October 15, 2012

Creating sound economic policy and a stable macroeconomic framework is essential to societies recovering from violent conflict, yet few practitioners have the background needed to apply economic concepts effectively. USIP’s new publication titled “Peace Economics: A Macroeconomic Primer for Violence-Afflicted States” provides a concise but broad overview of practical ways that sound macroeconomic fundamentals could be used to build stability in states that are affected by violent conflict. The discussion extends beyond economic principles into the wider realm of social reconstitution, social contract and social capital.

The book’s co-authors, Jurgen Brauer and Paul Dunne, examine recent case studies and illustrate the applicability of concepts presented in the book. For more, join us on October 23 for a book launch with the authors. USIP’s Raymond Gilpin, director of the Center for Sustainable Economies, will moderate the discussion, also featuring Todd Moss, Vice President for Programs and Senior Fellow at the Center for Global Development.

The first line of your book says, "Without economics there can be neither war nor peace." For starters, what is the relationship between peace and economics?

True, as regards monographs, searching the holdings of the U.S. Library of Congress for example with the key words “peace economics” gets one back to 1952, then the 1940s, and then into the 1920s in the wake of the disaster of World War I. So ours is an attempt not just to reclaim and reintroduce the title – Peace Economics – but thereby also to help shift the scholarly (and public) focus from the costs of war to the benefits of peace. But peace is of at least two kinds: a “fake” peace, as our students in Thailand call it, that embeds within it the seeds of the recurrence of war – an unstable peace, in Kenneth Boulding’s words – and a “true” peace, one that is self-reinforcing, “positive,” forward-looking, and stable, where forces of societal strength are not repeatedly overwhelmed by forces of societal strain. Everyone knows that war is costly, but so is fake peace that works by repressing strain rather than building strength. To be sure, peace is not the absence of conflict but instead it is the nonviolent and, on the whole, constructive and productive management of conflict that permits parties in conflict to apply economic resources toward the continual betterment of life and of our human and natural condition.

What inspired this primer? Why hasn’t there been more attention paid to this area?

Raymond Gilpin, who directs USIP’s Center for Sustainable Economics, approached us with the observation that much of academic economics is simply far too focused on addressing scholarly puzzles so as to be readily useful to noneconomist peace negotiators and reconstruction practitioners who are engaged in redesigning and rebuilding violence-ravaged societies. Dr. Gilpin also observed that many peace treaties do not even mention economics as an area of negotiation, even as postwar economic failure can re-stimulate war – as in the case of the badly designed Treaty of Versailles that ended WW I but seeded WW II. Moreover, much of the current academic focus still aims at understanding the causes of violence and on estimating its costs rather than on exploring how economic insights may be used to build violence-resistant societal structures to begin with, those that would help minimize the probability of falling into a perpetual cycle of war, peace, and war again. Academic work is important of course but a peace negotiator or reconstruction practitioner cannot afford to await the outcome of the slow accretion of academic knowledge. So, as a practical matter, what to think about when one negotiates a peace accord? What questions to ask of reconstruction and development assistance experts? What pitfalls to avoid? The time seemed right to collate relevant knowledge in straight-forward English and to suggest peace-design principles that practitioners may wish to apply to a particular situation at hand.

What are some basic “rules of thumb” regarding peace and economics?

We have not written a “Field Manual” where in Box 57 on page 219 one can look up “the answer” as to what to do to rebuild and train the staff on the central bank of a society devastated by violence or where in Appendix K on pp. 554-567 one finds “the instructions” on how to compute the size of reconstruction-aid requests.

“Rules of thumb” is exactly the right phrase to use. Rather than telling readers how to build a bridge we suggest a set of principles to follow that, if violated, will probably lead to the restart of war. Based on economic research, the principles apply as a package. If ten principles are being followed, and the eleventh one is not, then the likelihood is that sooner or later war will restart. Among the principles are for instance that in reconstituting society after violence one must aim at the “formation of common values,” creating a common identity whereby members of society identify with society as a larger order and not just with subgroups within society. For example, the relative success of the post-World War II European project that resulted in today’s European Union stems, in part, from instilling in Europeans an individual self-understanding – an identity -- as “European,” and not merely as “German,” or “French,” or “Italian.” Increasingly, the young generation of Europeans perceives and values itself as belonging to the larger order of Europe. Should identification strongly switch back to the smaller orders, say, of being “Greek” and “German,” the danger rises of recreating “insider” and “outsider” thinking and of “us” versus “them” attitudes. And this, in turn, increases the ratio of forces of strain to forces of strength in the direction of less peace and a higher likelihood of conflict.

On the face of things, this seems to have little to do with “economics” as many people understand the term. But trade relations for instance are linked to a surprisingly strong degree to operate within rather than across identity groups: more trade between New York and Oregon for instance than either between New York and eastern Canada or between Oregon and western Canada; more trade between France and its former, but French-speaking, colonies than between a former French-speaking colony and its immediate, non-French speaking neighbors. The same holds for trade-patterns within countries: A far higher degree of trade-interaction within the Latino communities in the United States, say, than between Latinos and non-Latinos. So, forming common values – identities – that transcend smaller orders is important for peace.

How could practitioners in Afghanistan and Iraq use this primer? And, how could policymakers?

Again, the specific answer is not to be found on page 219, or anywhere else in the book. There is no specific response to any specific war or violence scenario. As the book’s authors, we are not the composers of a score of music, the point person in Afghanistan is not the orchestra director, and the reconstruction practitioners are not the violinists and flutists and drummers. Instead, the book is a primer regarding, if you will, the principles of composition. Peace negotiators and reconstruction practitioners will need to write their own scores.

We do, however, include in the book a series of mini-case studies – failures and successes – that illuminate certain aspects of each chapter’s main take-home points. As to policymakers, the book provides them with an understanding of the economic issues they may face in the task of economic reconstruction, even as we provide economists with an improved understanding of what special economic policy issues arise in the aftermath of severe, long-lasting, and widespread violence and war.

Explore Further

• Using Entrepreneurship to Promote Stability in Fragile Regions
  Peace Brief by Raymond Gilpin and Steven Koltai
• How Business Can Foster Peace
  Special Report by John Forrer, Timothy L. Fort, and Raymond Gilpin