Essays on Civil War, Inequality and Underdevelopment

Syed Mansoob Murshed

• Publisher: Agenda Publishing
• Year: 2021
• ISBN:
  9781788213769
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Syed Mansoob Murshed has been at the forefront of research in the rational choice approach to conflict. His pioneering work over many years has demonstrated that armed conflict is inseparable from inequality and economic development.

This book brings together Murshed's key economic writings on conflict and includes work on conflict causation, sustaining peace agreements, the relationship of conflict and economic progress, the trade–conflict nexus, the effects of conflict on financial deepening and fiscal capacity, as well as case studies of everyday violence and transnational terrorism. The essays cover both theoretical ideas, critical literature reviews, mathematical modelling, and crossnational and subnational econometric empirical analysis.

The enduring nature of war and conflict and uneven economic outcomes make Murshed's work of lasting significance.

1

Conflict, civil war and underdevelopment

Conflict is a feature of human society since time immemorial. Disputes that arise may be organized around social class, ethnicity, religion, region, or some combination of these factors. The struggle can be over economic opportunities, as well as political and civil rights, among other contestable factors. In peaceful societies, conflict is channelled into non-violent means and institutions for both its expression and resolution. Economic and human development cannot occur without a large measure of social stability, which in turn requires the nurturing of institutions for non-violent conflict resolution. Conflict in low-income countries makes the objective of poverty reduction all the more difficult, since not only is growth retarded, public money is taken for military spending from basic social services, and the poor are themselves disproportionately the victims of conflict. Economists are increasingly concerned with how badly designed economic policy raises the vulnerability of low-income developing countries to conflict, and how economic policy reinforces, or weakens, the social contract that underpins peace. Fundamentally, violent internal conflict is a symptom of the absence or breakdown of the implicit or explicit social contract that sustains peace.

Traditionally war has been viewed as an irrational act, brought about by misunderstanding and coordination failure, and primarily a breakdown in relations between nation states. Today most armed conflicts occur between groups within the same nation state, and in the developing world. A common view is that civil war is fundamentally irrational, and therefore not amenable to the techniques of economics or rational-choice political science. But is this so? Once the interests of belligerents are taken into account, conflict may be the product of rational decisions, even if it is only of a bounded or myopic rational choice variety. Even a terrible genocide, as in Rwanda for instance, is often planned well in advance in a cold, pre-meditated manner and carried out to meet a well-defined objective. Furthermore, evidence is accumulating that socio-economic variables, such as the desire to control natural resource rents, social fragmentation, poverty, inequality, and institutional breakdown, all play a role in contemporary civil wars. Economic analysis, particularly fields dealing with endogenous public choice, has much to say about these matters. Also, empirical techniques associated with econometrics can shed light on many hypotheses, particularly given the emergence of qualitative data, for example on governance indicators.

The part played by civil wars in lowering economic growth, particularly in Sub-Saharan Africa, where per-capita growth rates have been negative in many countries for much of the last two decades cannot be overestimated. As Rodrik (1999) emphasizes, countries with weak institutions of conflict management, as well as high income inequality are less able to withstand economic shocks and experience growth failure. They are also more prone to the risk of civil strife and war, since their weak institutions, which are further weakened by shocks and lower growth, are unable to contain the resulting social pressure and distributional conflict.

For just over two decades, economists have started paying much more attention to internal conflict. This is not to say that it was completely ignored before, but the new research has very much arisen out of a pressing need to understand continued development failure, especially in Sub-Saharan Africa. In this new literature, a distinction is often made between grievance, a motivation based on a sense of injustice in the way a social group is treated, often with a strong historical dimension; and greed, an acquisitive desire similar to crime, albeit often on a much larger scale. Nobody would claim of course that these motives are entirely separate in practice (and motives often change during the course of war), but the distinction can be a useful analytical starting point. An important question is whether contemporary civil wars are more the product of grievances or more the result of greed (Collier & Hoeffler 2004).

There are genuine grievances producing civil war, many of which are related to economic factors: systematic economic discrimination against groups based on ethno-linguistic or religious differences. Extreme poverty and poor social conditions (including refugee camps) also facilitate conflict by providing more readily available combatants. Competing groups are formed when collective action problems can be overcome (Olson 1965). Many of today’s civil wars have an ethnic or nationalist dimension and ethnicity, whether based on language, religion or other distinctions, is often a superior basis for collective action in contemporary conflicts in poorer countries than other social divisions such as class. In coalescing groups, therefore, present-day and historical grievances play a crucial part. This is all the more possible when there are inequalities across a small number of clearly identifiable groups – horizontal inequalities (see, Stewart 2000). More often than not, these take the form of high asset inequality, discriminatory public spending across groups and unequal access to the benefits of state patronage, such as government jobs. Furthermore, state failure in providing security and a minimal level of public goods often force individuals to rely on kinship ties for support and security, this ethnic capital thereby becoming highly important to individuals (as discussed in Azam 2001). But, as always, ethnicity must be treated carefully: there is no simple, linear relationship. Indeed, where ethnic diversity is very large, we would not expect to see much conflict, as the different groups find it difficult to organize against each other, a conjecture that is verified by empirical work by de Soysa (2002), for example.

Discussion of greed as a motive for conflict has mainly arisen in the context of natural resource endowments, an abundance of which – at least so far as valuable minerals are concerned – appears to increase the risk of a country falling into serious conflict. Certainly, there are all too many tragic examples of conflict in mineral-rich countries, notably Angola, the Democratic Republic of the Congo, and Sierra Leone, to name but three. The issue is addressed by all the contributions to this issue directly or indirectly. Capturable natural resource rents, such as alluvial diamonds, can result in contests over the right to control these, some of which takes the form of warfare, but also criminality and corruption in other instances. Buhaug and Gates (2002) find that the presence of capturable natural resources tends to draw the conflict closer to these resources, thereby enlarging the conflict zone.

A related point concerns environmental conflict, specifically the struggle over land use and water rights in situations of acute shortage of these means of livelihood. De Soysa (2002) examines the contribution of shortages of renewable resources such as land or water relative to the abundance of non-renewable resources (diamonds, oil) in determining the risk of conflict. The results of his econometric investigation across a cross-section of 138 countries suggest that the former has little impact, whereas mineral resource endowment significantly contributes to the risk of conflict. Also, the more exposed a nation is to trade the greater the likelihood of peace; an intuitive outcome as international trade cannot flourish in very poorly governed and conflictual societies.

The greed versus grievance dichotomy is a useful entry point into the debate. But for these forces to take the form of large-scale violence there must be other factors at work, specifically a weakening of the social contract. Therefore, while rents from capturable point resources do constitute a sizeable ‘prize’, violent conflict is unlikely to take hold if a country has a framework of widely-agreed rules, both formal and informal, that govern the allocation of resources, including point-resource rents, and the peaceful settlement of grievances. Such a viable social contract can be sufficient to restrain, if not eliminate, opportunistic behaviour such as large-scale theft of resource rents, and the violent expression of grievance.

Conflict-affected nations have histories of weak social contracts (or a once strong social contract that has degraded). This weakness is in many instances a legacy of colonialism which institutionalized mechanisms favouring settlers over indigenous peoples (Guatemala, Indonesia, South Africa); divide and rule favouring one ethnic group over another, as in Rwanda; market controls to create rents for settlers to the cost of locals (Indonesia and Zimbabwe); and the expropriation of land and resource rents (Angola, Sri Lanka and the Belgian Congo). Pre-colonial ethnic rivalry over territory and assets, the case in resource-scarce countries such as Afghanistan, Somalia and Sudan, and the failure of long-standing independent states to strengthen mechanisms of political representation, notably Ethiopia, Haiti, and Liberia also lie behind weak social contracts (see Nafziger, Stewart & Väyrynen 2004). A single ethnic group (or a subset) often assumed power in the immediate post-independence era (the 1960s), subjugating others and concentrating the fruits of state power – public employment, other public spending, and resource rents – into its own hands (see Ndikumana 2001 on Burundi and Rwanda). A final complexity in fatally weakening social contracts was the interaction of these ‘domestic’ factors with external events, notably the Cold War, which provided finance and ideological succour to ruling elites and rebels (notably in Central America, Central Africa, and the Horn of Africa).

The net result of these processes is the accumulation of grievances within the context of a disintegrating social contract that would otherwise have provided the rules of the game to govern the distribution of the social pie and to achieve peaceful conflict resolution. And the collapse of the social contract, and the resulting civil war, nearly always has a strong fiscal dimension: the state is increasingly perceived to exercise favouritism in public spending and to tax unjustly. Azam and Mesnard (2003) present a model of civil war in which the social contract between different groups weakens when the state breaks its implicit promise to make a fiscal transfer to all of society’s members. Those who are excluded rebel in an attempt to overthrow the state and redress their grievance. Addison, Le Billon and Murshed (2002) present a model in which civil war is partly motivated by a desire for natural resource rents, but where historically generated grievances also play a role. Addison and Murshed (2001) discuss the role of the social contract and its disintegration as civil war develops.

In summary, both greed and grievance motivate belligerents, but they have complex and deep roots in a disintegrating social contract that then permits their free, and violent, expression. These deeper roots also provide some hope: even societies marked by prolonged civil war can in some instances reassemble a working social contract (Mozambique), or make progress towards one (Guatemala). Somalia’s civil society is showing a remarkable creativity in trying to cut across both greed and grievance to create a social contract, drawing on long-standing and traditional means of dispute resolution. If greed or grievance alone drive conflict, violence would simply continue indefinitely.

Still, while there is hope there is also much to fear. Conflict, once initiated, can have unpredictable dynamics. Open warfare is just one manifestation of the disintegration of the social contract. The other is criminality that also flourishes in the environment of failed states and poor governance. In addition, criminal activity, whether involving extortion or trade in contraband goods, play a major part in financing conflict. Skaperdas (2002) considers warlord competition. This is a situation where warlords, akin to gangsters, compete with one another for the lootable or capturable surplus. Although it is a model of banditry, there are surprising similar overtones in a variety of civil wars in Africa (Sierra Leone, Democratic Republic of Congo, Liberia, Angola) and elsewhere (Chechnya, Georgia). Excessive competition between rival warlords lowers the amount of the very loot that they compete over. This is because excess warlord competition discourages peaceful production (which may not always be true of non-renewable resources). If that is the case then a long-term time horizon ought to discourage excess competition and violence, but it may not do so if eliminating the enemy now yields greater expected returns in the future. Mehlum, Moene and Torvik (2002) consider the allocation of talent, especially after the end of war and after demobilization. Talented individuals may choose to criminally predate or act as protectors of the predated. This situation can also arise in societies, as in the former Soviet Union, where the social contract was severely stressed by the transition from communism, especially in Azerbaijan, and the other newly independent states of Central Asia. An oversupply, or the new entry of predators, increases demand for the complementary service – protection from predation, and overall criminality increases. This is inimical to poverty reduction and the resumption of sustainable reconstruction and growth.

Other factors also influence the dynamics and longevity of wars, especially when they affect the ability of belligerents to organize and protect themselves. Buhaug and Gates (2002) consider a neglected dimension: the geography of conflict, and the relationship of topography to warfare. Using data from 1946 onwards they find that ethnic and secessionist wars tend to be located at a greater distance from the capital, while wars that try to capture the state by overthrowing the existing government are nearer to the capital. Conflicts with a longer duration tend to expand the total war zone. Similarly, conflict zones that adjoin an international border, offer rebel armies a better chance of escape, provide scope for resupply and trade in illicit products, and serve to expand the conflict zone. Mountainous, forested and rugged terrain should intensify the size of the conflict, but data difficulties regarding this variable render it insignificant in the regressions carried out.

Aside from the belligerents themselves, other actors are caught up in conflict, most noticeably civilians and humanitarian workers. These too influence conflict’s dynamics. In the model contained in Azam and Hoeffler (2002) there exists a trade-off between pure fighting and activities concentrated on terrorizing the population. While the former offers scope for looting, the role of terror is to displace civilians and lower rebel fighting efficiency, as rebel troops are less able to disguise themselves amongst civilians. But less loot is available when the government terrorizes civilians in rebel areas, as the population will have fled. Terror tactics are therefore likely to produce a refugee crisis. Foreign aid may discourage a looting war, as more money is available. But when the government is more inclined to terrorize civilians in rebel areas with a view to weakening rebel armies, more aid encourages more violence and increases the chances of a refugee crisis. Aid delivery can be redesigned to limit these perverse incentives, but to do so we need to understand clearly each conflict’s specific dynamics.

It is evident that peace agreements to end conflict tend to fail, and it takes several attempts to bring about a lasting peace (e.g. Walter 2002). In other words, one or more parties to a peace treaty often renege on their commitment to peace. The resumption of warfare lowers the reputation of those who repudiate peace agreements, making future peace agreements more costly and difficult to achieve. In the presence of capturable point resources and overall poverty, however, the resumption of warfare is sometimes attractive, all the more so when groups are impatient to consume (have a high discount rate). These matters are analysed in detail in Addison and Murshed (2002a). The commitment to any peace agreement can be enhanced by credible outside intervention, in the form of effective peace keeping forces. This is part and parcel of the reform of international institutions as discussed in Nayyar (2002). Most of the international institutions of conflict management that exist were fashioned during the cold war, and are geared to dealing with inter-state conflict rather than civil war.

To end conflict, we need to understand its causes. Unfortunately, we are only able to clearly identify factors that contribute to the risk of open political violence and civil war. The actual outbreak of civil war, however, requires triggers that are usually both internal and external; these are not predictable, and must arise in the context of the failure of state and society to manage conflict. Internal triggers are events that actually push potential belligerents over the brink into warfare. External triggers consist of actions and signals by outsiders, neighbouring countries and great powers, that make the prospect of fighting or secession more attractive. Conflict triggers can only be operational when the institutions of conflict management have degenerated, and the social contract is non-functional.

Be that as it may, the restoration of peace requires the reconstitution of the social contract. This requires a broad-based pattern of economic growth associated with reconstruction and the peace dividend. Each society will tend to have different conceptions regarding what constitutes a desirable pattern of broad-based public spending and taxation: for some the emphasis will be on the provision of public services that reduce the absolute poverty of the excluded groups, while others will demand a more comprehensive closure of the gap between the excluded and the favoured groups by means of public spending and taxation; a concern for reducing group inequality as well as reducing absolute poverty. But whatever the precise pattern of broad-based spending required, the necessary fiscal transfers must somehow be financed. Achieving peace from this starting point is exceedingly difficult since subsequent promises by the state to rectify the initial injustice, by fiscal transfers and other means, may be imperfectly credible (Addison & Murshed 2001). Moreover, in a prolonged conflict the tax base declines along with the economy, thereby reducing the size of the fiscal transfer that the state is able to offer compared with the initial transfer it should have made to avoid war. The state can, however, share the post-conflict peace dividend with the rebels, and reducing military spending after a peace deal will release resources for such broad-based spending as education and health.

Conflict is now more directly integrated into research on the causes of development failure than ever before. The debate has already moved on considerably from the early contribution...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Contents
• Preface
• Tables and figures
• 1 Conflict, civil war and underdevelopment
• 2 Revisiting the greed and grievance explanations for violent conflict
• 3 Greed, grievance and globalization
• 4 Economic dimensions of the liberal peace and its implications for conflict in developing countries
• 5 Enforcing peace agreements through commitment technologies
• 6 The conflict–growth nexus and the poverty of nations
• 7 Conflict and fiscal capacity
• 8 Does civil war hamper financial development?
• 9 The clash of civilizations and the interaction between fear and hatred
• 10 Transnational terrorism as a spillover of domestic disputes in other countries
• 11 Quantitative restrictions on the flow of narcotics: supply and demand restraints in a North–South macro-model
• 12 Spatial-horizontal inequality and the Maoist conflict in Nepal
• 13 Socioeconomic determinants of everyday violence in Indonesia: an empirical investigation of Javanese districts, 1994–2003
• 14 Not loving thy neighbour as thyself: trade, democracy and military expenditure explanations underlying India–Pakistan rivalry
• Acknowledgements
• References
• Index