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Texts and Reports - Public
Bads - Economic Dimension of Conflict - Summary of Discussions
Summary
of Discussions
Public
Bads - Economic Dimension of Conflict
Jochen
Hippler
Researcher at the Institute for Development and Peace (INEF)
University of Duisburg, Germany
Economic factors
comprise a core aspect of many instances of violent conflict - as the
participants unanimously agreed at the policy dialogue on "Public
Bads - Economic Dimensions of Conflict", convened by the German
Federal Ministry for Economic Cooperation and Development (BMZ) and
InWEnt, Capacity Building International, and held on November 26 and
27, 2002 at the Petersberg near Bonn, Germany. Economic factors can
play a decisive role in preventing violent crises or generating and
exacerbating them, in terms of their consolidation into "markets
of violence" and war economies. The conference was opened by the
Federal Minister for Economic Cooperation and Development, Heidemarie
Wieczorek-Zeul, Eberhard von Koerber (Deputy President of
the Club of Rome) and the Nobel Peace Prize Laureate José
Ramos-Horta (Foreign Minister for East Timor). The aim of this conference
was to encourage debate and exchange of experience between more than
100 participants from more than 24 countries from both the North and
the South, representing international organizations, companies, governments,
and civil society.
Causes of violent conflict
The participants agreed
that although economic factors can be considered as being of major significance,
this does not automatically imply they are inevitably and invariably
the underlying causes of violent conflicts. It may be that economic
interests and incentives are frequently the triggers and immediate causes,
especially in the classic conflicts over distribution that culminate
in violent resolution. However, conflicts can also cross the border
to violence for other reasons, for example, due to political tensions,
where the economic aspects only gain special prominence as the conflict's
dynamic unfolds. Various participants succinctly referred to "greed
and grievance" as being the two principal factors in generating
violent conflicts and Javier Nino Perez (EU Commission, Department
for Conflict Prevention) took both of these dimensions into account
when he said:
"Most armed conflicts are complex, and have deep ethnic and historical
roots. Often they have their origin in poverty and discrimination. But
it is increasingly clear that lack of economic opportunities and pure
greed are prominent root causes."
Nonetheless, there was no doubt that conflict causes vary widely in
different concrete contexts and have to be specifically analysed in
each individual case.
Privatising violence
and creating markets for violence
The participants attributed
particular significance to the tendency towards the privatization and
commercialization of political violence and this was an aspect especially
highlighted by Erhard Eppler, the former Federal Minister for
Economic Cooperation and Development. The borders are becoming increasingly
blurred between political movements making use of violence and mafia-like
structures, warlords' private armies, paramilitary groups operating
around the official army, police or secret services, and private security
services or troops. Nowadays, states or governments are even less likely
than before to be the sole cause of political violence and armed conflict,
and even less able to control it. Increasingly, private groups are turning
from only being instruments acting for a state into independent factors
in how violence is used; for examples, we need look no further than
the warlords in Afghanistan or Somalia, Osama bin Laden's Al-Qaida,
private mercenary companies from North America, Europe or South Africa,
drug barons and mafiosi structures or private paramilitaries. It is
becoming steadily harder to distinguish whether the kidnappings and
robberies or trading in legal and illegal goods (diamonds, oil, weapons,
drugs) is actually serving to fund some political struggle or whether
a political stance is primarily adopted to disguise such activities
and earnings. The term "markets of violence" has come to be
widely used to describe those cases where, on the one hand, violence
either enables the key players to acquire wealth or safeguards the wealth
they already have, and, on the other hand, where violence itself becomes
an economic commodity sold, for example, as "security" or
violence to the highest bidders. Under such circumstances, a war economy
often establishes its own internal dynamic and replaces the normal civil
society economic structures - as, for instance, when civil society business
activities collapse during the war, leaving only war-related means for
employment, income and profit.
This sort of fragmentation
and commercialization of violence can be especially dramatic in countries
undergoing a phase of ethnic conflict and disintegration of the state.
As the participants also agreed, it is then extremely difficult to escape
the spiral of violence since the range of actors and complexity of their
interests makes it a formidable task to find any political solution.
The role of the private
sector economy
During the discussion, particular
attention was directed to the role of private companies and trade associations
in situations where armed conflict is a threat or already acute. All
participants assumed that the private sector and trade organizations
do have - or could have - an important role to play, although more in
preventing the outbreak of violent crises than in direct conflict resolution
or defusing escalating conflict. Opinions differed on whether foreign
direct investment or economic growth in themselves actually help prevent
conflict - as suggested, for example, by private sector representatives
- or whether they could equally have the contrary effect. The view advanced
by, for example, Claudia Wörmann (Foreign Department of
the German Confederation of Industry, BDI), of foreign direct investment
in target countries particularly promoting economic stability and development
since it reduces the likelihood of conflict was countered by questioning
how and in what context such investments are made - issues raised by
Jens Martens (World Economy Ecology and Development - WEED) or
Jayasankar Krishnamurty (ILO), who added that, under certain
circumstances, Foreign Direct Investment (FDI) might even trigger or
worsen a conflict. At this point, there was a general consensus on the
pressing need for more debate and further research into the concrete
ways private sector activity affects the dynamics of conflict.
At the same time, participants
were warned of taking an undifferentiated view of "the" private
sector as one single factor; instead, a distinction must be drawn between
local, frequently small or small and medium-sized enterprises on the
one hand, and larger, transnationally operating companies on the other,
since their weighting, interest structures, and familiarity with local
conditions can vary widely. Drawing on her experience, especially in
Africa, Bianca Buchmann (Managing Director, Hospital Engineering
GmbH) remarked: "It cannot be ignored, however, that the interests
of Trans National Corporations (TNC) do not automatically tally with
those of their host countries. The latter need to enhance national economic
development while TNCs seek to improve their international competitive
position." In contrast, smaller and more medium-sized companies
are often far more directed towards local conditions.
Different opinions were
expressed when it came to evaluating the work of certain transnational
corporations in the direct local environment, which were then discussed
by taking the examples of the diamond industry (Judith Sargentini,
Fatal Transactions/Netherlands), producing coltan in Central Africa
(above all, after the talk held by Peter Kählert from H.C.
Starck) and an international oil corporation in the south of Sudan (introduced
by Haruun L. Ruun and Emanuel LoWilla, New
Sudan Council of Churches). The debate highlighted how companies adhere
to vastly different practices. It also showed that evaluating practices
requires, firstly, corporate public statements being compared to their
real application on the ground and, secondly, NGOs' criticisms of business
practices strictly adhering to the facts: plausibility alone cannot
be considered as sufficient grounds for making public accusations.
Among the participants from
the conflict regions of the South, there was a particular stress placed
on the need to adopt a differentiated approach to business within "the"
private sector, distinguishing older (i.e., pre-conflict) and more recent
sectors, where the latter are frequently linked to warring factions
and criminally active, or have mafia-like structures. This was further
emphasized in comments made by the former Lebanese Minister of Finance,
Georges Corm. Regional commercial enterprises that have been
in business for years or decades, generally locally-owned, are seldom
interested in situations that exacerbate or inflame conflict since traditional
companies are precisely the ones to suffer most in conflict situations,
through weakened domestic demand, infrastructure erosion and decay,
destruction of own production facilities, and the loss of valued business
partners in other regions. Yet given favourable conditions, these private
sector companies can, at certain times, become key factors in a finding
a peaceful resolution, as Tilak de Zoysa, Chair of the Ceylon
Chamber of Commerce, made clear with reference to Sri Lanka.
Mafiosi economic structures
Some parts of the private
sector profit directly from the wars and may even be generated and established
by them. Typically, such sectors operate on the edge of legality and
often in areas beyond it; smuggling, arms and drugs trafficking, and
war-related financial speculation are the principal activities characteristic
for these new, rapidly developing, economic empires, illustrated by
reference to Afghanistan and Lebanon (described by Georges Corm,
former Lebanese Minister of Finance). With regard to Afghanistan, Umer
Daudzai (Focal Point for Afghanistan, UNDP Bureau for Crisis Prevention
and Recovery) said: "There are allegations that many of the Afghan
traders may have made their fortunes through involvement in drug trafficking
and smuggling. According to a United Nations Development Programme/World
Bank study in the year 2000, the total turnover of the smuggling across
Afghanistan was US$ two billion. A similar figure was given on estimating
the total amount involved in drug trafficking originated from Afghanistan."
In countries such as Afghanistan or Lebanon, illegally obtained sums
of money like these do not solely mean material wealth; they also generate
influence and power. Once a violent conflict ends, these business figures
generally attempt to transfer their illegally obtained funds into the
legal economic sector. Mary B. Anderson (President, The Collaborative
for Development Action, CDA) posed the central question of how such
criminal economic structures ought to be treated after the violent conflict
phase ends. Should the road to legality be levelled to reinforce peaceful
development, or the representatives of such business activities rather
be held responsible for crimes repeatedly committed? This issue, too,
is one requiring further debate and research.
Business ethics
A key aspect of the discussion
reflected the issue of business ethics, a topic specifically emphasized
by Wilfried Steen of the Church Development Service (EED). These
concerns had already been touched on at the start of the policy dialogue
by Eberhard von Koerber, who has acquired first-hand knowledge
of them not only through his work both as Deputy President of the Club
of Rome and Deputy Chair at the Wittenberg-Center for Global Ethics
but also from his experience in the executive management at BMW. As
he said: "Their power to impact globally, their vast international
experience and their knowledge, all give these companies a responsibility
for the societies where they are active. Knowledge does not only lead
to freedom, it also leads to responsibility."
This view was widely echoed
although representatives from various non-governmental organizations
particularly questioned whether major corporations always did justice
to this responsibility and wondered if companies actually put the aims
they publicize into practice, for example, in the human rights area.
Peter Knoedel, Chairman of the Board of Deutsche BP AG, considered
the positive role played by business was apparent in two principal areas:
firstly, in providing a role-model in potentially difficult countries
(by rejecting corrupt practices, ensuring equal treatment for employees
irrespective of their ethnic origin or affiliations, etc) and, secondly,
in implementing multilateral, voluntary rules directed to ensuring similar
conditions for all companies. In the face of this optimistic assessment,
François Grignon (Central Africa Project Director; International
Crisis Group, ICG) took a more sceptical view of the private sector
role, citing contrary experience and noting that the way many companies
used their ethical principles to gain or enhance a public profile was
not echoed in reality, at least not in many of the Central African countries.
And, as Jens Martens (WEED) and other participants emphasized,
even economic growth can undermine stability in Third World countries
and promote increased conflict.
Voluntary corporate codes
of conduct
The discussion on the issue
of business ethics was linked to the question of voluntary corporate
codes of conduct. In the meantime, such codes are being established
under UNO auspices (as presented by Melissa Powell, Project Manager
for UNO's Global Compact), in a US / UK initiative, at the EU Commission
(as described by Javier Nino Perez, Department for Conflict Prevention
at the EU Commission), by the OECD and in numerous other initiatives
and contexts.
As Bianca Buchmann pointed out: "In Europe we have right
now about 27,000 codes of conduct or social standards, many applicable
only to particular industries, some tested and implemented, others toothless
declarations. They exist alongside internationally defined and monitored
guidelines for good corporate governance such as Kofi Annan's Global
Impact, the International Chamber of Commerce code of conduct and the
Business Endorsement of NEPAD (New Partnership for Africa's Development),
to name just a few."
The benefits of voluntary
codes of conduct vary widely, but at least they provide a benchmark
to measure a given company's conduct against. There was widespread consensus
that the critical monitoring provided by NGOs is important here, since
they can draw attention to insufficient standards and reveal violations
of such agreements. In this way, they maintain sufficient pressure to
encourage corporations to adhere to the codes they have established.
Representatives from the private sector, civil society and governments
all pointed out that, even though the codes of conduct are voluntarily
established, it cannot simply be optional to keep to such agreements.
Robert Davies, Chair
of the Prince of Wales International Business Leaders Forum (IBLF),
stressed that it is not enough just to improve corporate codes of conduct
if companies are not following them.
Simply ensuring a level of independent monitoring does not make the
codes of conduct genuinely useful; instead, they will first be considered
as truly helpful when adherence to them is also guaranteed via mechanisms
instigated by the state. The Belgian Ambassador to Germany, Lodewijk
Willems, called for a "policy combining binding regulations
by governments with business codes of conduct", since otherwise
the anomalous situation could arise that precisely those companies adhering
to their social standards are the ones disadvantaged.
As a general example of the challenges in this area, Bennett Freeman
(Sustainable Investment Strategies, Columbia University/USA) cited the
present state of the Voluntary Principles on Security and Human Rights
formulated in 2000 by the UK / US governments, saying: "Two years
after their launch, the credibility of the Voluntary Principles is on
trial; the ability of the process to demonstrate concrete progress is
being tested. The NGOs inside the process and others outside of it cannot
be expected to accept such progress on trust alone."
The role of state and
governments
The role of the state was
an important part of the discussions in a variety of contexts and it
quickly became apparent that highlighting the private sector role cannot
be taken to imply any underestimation of the crucial part played by
governments in preventing violent conflicts or dealing with them. Peter
Knoedel (Deutsche BP) reminded participants that "The business
of business is business"; companies cannot primarily be concerned
with development or peace policy tasks. In other words, their main province
is specifically related to their business goals since, as he pointedly
stated: "We are not there to run the world - we do not have the
skills, and we have no mandate", receiving support for this view
from former German Interior Minister Gerhart Baum.
Only taking this perspective
into account made clear that, although the private sector can make crucial
contributions to conflict prevention and conflict resolution processes,
it neither replaces, nor wants to replace, the political level of government
action. On the contrary, the key role of government agency was repeatedly
stressed; as Lode Willems, the Belgian Ambassador, put it: "We
should not ask private business to do the job we as governments should
do", and he received support for this later from Adolf Kloke-Lesch
of the BMZ, who added: "It is obvious that companies cannot fill
the gap left behind when the political sphere fails to meet the burden
of responsibly incumbent on it."
The participants considered
there was a pressing need for governments to adopt an active role. In
the case of the North, state involvement remains imperative in preventing
conflict escalation and redirecting existing conflict into peaceful
channels of resolution by, for example, reinforcing official development
cooperation, setting the frame for key economic data, and enhancing
civil society and private sector cooperation; the governments in the
South equally have a key role to play, especially where the decay of
statehood and fragmentation of both state and society are common causes
of violent conflict, or, in the reverse instance, an incompetent, corrupt
or ineffective state fosters conflict and promotes violence, especially
by repressive or dictatorial acts. For this reason, the participants
called for "reinforcing" the state in the sense of enabling
it to assume its functions more efficiently - and to achieve this within
the framework of "good governance" practices, i.e., without
corruption, in transparent, pluralistic and open political processes.
In this context, Jayasankar Krishnamurty (International Labour
Organization, ILO) underlined how essential it is to have successful
macro-economic policies and a functioning tax system, adding that the
success of promoting peace on the basis of a functioning economy frequently
depends on whether these goals are pursued within the structure of a
functioning state.
Preventing violent conflict
as a core task
This topic triggered a discussion
on possible forms of prevention as precautionary measures in the struggle
against violent crises. Participants were unanimous in their assessment
of the key role played here by economic factors. Societies that are
economically stabile and capable of meeting future demands with adequate
room for manoeuvre in distribution and a minimum of just distribution
are less likely to experience violence than shrinking economies facing
diminishing amounts available for distribution and major social differences.
Moreover, not only can the governments in the North and South contribute
in this area, the private sector is equally able to offer support, especially
if they act together and are not distracted by the temptation to maximise
their short-term interests. In this context, Peter Wittig (German
Foreign Office ) pointed out the need to create or intensify national
and international systems of incentives directed towards the different
groups of producers, traders and consumers, in order to facilitate appropriate
actions in conflict situations.
Promoting good governance
could be a crucial measure in prevention, although one that is only
effective indirectly and in the long-term; this would involve, for example,
training state and private sector personnel, rejecting and fighting
corruption and an economy of patronage, fostering transparency and non-discrimination,
and an open cooperation with civil society on the local and international
levels. Positive influences like these, aimed in total at strengthening
those mechanisms for finding violence-free solutions to conflict, should
first be made effective by good example, as, for instance, where transnational
corporations themselves act in accordance with their principles. However,
this is an area where the governments equally need to be supported through
policy dialogues.
There was general agreement on the question of the priority of prevention
since, in the pre-violent conflict phase, the private sector and the
political sphere have greater potential to make their influence felt
than after escalation leading to, for instance, civil war. Representatives
of all groups shared the view that the chances for successful intervention
and constructive conflict resolution processes are considerably lessened
once the threshold to violence has been crossed.
Conclusion
The policy dialogue revealed
a remarkable unity of opinion on the question of private sector involvement
in pre- or post-conflict situations, agreeing it can have a major part
to play though the principal responsibility remains firmly located within
the political arena. Without a functioning state apparatus in potential
conflict countries, the chances of preventing conflict or constructively
dealing with it are slight. For this reason, a key task in a development
policy directed at conflict prevention is to strengthen those states
where effective governmental agency is present and, at the same time,
state tasks refer to the criteria of "good governance". In
this context, Adolf Kloke-Lesch (BMZ) emphasized, in his closing
statement, the "general preventative effect created by social and
economic development" and, to this end, ascribed a special significance
to "promoting good governance". As he said, "Focussing
on 'failed states' or 'bad performers' is no doubt essential and, in
policy terms, unavoidable. But this shouldn't let us become distracted
from providing substantial international aid to support those countries
that are taking steps in the right direction."
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