On-line video of Presentation by Paul Collier at "Development and Security'", the 7th Annual Bank Conference on Development Economics (ABCDE Amsterdam, May 23-24, 2005). [Papers, photos and other videos through the conference website: http://www.worldbank.org/abcde-amsterdam ]
|Democracy, Development and Conflict
[forthcoming in The Journal of the European Economic Association]
|Paul Collier and Dominic Rohner||
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|Post-Conflict Recovery: How Should Policies be Distinctive [forthcoming in Journal of African Economies]
PDF file (269kB)
|Military Spending and the Risks of Coups d’Etats||Paul Collier and Anke Hoeffler||
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|Unintended Consequences: Does Aid Promote Arms Races? 2007, Oxford Bulletin of Economics and Statistics 69: 1-28.||Paul Collier and Anke Hoeffler||
PDF file (Blackwell's website)
|Post-Conflict Monetary Reconstruction [World Bank Econ Rev 2008 22: 87-112]||Christopher Adam, Paul Collier and Victor Davies||
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|Beyond Greed and Grievance: Feasibility and Civil War||Paul Collier, Anke Hoeffler and Dominic Rohner||
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[Handbook of Defence Economics 2].
|Paul Collier and Anke Hoeffler||
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|Paul Collier, Anke Hoeffler and Måns Söderbom||
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|Grand Extortion: Coup Risk and the Military as a Protection Racket||Paul Collier and Anke Hoeffler||
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|Post-Conflict Economic Recovery||Paul Collier||
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|Economic Causes of Civil Conflict and their Implications for Policy.
[in Leashing the Dogs of War: conflict management in a divided world (USIP Press Books 2007)]
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|Coup Traps: Why does Africa have so many Coups d’Etat?||Paul Collier and Anke Hoeffler||
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|Understanding Civil War (Volume 1: Africa): Evidence and Analysis||Edited by Paul Collier, Nicholas Sambanis|
|Understanding Civil War (Volume 2: Europe, Central Asia, & Other Regions): Evidence and Analysis||Edited by Paul Collier , Nicholas Sambanis|
|Iraq : A Perspective from the Economic Analysis of Civil War.
[Turkish Political Quarterly Vol.4 No. 2 (2005)]
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Of all the problems within the domain of social science, security is the one where the nature of the problem has changed most radically in the past fifteen years. The security problems of weak states and their wider consequences are now central and are likely to stay so.
Reducing the global incidence of civil war: A discussion of the available policy instruments
Despite the enormous global attention inter-state wars attract, the principal source of major armed conflict in contemporary politics is intra-state. During 2003, there were 19 major armed conflicts in 18 locations worldwide. Only two of these 19 conflicts were fought between states. The majority of the intra-state wars were fought in poor countries: four of the 19 conflicts were in Africa and eight in Asia. These civil wars attract less attention but persist for much longer than inter-state wars. On average, a civil war lasts ten times longer than an international war.
Current research focuses on three issues. First, on the opportunities of global conflict prevention, second, the analysis of instruments aimed at shorting existing conflict and third, on recommendations on how to design policies for post-conflict societies. Post-conflict periods are characterized by particularly high risks of renewed civil war and the research to date suggests that the best opportunity for development policy is in the prevention of recurring war in post-conflict societies. The analysis of possible policy instruments in the reduction of the incidence of civil war is based on a global cost benefit analysis. The estimated cost of each policy instrument is compared with the benefits resulting from a reduction or shortening of wars.
The benefits of reducing the incidence of civil war
The benefits resulting from a reduction in the incidence of civil war accrue at three distinct levels: national, regional and global. Taking the national level first, one clear cost of civil war is a reduction in economic growth. Using a conservative estimate, one year of conflict reduces a country’s growth rate by 2.2%. Since, on average, each civil conflict lasts for seven years, the economy will be 15% smaller at the end of the war than if the war had not taken place. During the post-war recovery, even though the economy on average grows at an annual rate of more than 1% above the norm, it will take roughly ten years to return to its pre-war growth rates (that is, 17 years after the conflict started). 21 years after the start of the original war, the GDP has returned to the level it would have achieved if no war had occurred. The total economic cost, expressed as a present value at the start of the war is 105% of the GDP at that point. The welfare of a country’s population is further reduced because of increased military spending during and after the war. The additional cost is estimated at 18% of GDP.
Conflict also has a severe effect on human health. One way of summarising this effect is to express the cost in terms of Disability Affected Life Years (DALYs): a measure of the total number of people affected and the period for which their disability lasts. An average war causes an estimated 0.5 million DALYs each year. Assuming a recovery period of 21 years gives a figure of 5 million DALYs as the net present value of health costs when hostilities start. If each DALY is valued at $1,000 (roughly the per capita income in many at-risk countries), the economic cost of harm to human health in a typical war is around $5 billion.
At the regional level, the research indicates that the growth rate and military expenditures of neighbouring countries are affected during and after the war. On average, each country has 2.7 neighbours. Applying the same methods detailed above, the loss of income is 115% of the initial GDP of one country, which is greater than the direct effect in the conflict country itself. Due to neighbourhood arms races, the regions military expenditure will also rise, causing a cost of about 12% of one country’s GDP.
Other costs which are too difficult to quantify are incurred both in the country at war and in the region as a whole, including forced migration and increased disease. With the proviso that the figures so far are underestimated, the total benefit of averting a single “typical” civil war can be calculated. The various national and regional costs covered amount to 250% of initial GDP. The average GDP of conflict-affected low-income countries just prior to war is $19.7 billion, with the cost of a single war around $49 billion. To this we must add $5 billion of health costs, giving a total cost of $54 billion for a single low-income country.
In addition to this already significant figure, there is the ‘conflict trap’, in which countries that have just experienced a civil war are more likely to have further conflict. Looking at the 21 countries in which wars started and ended in the period 1965-99, the risk of conflict over the five years before the war averaged 22.3%, rising to 38.6% post-war. Over the 15 year period needed for the risk to reach the pre-war level again, the additional discounted cost is $10.2 billion. Thus, the total national and regional cost of a single war is more than $64 billion.
There are additional, global impacts of civil wars, massive in scale but difficult to assign a cost. Three world scourges over the last 30 years have had civil conflicts as contributory factors: hard drug production, AIDS and international terrorism. Based on the figures above, the benefits of reducing the number of countries at war at any one time can be calculated. At present, an average of two civil wars start each year. The net cost of these would be $128 billion. So, an initiative that reduced the chance of a new war by 10%, for example, would generate benefits of around $13 billion each year.
Opportunities for conflict prevention
The empirical research shows that a country’s political and social characteristics are much less important than economic factors in determining the risk of war. The three most significant characteristics are level of income, its rate of income growth and the degree of dependence upon natural resources. Thus, raising the economic growth rate and harnessing the ‘resource curse‘ reduces the risk of conflict. Two major policy options might deliver these benefits: aid and better utilisation of income from natural resources.
The effect of aid will depend to a large extent on the political and institutional situation. Additional aid as a means to boost growth is also subject to the law of diminishing returns. An extra 2% aid to poor and generally peaceful states would amount to an estimated cost of $195 billion (net present value over a decade). This indicates that unselective aid programmes are not a cost effective way of reducing conflict because the benefits are less than 10% of the costs. This is not to say that the aid may not be justified - after all, its main purpose is poverty reduction. However, conflict reduction should not be expected to be a major outcome.
Improved governance of income from natural resources
Not only is income from natural resources poorly converted to growth in many conflict-prone countries, but revenue from primary commodities is actually a risk factor in civil war. There are a number of reasons for this, including the fact that valuable resources can encourage regional secessions and provide finance for rebel movements. There are two ways in which the international community can act collectively to improve this situation. First, increase the transparency of revenue streams. A particular campaign, backed by a range of NGOs, the G8 governments and international institutions is known as the Extractive Industries Transparency Initiative (EITA). Second, greater medium-term revenue smoothing should be encouraged to avoid destabilising booms and busts.
Such international action would provide a template for government reform, and would give clear guidelines against which poorly performing governments could be measured. International agreements are difficult to achieve, and only a limited number can be negotiated at one time. There is therefore an opportunity cost of pursuing this particular strategy in preference to some other initiative which could also bring equal or greater benefits. It should be feasible to halve the adverse effects of poorly managed natural resource incomes (complete elimination may be an overly ambitious target). This would create a knock-on effect: reducing conflicts via increased growth rates. To halve the adverse effects, growth rates would be raised by 0.067%, assumed to be permanent once reforms are in place. The benefit in present value terms would be $12.1 billion.
There is also a much larger realisable benefit. Greater transparency in the revenue flows can reduce regional grievances and the incentives for secessionist groups to take control of the income. If such action reduced the risk from natural resource dependence by 10%, the overall risk of war for a typical country would fall from 13.8% to 12.7%. This would be worth $3.9 billion annually and, assuming it is permanent, gives a present value benefit of $77 billion. The total benefit from conflict reduction by this route is then $89 billion, making this a cost effective option.
Reducing post-conflict risks
During the first decade following a war, there are very high risks of repeat conflict: around half of all civil wars arise in this way. However, typically there are only about 12 countries in this post-conflict category at any given time, making it relatively easy to direct resources to them. Two policy approaches to reduce post-conflict risks are the use of aid, and military spending. Countries typically have higher growth rates in the post-conflict decade, but these are neither assured nor evenly spread. Growth is, in fact, driven entirely by the amount of aid, and is concentrated in the middle years of the decade. Although the need is great immediately post-conflict, there is limited capacity to use aid effectively, whereas by the middle years, resources can be managed better and needs addressed properly. The opportunity identified is then to provide increased aid at the time when it is most useful: the analysis is for an aid increase of 2% of GDP for years three to eightof the decade. There are typically 12 countries in their first post-conflict decade at any one time, with a combined GDP of about $163 billion. The cost of the additional aid averages $1.6 billion per year over the decade, with a net present value of $13 billion. The gain in growth rate in the years when extra aid is received would be 1.1%, more than five times the increase seen in normal non-conflict situations. The benefits of this targeted aid in terms of avoiding conflict can be calculated as $31.5 billion across the 12 countries. This intervention is clearly cost-effective for the additional security benefits alone, in addition to its main purpose of poverty reduction.
In a country’s vulnerable years immediately post-war, government military spending is maintained at a high level and actually appears to be counter-productive in terms of peace-keeping. There is a case for international military intervention, on condition that the government makes serious cuts in its own military expenditure. Merely by reducing this spending to pre-conflict levels, GDP would increase by 2% in the decade.
Assuming that an international peace-keeping force completely avoids the outbreak of another war during the ten years it is in place, a risk of 38.6% in the first five years and 31.9% in the second is averted. With the average civil war costing $64 billion, the present value of this intervention is $29.9 billion. In addition, a gain of $3.2 billion can be attributed to the reduced risk of war because of reduced military spending and increased GDP, making a total of $33.1 billion.
Costs will vary with the individual country’s situation, but as a typical example the current British force in Sierra Leone has cost, on average, $49 million each year. If we assume that such forces will be in place for the full ten years, the net present value comes to only $397 million. The benefit/cost ratio is therefore enormous: an expenditure of less than half a billion dollars securing a benefit of $30 billion. Extending this approach to all 12 typical post-conflict situations would deliver a benefit of $397 billion for a cost of less than $5 billion.
All of the above estimates are approximations. Nevertheless, they enable us to distinguish between those policies offering very high rates of return and those which are uneconomic. The option of international military intervention under Chapter VII of the United Nations Charter offers enormous benefits, but is also the most difficult politically. Clearly, aid has very limited effectiveness in conflict prevention unless it is much better targeted.