.
We live in an era of costly military spending and even costlier peace. In 2016 alone, the Global Peace Index estimated that the global economic impact of violence was $14.3 trillion, or a total of 12.6% of the total world GDP—the equivalent of every individual across the globe paying $1,971 per year in violence-related funding.
Conversely, peace-related aid remains a mere fraction of the cost of defense spending, despite the fact that rebuilding recent war- and disaster-affected areas and providing assistance for refugees requires immense amounts of financial aid. In fact, a total of 63,912,700 refugees and internally displaced persons were accounted for in 2016, or nearly 1% of the total global population. With many countries in dire need of economic assistance and even more displaced people in need of even the most basic of necessities, it is imperative that economic efforts geared toward rehabilitation—and ultimately, peace—be increased dramatically.
But with many fears surrounding who should fund reconstruction projects in post-war areas and the potential extreme financial losses often associated with such endeavors, the private sector and others remain cautious about just how economical rebuilding peace can be, and whether or not peace is worth the economic strain.
The Global Peace Index found that due to conflict in the Middle East and North Africa leading to battle deaths, terrorism, and increases in refugee populations, the last decade had seen a 2.14% decline in global peacefulness. However, in 2017 the same index also reported an increase of 0.28% in global peacefulness when compared to 2016, and determined that 93 countries had actually become more peaceful over the span of a year, which raises an interesting question: is the world trending more towards overall global peace or violence? One thing is certain: recent post-conflict areas will require immense rebuilding efforts in order to achieve peace despite any economic losses they may cause, and total global peace will not be achieved until these efforts have been realized.
The idea that peace is costly stems from the fact that economic redevelopment in post-conflict areas is not the same as traditional development—it requires aspects such as the demobilization, disarmament, and reintegration of war-affected groups, the rehabilitation of services and infrastructure in post-war zones, and other related programs in addition to traditional economic development, as outlined in a United States Institute of Peace’s special report. Similarly, while designated organizations for quick-acting emergency aid for refugees and those in immediate war-torn areas have been established for decades, agencies specifically in charge of reconstruction projects in post-conflict areas currently do not exist. The lack of organization and economic investments makes it difficult to rehabilitate areas in need, which in turn often leaves these sensitive areas susceptible to outbursts of violence and disrepair. In order to prevent future acts of violence, it is crucial that peace efforts receive much more funding—especially from the private sector.
Interestingly, recent research by the World Bank shows that while many post-conflict and fragile states can carry high levels of economic risk, the rate of return on capital in these countries is, on average, three times higher than the global average. In fact, the risk premium in these fragile countries is often exaggerated, as the World Bank’s Enterprise Business Survey shows that while average business losses to crime were $15,957 in high peace countries, low and very low peace countries actually experienced less business loss to crime at $7,921 and $9,478 being reported, respectively. Despite the reservations many businesses may have about funding reconstruction in post-conflict areas, it appears that it is entirely possible for the private industry to acquire economic gains from these projects.
If certain aspects of the reconstruction process—such as focusing on agriculture, legitimate business activity, and other job-creating investments in services and infrastructure—were to be implemented in the earlier stages of the reconstruction process, for example, reconstruction in post-conflict areas could not only lead to earlier stability, but also reinvigorate both the local economy and provide returns to the international stakeholders in charge of the rebuilding process. It is entirely possible, then, that the economics of peace is not necessarily at odds with the private industry, but could enter into a mutually beneficial relationship. And while it may be costly in the beginning, the reintroduction of healthy economies into the international market will only bring immense benefits for all involved.
Whether or not the world is becoming more or less violent, there are countless post-conflict areas in today’s world in need of immediate humanitarian and reconstructive assistance. However, while we have traditionally viewed the economics of peace as costly and financially unstable, recent studies suggest that the private industry may very well hold the key to fruitful and stable reconstruction of fragile countries in a way that is beneficial to both parties. And while peace may not always be financially attractive in all post-conflict circumstances, one thing remains certain: the economics of peace may sound costly but there are no opportunities for a healthy economy in areas ridden with violence.
About the author: Ana C. Rold is Founder and CEO of Diplomatic Courier, a Global Affairs Media Network. She teaches political science courses at Northeastern University and is the Host of The World in 2050–A Forum About Our Future. To engage with her on this article follow her on Twitter @ACRold.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
a global affairs media network
The Economics of Peace: In A Defense Industrial World, Why Is Peace Better for the Economy?
October 23, 2017
We live in an era of costly military spending and even costlier peace. In 2016 alone, the Global Peace Index estimated that the global economic impact of violence was $14.3 trillion, or a total of 12.6% of the total world GDP—the equivalent of every individual across the globe paying $1,971 per year in violence-related funding.
Conversely, peace-related aid remains a mere fraction of the cost of defense spending, despite the fact that rebuilding recent war- and disaster-affected areas and providing assistance for refugees requires immense amounts of financial aid. In fact, a total of 63,912,700 refugees and internally displaced persons were accounted for in 2016, or nearly 1% of the total global population. With many countries in dire need of economic assistance and even more displaced people in need of even the most basic of necessities, it is imperative that economic efforts geared toward rehabilitation—and ultimately, peace—be increased dramatically.
But with many fears surrounding who should fund reconstruction projects in post-war areas and the potential extreme financial losses often associated with such endeavors, the private sector and others remain cautious about just how economical rebuilding peace can be, and whether or not peace is worth the economic strain.
The Global Peace Index found that due to conflict in the Middle East and North Africa leading to battle deaths, terrorism, and increases in refugee populations, the last decade had seen a 2.14% decline in global peacefulness. However, in 2017 the same index also reported an increase of 0.28% in global peacefulness when compared to 2016, and determined that 93 countries had actually become more peaceful over the span of a year, which raises an interesting question: is the world trending more towards overall global peace or violence? One thing is certain: recent post-conflict areas will require immense rebuilding efforts in order to achieve peace despite any economic losses they may cause, and total global peace will not be achieved until these efforts have been realized.
The idea that peace is costly stems from the fact that economic redevelopment in post-conflict areas is not the same as traditional development—it requires aspects such as the demobilization, disarmament, and reintegration of war-affected groups, the rehabilitation of services and infrastructure in post-war zones, and other related programs in addition to traditional economic development, as outlined in a United States Institute of Peace’s special report. Similarly, while designated organizations for quick-acting emergency aid for refugees and those in immediate war-torn areas have been established for decades, agencies specifically in charge of reconstruction projects in post-conflict areas currently do not exist. The lack of organization and economic investments makes it difficult to rehabilitate areas in need, which in turn often leaves these sensitive areas susceptible to outbursts of violence and disrepair. In order to prevent future acts of violence, it is crucial that peace efforts receive much more funding—especially from the private sector.
Interestingly, recent research by the World Bank shows that while many post-conflict and fragile states can carry high levels of economic risk, the rate of return on capital in these countries is, on average, three times higher than the global average. In fact, the risk premium in these fragile countries is often exaggerated, as the World Bank’s Enterprise Business Survey shows that while average business losses to crime were $15,957 in high peace countries, low and very low peace countries actually experienced less business loss to crime at $7,921 and $9,478 being reported, respectively. Despite the reservations many businesses may have about funding reconstruction in post-conflict areas, it appears that it is entirely possible for the private industry to acquire economic gains from these projects.
If certain aspects of the reconstruction process—such as focusing on agriculture, legitimate business activity, and other job-creating investments in services and infrastructure—were to be implemented in the earlier stages of the reconstruction process, for example, reconstruction in post-conflict areas could not only lead to earlier stability, but also reinvigorate both the local economy and provide returns to the international stakeholders in charge of the rebuilding process. It is entirely possible, then, that the economics of peace is not necessarily at odds with the private industry, but could enter into a mutually beneficial relationship. And while it may be costly in the beginning, the reintroduction of healthy economies into the international market will only bring immense benefits for all involved.
Whether or not the world is becoming more or less violent, there are countless post-conflict areas in today’s world in need of immediate humanitarian and reconstructive assistance. However, while we have traditionally viewed the economics of peace as costly and financially unstable, recent studies suggest that the private industry may very well hold the key to fruitful and stable reconstruction of fragile countries in a way that is beneficial to both parties. And while peace may not always be financially attractive in all post-conflict circumstances, one thing remains certain: the economics of peace may sound costly but there are no opportunities for a healthy economy in areas ridden with violence.
About the author: Ana C. Rold is Founder and CEO of Diplomatic Courier, a Global Affairs Media Network. She teaches political science courses at Northeastern University and is the Host of The World in 2050–A Forum About Our Future. To engage with her on this article follow her on Twitter @ACRold.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
