction strategies aimed at transnational organized crime, money laundering, corruption, and drug trafficking.(7)

In order to improve these regulatory efforts to curtail resource flows, multilateral and bilateral donors should focus on capacity building programs to create the administrative and technical capacities necessary to overcome the severe implementation and enforcement problems, particularly in conflict-prone countries.

Commodity control regimes also need to be complemented by more comprehensive efforts that address the financial flows connected to “conflict goods”. This will require increased coordination between international financial institutions, the OECD Financial Action Task Force on Money Laundering, and law enforcement agencies in industrialized countries, which are home to most financial markets.

Anticipating negative impacts: Yet, even the most robust control regimes are unlikely to have a decisive or even fully positive impact. Special care is required to anticipate and mitigate unintended negative impacts that regulation might entail. Why is this so?

The self-financing nature of conflicts can lead to increased indiscriminate predation of civilians in the form of forced labor, extortion, pillaging and looting, as control over lootable natural resources relieves combatants from the need to generate social capital among putative supporters. Easy access to lootable resources may foster fragmentation of both state and rebel combatant groups, thus multiplying the number of potential peace spoilers. In some cases, access to resources such as coca in Colombia, poppies in Afghanistan, alluvial diamonds in Sierra Leone and Angola, as well as the shadow trade in Kosovo, have not only benefited rebel groups and warlords, but also generated incomes for the civilian population forced to cope with the conflict situation.

Under such circumstances, regulatory policies aimed at denying rebels access to these resources can have adverse impacts. Rebels may compensate for the lost revenues through increased civilian predation. Fractionalization of armed groups may further increase due to violent intra-group competition over the "shrinking pie," and regulatory efforts may face strong local opposition and increase civilian support for rebel groups while also exacerbating civilian hardships.

Policy-makers should therefore conduct "conflict stakeholder assessments" when devising control regimes so as to properly distinguish between those actors who engage in armed conflict for profit and power, and those who are forced to participate in war economies to sustain their civilian livelihoods and who may suffer as much from indiscriminate rebel predation as from ill-conceived efforts to end it.

Furthermore, in considering sanctions as a conflict resolution tool, policymakers should understand that sanctions, far from being neutral and non-violent, can be a highly coercive and partisan policy instrument. Targeted commodity sanctions and arms embargoes against rebel groups may contribute to conflict termination where they shift the military balance in favor of government forces. Yet breaking military stalemates may, in the short-run, lead to increased violence, such as witnessed in Angola.

Economic incentives and peacemaking: In some instances, economic agendas may in fact provide putative adversaries with an incentive for informal collusion rather than hostile opposition. In the diamond fields of Sierra Leone and Angola, for example, rank-and-file combatants negotiated temporary cease-fires to maximize personal benefit. In Burma, the military government reached quasi-formal, relatively durable cease-fire agreements with rebel groups by granting them lucrative business deals. Economic interests may also influence combatants' willingness to join post-conflict demobilization, disarmament and reintegration (DDR) programs, as the possession of arms provides combatants not only with personal security but also economic benefits.

This suggests that policy-makers need to identify and apply economic incentives of combatants within a wider set of strategic inducements for peacemaking. Providing "economic peace dividends" may in some instances help to co-opt belligerents into cease-fires or more formal peace processes. Yet, rewarding warlords with the spoils of war risks the creation of "negative peace", where justice and sustainability are deeply compromised and the threat of renewed conflict remains high.

Importantly, humanitarian and development aid should be better integrated into the design and implementation of DDR programs. If provided early on in the DDR process, job programs, skill training, and alternative livelihood projects can play an important role in convincing combatants to chose peaceful sources of income over making a living by the gun.

Criminalization of conflict: Insurgency groups have increasingly engaged in illegal economic activities either directly or through links with international criminal networks engaged in the smuggling of valuable resources and trafficking of arms and drugs. Once entrenched, such criminalized war economies pose important challenges for peacebuilding by undermining stability and multiplying the number of potential peace spoilers. Contrary to criminal organizations that employ violence for the sole purpose of economic profit, however, insurgent groups retain – albeit to varying degrees – military and political goals. For them, violent predation and criminal activities serve as a means to an end rather than an end in itself.

While improved law enforcement is an important policy tool, policy makers should hence avoid casting rebellion as a purely criminal, rather than political, phenomenon. Otherwise, doing so may risk mischaracterizing legitimate grievances and foreclosing opportunities for negotiated resolution, and may lend de facto legitimacy to state actors, regardless of their behavior and role in the conflict.

This also shows that transforming criminalized war economies requires both "carrots and sticks". Policy attention should be directed at prosecuting the most egregious forms of economic criminality while at the same time providing incentives and alternative livelihoods for belligerent and civilian beneficiaries of illegal and shadow economies to join the formal civilian economy.

Bringing the State back in: The high risk of conflict attributed to natural resource abundance in a given country is not a direct relationship, but rather one that is mediated by critical governance failures. Systemic corruption and economic mismanagement, patrimonial rule, and the exclusionary "shadow state" often associated with resource abundance, may fuel political and economic grievances by undermining the state's legitimacy, and by weakening its capacity to perform core functions, such as the provision of security, the management of public resources, and the equitable and efficient provision of basic goods and services.

State weakness and poor governance, particularly the state's failure to manage natural resource exploitation effectively and equitably, also strongly influences the opportunity for and feasibility of rebellion as it affects the relative strength of the state being challenged. As the pervasive informal diamond sector in Sierra Leone and the cross-border smuggling networks in Kosovo indicated, the more widespread the informal economy, the less resources accrue to the state and the easier it is for rebels and warlords to capture resources and trade routes that give them access to the finances and weapons necessary to challenge the state.(8)

Thus, research and policy on the economic dimensions of conflict need to more adequately address the role of the state both as an institution and as a central actor in the political economy of armed conflict. The development and security communities should particularly focus on structural conflict prevention by addressing the underlying problems of weak economic governance and state-failure in conflict-prone regions that make armed insurgency politically and economically feasible.

As part of their "good governance" programs, donors should also strengthen their assistance in designing and monitoring policy tools and strategies for more effective, equitable, and accountable systems of natural resource management and revenue-sharing.(9) An innovative example is the multi-donor-financed Peace Diamonds Alliance in Sierra Leone, which ensures transparent resource management by the government, while at the same time increasing benefits for artisanal miners dependent on the diamond industry.(10)

Examining conflicts in terms of their political economy – particularly where resource abundance, rather than scarcity, is a driving factor – has yielded important new insights for conflict management and development aid. But clearly, conflicts cannot be reduced to their economic dimensions alone. Neither, then, should policies.

1) Mats Berdal, David M. Malone (eds.): Greed and Grievance: Economic Agendas in Civil Wars. Lynne Rienner Publishers, 2000 / Paul Collier, Anke Hoeffler: Greed and Grievance in Civil War. World Bank Policy Research Paper 2355, 2001
2) Michael Renner: The Anatomy of Resource Wars.
WorldWatch Paper 162, 2002
3) See for example C. Cramer: Homo Economicus Goes to War: Methodological Individualism, Rational Choice and the Political Economy of War, in: World Development 30(11), 2002, 1845-1864
4) Karen Ballentine, Jake Sherman (eds.): The Political Economy of Armed Conflict: Beyond Greed and Grievance. Lynne Rienner Publishers, 2003
5) Michael Ross: Oil, Drugs, and Diamonds: The Varying Roles of Natural Resources in Civil Wars, in: Ballentine and Sherman, op. cit., pp. 47-70 / Philippe Le Billon: The Political Ecology of War: Natural Resources and Armed Conflicts, in: Political Geography 10(5), 2001, 561-584
6) Richard Snyder: Does Lootable Wealth Breed Disorder?
A Political Economy of Extraction Framework. Paper available at www.santafe.edu/files/gems/obstaclestopeace/snyder.pdf
7) Jake Sherman: Policies and Practices for Regulating the Resource Flows to Armed Conflict. International Peace Academy, 2002
8) William Reno: Warlord Politics and African States. Lynne Rienner Publishers, 1998
9) Paul Collier et al.: Breaking the Conflict Trap: Civil War and Development Policy. The World Bank, 2003
10) www.peacediamonds.org/home.asp