Economic Agendas in Civil Wars: A Conference Summary

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CIAO DATE: 05/02

Economic Agendas in Civil Wars: A Conference Summary

Adekeye Adebajo

April 1999

International Peace Academy

Executive Summary

A conference on economic agendas in civil wars took place in London on 26 and 27 April 1999 co-sponsored by the International Peace Academy (IPA), the Center for International Studies (Oxford University), the Department of Foreign Affairs and International Trade (Canada), the Foreign and Commonwealth Office (UK), the Department for International Development (UK), the World Bank, and the International Development Research Center. It was chaired by IPA President David M. Malone.

The conference had three main objectives. First, to improve the understanding of policymakers, academics, and the NGO community about the political economy of civil wars by focusing particularly on the economic agendas of competing factions in these conflicts. Second, to assess how "globalization" and open international markets create opportunities for political élites to pursue their economic agendas through trade, investment, and migration ties to neighboring states and to industrialized countries. Third, to examine possible policy responses and tools that external actors like governments, international organizations, NGOs, and private sector firms can employ to change incentives and disincentives for belligerents and promote peaceful outcomes to civil wars.

This report reviews how and why economic agendas in civil wars thwart efforts at achieving peace and suggests instruments and policies that external actors can employ to alter the structure of incentives and disincentives to factions engaged in civil conflicts. Some of the main arguments advanced at the conference were the following:

It is crucial for policymakers to understand the economic agendas of belligerents before they can build structures of incentives and disincentives to achieve peace. A small group of well-organized political élites often have powerful interests in sustaining civil conflicts due to the enormous profits which accrue to such groups through their control of territory and the means of violence.
Economic "globalization" has facilitated the exploitation of global networks of production and exchange by factions in civil wars, while the reduction of external aid after the cold war has allowed rival factions to challenge local autocrats in collaboration with foreign firms.
The description of "criminal" agendas in civil wars, which presumes that the state has a monopoly over military force and over inter-action with global markets does not fit neatly with the civil wars of the 1990s, which often involve cases of state collapse.
Financial sanctions can be a cost-effective way of influencing the behavior of recalcitrant factions in civil conflicts, using some of the technology and expertise acquired in imposing financial sanctions on drug traffickers and terrorists.
Legal instruments also exist that can potentially be used to punish war criminals, but there are tremendous obstacles to transferring legal norms from the domestic to the international arena.
Two other important tools in the armory of international sanctions involve the regulation of international arms transfers and of international aid flows. Both face difficult economic and political obstacles and require the cooperation of many states and private firms to implement successfully.

Summary Record

Three broad sets of issues were given special attention in London:

The economic "rationality" of conflict for belligerents, including: the manner in which conflict serves to redistribute resources within a society caught by civil war; the degree to which, within competing sides in civil wars, "winners" and "losers" from the conflict can be distinguished; how the "winners" can continue to command support among the "losers" in order to sustain their position in a conflict.
The economic strategies which leaderships use to sustain their positions, including: the kinds of relationships they establish with local markets and commercial interests during civil wars; the kinds of relationships they establish with foreign investors or commercial enterprises, particularly over control and export of valuable natural resources; how they can finance conflict through trading or trafficking in "illegal commodties" e.g. drugs, weapons, people (and how they find external markets for these commodities and purchasers for what they have to sell); how they finance conflicts through fund-raising, both legally and illegally, from Diaspora communities; how they manipulate humanitarian aid and economic assistance provided by external actors to sustain their economic position?
The role of economically motivated violence as a barrier to ending conflict, including: the relationship between the economic strategies pursued by leaderships and the perceived advantages of war and peace; the trade-offs that have to occur between leaders, their internal supporters, and their external economic clients, for a shift in this calculus to take place.

Among the main views registered at the conference, several stand out:

Based on statistical models, conflicts are far likelier to be caused by "greed" than by "grievance." Proxies for greed are good predictors for civil conflict, while proxies for grievance are less so. The former include an economy based largely on primary commodities (diamonds, minerals, agricultural products), large numbers of (unemployed) young men, and a low level of education. Proxies for grievance include economic inequality, a lack of political rights, and government incompetence. Only a prior period of rapid economic decline supports a grievance-based explanation for civil war.
This view was challenged in part during the conference discussions. Political factors were seen by many as important (although not exclusive) root causes in the outbreak of conflict. The political aim of seizing a state or seceding from it can be the primary engines of conflicts which then "mutate" into economic agendas: pillaging, seizing land, exploiting labor and controlling trade. Exploitation and expropriation can also result in genuine grievances being mobilized on behalf of political agendas. The role of leadership and institutions in managing grievances and thus preventing conflict was thought to have been missed by explanations focussed mainly on greed.
Economic "globalization" has enabled rival factions, using commercial networks built up with foreign firms, to challenge local autocrats. This has had both negative and positive results, depending on the nature of the state's government.
The description of "criminal" agendas in civil wars derives from a notion of a state having a monopoly over inter-action with global markets and over the legitimate use of force. But the civil wars of the 1990s often involve the exploitation of civilians to enrich powerful individuals and groups both within government and on rebel sides.
Financial sanctions can be a cost-effective way of influencing the behavior of recalcitrant factions in civil conflicts. Much of the technology and expertise acquired in imposing financial sanctions on drug traffickers and terrorists could be useful in crafting financial sanctions against belligerents in civil conflicts.
Legal instruments exist to punish war criminals, but there are tremendous obstacles to their application beyond the domestic arena at the international arena. In order to succeed, national courts must cooperate with efforts to implement international legal norms. A sense exists that international legal mechanisms should be set up to address economic crimes such as gross embezzlement and extortion by political and military actors, but little momentum is evident on this front, which requires more research and advocacy.
Other potentially important tools include the regulation of international arms transfers and of international aid flows. Both face difficult economic and political obstacles, with vested interests and a multiplicity of donors, buyers and sellers. Progress will require the co-operation both of states and of private firms. The regulation of arms flows could potentially discourage conflicts but aid flows play a limited role in influencing belligerents, as it often constitutes only a fraction of the resources available to them.
While the important role of private sector actors was highlighted repeatedly, the motivation and behavior of the international private sector in its actions pertaining to countries at risk of, or undergoing, civil war appeared to be a "black box" for most participants, requiring a concerted research effort.

Discussions further highlighted the following:

War was seen by some as a continuation of economics by other means. Many wars are not about waging and winning battles but about dividing the spoils of conflicts between contending parties. Profits can be spectacular for the small groups benefiting from war. Contrary to popular misconceptions, the war economy does not retard development for all and often leads to an alternative system of profit and power for those benefiting from it rather than being simply a breakdown of a particular system.
During many civil wars, warlords on all sides attempt to create a monopoly of predation to sustain the war and enrich themselves, even as their rapacious fighters loot local communities for smaller profits. Violence has many functions in civil wars, including the undermining of laws and administrative procedures, the protection of economic privileges, and the repression of political activity of rival groups which could threaten the economic advantages for some actors.
Primary products - which can be heavily taxed and are the easiest goods to loot - are particularly important to conflicts. These products are often generic rather than branded goods, making it easier to hide their destination in sellers' markets. Statistical data show that states with economies dominated by primary commodity exports are four times more likely to fall victim to a civil war than others.
Virtually all participants rejected century-old "ethnic hatreds" as the root cause of conflict, viewing such arguments as historically unsound. Ethnicity was seen as shaped by conflict rather than conflict being shaped by ethnicity. Some research suggests that ethnic and religious fractionalization significantly reduces the risk of conflict. The more ethnically fractionalized a society the safer it is, with such diverse states 40 percent safer from conflict than homogenous societies.
Given that the groups that do well out of war may not be keen to take part in peace settlements, peace requires conditions under which groups that benefit from it become more influential. If the small, organized interest groups benefiting from war can not be bought off, suggested the participant, then they must be defeated and their profits from conflict reduced.
A lasting solution to a conflict requires a settlement that takes into account the factors that helped start (and fuel) the war. It is vital not just to recreate the political economy of peacetime that may have led to the war in the first place.
Economic "globalization" has favored access to international networks of production and exchange by both autocrats and warlords in furtherance of their economic and political agendas.
Leaders can use commercial networks to maintain their control over the state. "Shadow states" emerge under the likes of Zaire's Mobutu or Liberia's Doe who relied on control of commercial networks tied to foreign firms and external aid to favor selected local clients and to ensure their loyalty and obedience. They neglect (by design) the provision of social services and the building of effective institutions. Such leaders, or warlords who emerge to challenge the ruler, seek to disrupt normal internal trading systems, forcing the populations to appeal to them for support and protection. Markets rather than government institutions are their prime instruments. Challenges to such profitable strategies can result in civil conflicts, with leaders in weak states lacking the resources for effective counter-insurgency, having siphoned off resources through embezzlement of state revenues.
The legitimization of local economic agendas by compliant foreign firms raises just one of the many dilemmas in defining criminality in civil wars. Foreign firms colluding with rebel groups and kleptocratic governments are seldom seen as committing crimes. The "informal economy" provides the only basis of survival for the vast majority of the population of many countries at war, whether controlled or not by mercantilist political elites. Secretive trans-boundary linkages can allow some countries to become exporters, from a state in conflict, of raw materials that they do not produce. Neighboring states can also profit from the trafficking of arms and narcotics.
The agendas of humanitarian agencies (many of them non-governmental organizations - NGOs) in civil wars are also important. They are intervening more assertively just as the UN Security Council, suffering from a profound malaise, is unable to tackle effectively key problems and to mobilize resources for others. However, humanitarian interventions can prolong and exacerbate rather than resolve conflicts. Fighters often loot humanitarian aid to sustain their campaigns and enrich themselves. (Nevertheless, there was agreement that humanitarian assistance is not the primary source of funding for warlords, since other more lucrative sources of profit exist.) NGOs may have parochial economic agendas of their own influencing their involvement in civil conflicts.

Discussion of policy instruments for external actors included the following points:

Financial sanctions were seen by some as a cost-effective way to force a change of behavior in autocrats and warlords if targeted at the leadership and their associates. (More wide-ranging trade sanctions can make targeted leaders more popular, e.g. in Cuba, Iraq and Serbia, and weaken or destroy democratic opposition to their rule.) Financial sanctions must be sufficiently broad as to detach from the regime individuals who are instrumental in maintaining autocrats in power. However, the international financial structure is porous and frequently provides a safe haven from the most determined pursuers. It is difficult to gain multilateral compliance for financial sanctions due to divergent interests both between countries and within their competing agencies and bureaucracies. (Some governments who benefit from "hot" money in "haven" jurisdictions have simply refused to rein in such activities.) Western intelligence agencies need to equip themselves better to deal with "haven" jurisdictions. Policymakers, investigative journalists, and researchers need to focus more on public disclosure of "looting" by "leaders" in order to increase pressure on them.
Legal instruments are potentially very useful. The legal architecture of norms, rules, and principles enshrined in a wide array of conventions is imposing. The main task now is to enforce these agreements. Efforts have been made to transfer penal sanctions from national legal orders to the international system. But many of the international laws on war crimes were drafted with inter-state wars in mind and are more controversial when applied to the more common intra-state wars of the 1990s. National criminal justice systems still have precedence in executing international penal law. With due process respected more in the breach than the observance in many countries, further complications arise. Sorting out how the norms developed by the international community over the past one hundred years can be made real and relevant in the theatres of today's most murderous conflicts is a challenge largely ignored to date (except for the creation of the ICTY and the ICTR and adoption of the statute for an international criminal court at Rome in July 1998). Addressing misdeeds of gross "malgovernance" short of mass human rights violations and war crimes is still on the distant horizon. Given the importance of economic factors in civil wars, it requires urgent attention.
Regulation and self-regulation of private sector transactions, particularly in the arms field, is a topic recently pressed onto the international agenda by NGOs. The circulation of arms through porous borders has fuelled civil wars, facilitated their spread to neighboring states, led to increased crime, and spawned booming business for private security companies protecting those clients able to afford their services. However, serious difficulties in regulating arms flows or pressuring arms merchants to regulate themselves arise from the multiplicity of sources and the large incentives that suppliers (both countries and companies) have in selling off excess stocks. It is hard to convince states that have turned to weapons production as a form of economic development or that have long-standing large military industries to turn their swords into ploughshares.
Three approaches to the curtailment of the weapons trade were cited: combating the trade itself, challenging the supply side, or changing the demand side. The first is difficult as long as there are willing buyers and sellers in a profitable market. Tackling demand depends on factors of governance, economic growth and income distribution none of which may be encouraging in the short term in many countries. However, on the supply side, possible approaches include industrial conversion policies, tightening regulations on the transfer of existing stocks of weapons and more effective and transparent export controls. Due to the difficulties involved in obtaining co-operation for the effective regulation of arms flows, attention has often shifted to cutting off the financial resources to those engaged in conflict, e.g. through the diamond trade. NGOs have attempted to pressure foreign corporations like South Africa's De Beers to demonstrate corporate responsibility, but, until recently, interest in confronting such companies has been scant among powerful governments. (Canada's energetic chairmanship of the UN Security Council's Angola Sanctions Committee may signal some change in the right direction.)
The regulation of aid flows is another instrument through which external actors could potentially influence belligerents in civil wars. Conflicts diminish the quantity of goods in a society and external aid can potentially help fill this vacuum to avoid further conflict or to reduce current levels of violence. However, aid has historically been notoriously political. Conditionality has also been used by governments with mixed motives. OECD aid figures are currently the lowest this decade, and food aid has declined significantly. In the post-cold war era, the politicization of aid is also reflected in the fact that more strategically important areas (to the west) like the Balkans have been able to attract much higher levels of assistance than have many parts of Africa. The limitations of aid in influencing outcomes in civil conflicts needs to be emphasized: aid seldom makes a difference to the balance of power in such conflicts, and narcotics and arms flows are substantially more important in fuelling civil wars. Thus, economic aid can not necessarily lead to the resolution of conflicts, and external actors have to weigh the effect of their interventions carefully to avoid the entrenchment of conflict and further privation. Enhancing or creating legitimacy for the state was seen as a pre-requisite for long-term stability and economic development, and foreign assistance was also seen as potentially very useful on this front.