CIAO DATE: 05/02

The Economics of War

Executive Summary

• Greed and grievance, or "need, creed and greed," are all important sources of conflict, though the relative weight of each factor varies across cases and across time. Poverty, social inequality, rapid economic decline, large numbers of young unemployed males, and polarized identity politics may all provide the necessary catalyst for conflict, particularly when accompanied by repressive, illegal or extralegal behavior on the part of governments. Yet, as World Bank economist Paul Collier cautions, what motivates conflict and what makes it feasible are separate issues. In general, the existence of some form of grievance, whether economic, political, or social in nature, appears to be the most persuasive motivation for conflict. Greed, or, more broadly, economic motivations — whether the pursuit of resources for war-financing or for elite self-enrichment — appear more significant in sustaining, prolonging, and transforming conflict.

• Valuable natural resources are not in and of themselves a reliable indicator of where conflict is likely to occur, but they do appear to make conflict more feasible when grievances already exist, as they offer a ready means of financing rebellion. This explains in part why, for example, not all diamond producing countries experience conflict. Yet, resources may also become a source of grievance when state institutions responsible for their equitable management instead engage in private, criminal accumulation. Thus, formerly stable diamond producing countries may also become conflict-prone, when poor management and corruption gain the upper hand.

• In some cases, resource competition may exacerbate civil war. In others, civil war may exacerbate competition over resources. In both cases, war requires resources. Resolving or preventing war would thus require cutting off the means for waging it: limiting combatants' access to resources and hence, arms, materiel, and profit, and targeting the international networks upon which they rely for these goods. Yet, without more farsighted policies to address the underlying causes of conflict, such as those that support legitimate and inclusive governance and provide development assistance, poverty reduction, market diversification, and legal and financial reform, the conflicts of the present will prove difficult to resolve and the peace settlements of the future even more difficult to sustain.

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