The Role of Economic Interdependence in the Origins ... - Cairn

THE ROLE OF ECONOMIC INTERDEPENDENCE IN THE ORIGINS ANDRESOLUTION OF CONFLICT

Derek Braddon

Dalloz | « Revue d'économie politique »

2012/2 Vol. 122 | pages 299 à 319 ISSN 0373-2630DOI 10.3917/redp.218.0299

Article disponible en ligne à l'adresse :--------------------------------------------------------------------------------------------------------------------https://www.cairn.info/revue-d-economie-politique-2012-2-page-299.htm--------------------------------------------------------------------------------------------------------------------

Distribution électronique Cairn.info pour Dalloz.© Dalloz. Tous droits réservés pour tous pays. La reproduction ou représentation de cet article, notamment par photocopie, n'est autorisée que dans leslimites des conditions générales d'utilisation du site ou, le cas échéant, des conditions générales de lalicence souscrite par votre établissement. Toute autre reproduction ou représentation, en tout ou partie,sous quelque forme et de quelque manière que ce soit, est interdite sauf accord préalable et écrit del'éditeur, en dehors des cas prévus par la législation en vigueur en France. Il est précisé que son stockagedans une base de données est également interdit.

Powered by TCPDF (www.tcpdf.org)

© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T

éléchargé le 09/09/2022 sur ww

w.cairn.info (IP

: 65.21.229.84)

www.cairn.info/publications-de-Derek-Braddon--87828.htm?WT.tsrc=pdf

https://www.cairn.info/revue-d-economie-politique-2012-2-page-299.htm

http://www.tcpdf.org

The Role of Economic Interdependencein the Origins and Resolution of Conflict

Derek Braddon1

The historic debate about the relationship between economic interdependence andconflict has intensified in recent years with two schools of thought dominating thediscussion. One school argues that increased levels of economic interdependenceencourage good political relationships and wards off possible conflict. The opposingschool of thought suggests that excessive interdependence may actually create resent-ment, intensify rivalry and, ultimately, political discontent leading to conflict. This paperexamines the main contributions to the debate and then explores the role of economicinterdependence in two different conflict scenarios – Africa and the Balkans. Onlyrecently has the relationship between economic interdependence and conflict scenariosreceived rigorous empirical analysis and the results so far have failed to reach any kindof consensus. We are left to conclude, therefore, that while economic interdependencemay not be a “silver bullet” guaranteed to pacify all interstate conflicts, it may helpconstrain the conflict escalation process to good effect.

Conflict resolution - economic interdependence - liberal economics - sanctions - trade

Le rôle de l’interdépendance économiquedans le déclenchement et la résolution des conflits

Le débat historique concernant le lien entre l’interdépendance économique et le conflits’est accentué ces dernières années, deux écoles de pensée dominant le débat. L’unedes deux écoles soutient que des niveaux élevés d’interdépendance économiqueencouragent de bonnes relations politiques et évitent d’éventuels conflits. A l’opposé,la seconde école de pensée suggère qu’une interdépendance excessive peut provoquerle ressentiment, accentuer la rivalité, et finalement le mécontentement politiquemenant au conflit. Cet article examine les contributions majeures à ce débat et exploreensuite le rôle économique de l’interdépendance économique dans deux scénariosdifférents du conflit, à savoir l’Afrique et les Balkans. C’est seulement récemment queles rapports entre l’interdépendance économique et les scénarios conflictuels ont faitl’objet d’une analyse empirique rigoureuse, et jusqu’à présent les résultats demeurentcontroversés. Il nous reste donc à conclure que même si l’interdépendanceéconomique n’est peut-être pas le “remède miracle” pour pacifier tous les conflitsinterétatiques, elle peut avoir un effet positif pour désamorcer le processus conflictuel.

Résolution de conflit - interdépendance économique - économie libérale - sanctions -

commerce

1. Professor, University of West England, Bristol. Email: [email protected] author wishes to thank two anonymous referees for their valuable comments on thispaper.

•L’

ÉC

ON

OM

IED

ES

CO

NF

LIT

S

REP 122 (2) mars-avril 2012

© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

Classification JEL : F51

1. Introduction

Cicero’s famous dictum that: “the sinews of war are infinite money”remains as relevant today as in its historic setting. Despite recent deep cutsin the defence budgets of many countries as they grapple with the economicconsequences of massive public debt burdens, the link between conflict andthe financial resources to pay for it remain inviolable. The precise relation-ship between military expenditure, designed to underpin extreme conflict(war) and the economy (and its positive or negative effects) is a much-researched part of literature of conflict and peace studies (see, for example,Dunne [2011]). Military expenditure can always be justified on “defence ofthe realm” grounds to protect both individual and national assets andvested interests; in turn, without sufficient economic resources, any result-ing conflict cannot be sustained for long.

The focus of this paper, however, is somewhat sharper. Rather thanaddressing the costs and impacts of military expenditure on the nationaleconomy directly, we will consider here the role played by economic inter-dependence in the emergence of conflict and also in attempts at its eventualresolution in two very different “real world” settings – Africa and the Bal-kans. The findings of a range of studies of particular conflict scenarios willbe evaluated to explore what kinds of economic interdependence are asso-ciated with factors triggering conflict and whether, once underway, thatsame interdependence can be harnessed to the mutual benefit of the com-batants in a way which will suppress and, ultimately, eliminate conflict. Inthe context of “peace economics”, this paper combines an element of “posi-tive economics” where conflict is “interpreted as a strategic destructiveinteraction between rational agents” and a more “normative” approach inexploring “economic policies intended to minimise the unproductive com-ponents within economies, thereby also reducing the risk of outbreak ofactual conflicts” (Caruso [2010]).

It is important to recognise at the outset that conflict initiation, resolutionor, indeed, prevention is no longer simply a matter of government-to-government; faction-to-faction; or even coalition-to-rogue state interaction.In a global economy, all three kinds of conflict will today inevitably involve awider group of participants, in particular the business community (Felgen-hauer [2007]). In a sense, this recognises the stake-holding dimension ofmodern conflict. As Felgenhauer notes: “The private sector, especially multi-national corporations, can powerfully contribute to comprehensive peacebuilding and derive profit from doing so. However, profit-oriented behaviourcan also endanger peace, unless the economic incentive structure inducesconflict-preventing business strategies” (Felgenhauer, op. cit.).

300 ———————————— The Role of Economic Interdependence in the Origins...


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

2. A brief overview of the “liberal” and“Realist” Views and Evidence

The historic debate about the precise relationship between economicinterdependence and conflict has intensified in recent years with twoschools of thought dominating the discussion. One school argues thatincreased levels of economic interdependence encourages good politicalrelationships and wards off possible conflict. This may be seen as anexample of liberal economics where two potential warring factions have toomuch to lose through their economic ties and vested interests to put it at riskby allowing a state of conflict to develop between them. The proponents ofthis view see, for example, the European Union as a prime example of thepower of economic interdependence to hold together in peace countrieswith a long and bitter history of wars and conflicts between themselves.

The opposing school of thought suggests that, rather than uniting peoplethrough common economic benefits, excessive interdependence may actu-ally create resentment, rivalry and, ultimately, political discontent leading toconflict. Indeed, some analysts go further and suggest that, in practice, mereeconomic exchange has little impact on the rarefied politics of internationalsecurity.

In the liberal case, economic exchange and conflict to win territory can beseen as possible substitutes for one another. As global wealth increases overtime, economic growth is easier to achieve via trade and foreign investment,extending economic interdependency and making military action to seizeadditional resources unnecessary and probably destabilising. Any actiondesigned to isolate the domestic economy and prevent or reduce tradetherefore becomes a possible source of conflict. In an excellent overview ofthe link between economic interdependence and peace, Mansfield and Pol-lins [2003] cite the well-known words of Montesquieu: “The natural effect ofcommerce is to lead to peace. Two nations that trade together becomemutually dependent: if one has an interest in buying, the other has aninterest in selling; and all unions are based on mutual needs.”

Mansfield and Pollins note, however, that critics of the liberal perspectivechallenge this view by asserting that powerful economic linkages can some-times undermine national security, especially where the gains from trade arenot equally distributed. Where this happens, critics suggest that interna-tional power relations will be affected and a powerful source of militaryconflict may be created (see, for example, Gilpin [2001]; and Mearscheimer[1990]). Furthermore, some states may view increased economic interdepen-dence as creating “vulnerability”, possibly requiring military action to com-pensate at some point.

The critics of the liberal perspective on economic interdependence see theeffect of increasing global prosperity differently as well. Rather than gener-ating a vested interest in the preservation of peace, as trade and prosperityincreases over time, so, they argue, does the range of economic issues overwhich disputes can emerge, sometimes leading to violent conflict.

Derek Braddon ——————————————————————————————————————————————————————— 301


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

Finally, while some studies seem to indicate that international economicinterdependence appears to have little bearing systematically on securityand peace, that is not to say, however, that there is no relationship betweenthe two – simply that the relationship may be unsystematic and unique tothe particular conflict being explored. Each real or potential conflict scenariowill be different and economic interdependence can take many forms; toexpect a reliable, systematic relationship can therefore be considered per-haps unduly optimistic.

Central to the interdependence debate are the issues of causality andendogeneity (see, for example, Blattman and Miguel [2010] on the linkbetween civil conflict and income). We know that economic interdependenceand peace or conflict are linked through a variety of channels of transmis-sion but we are unclear about the direction of causality, and indeed whatfactors are exogenous and what endogenous. In some cases, economicinterdependence can diminish the chances of conflict; in others, however, aneconomic relationship between two potential conflict nations may actuallyincrease the chances of conflict breaking out. Martin, Mayer and Thoenig[2008] have examined the relationship between war and trade in a study ofa large military data set for the period 1948 to 2001. They found an impor-tant and interesting difference in the likelihood of a conflict situation turninginto a full war where countries are engaged mainly in bilateral trade asopposed to multilateral trade. They consider that the probability of “escala-tion” to war is lower for countries that trade primarily bilaterally due to theopportunity cost of the loss of trade benefits. Countries which are moreopen to trade experience less bilateral dependence and therefore stand tolose less in the way of trade benefits should war with any one tradingpartner break out. Their empirical work not only provides strong evidencefor the contradictory effects of bilateral and multilateral trade in terms of thelikelihood of war with a trading partner but also find that multilateral tradeopenness increases more the probability of war between countries whichare close to each other. The authors suggest that this may explain whymilitary conflicts have tended to become more localised and less global innature over time. They also note, however, that the problem of endogeneityremains a important problem for the literature in this area of analysis (Mar-tin et al. [2008]).

An interesting paper by Gartzke et al. [2001] developed this interdepen-dence theme further. The authors noted that, in most of the literature of theeconomics of international trade, research findings appear to confirm theliberal view that peace is associated with higher volumes of trade. Peaceappears to be good for business and vice versa. However, Gartzke et al.suggest that developments in the global trade and finance world in recentyears have served to make this relationship between conflict and economicsrather limited in a modern context. Today, international capital markets mas-sively dwarf normal trading markets and lead Gartzke et al. to suggest thatthe conventional view through which economics inhibits conflict seems lessplausible and somewhat dated. Clearly, while there may be some occasionswhen the fear of damage to trade-based economic linkages does deter aconflict from unfolding, this is rarely the case where major militarised dis-putes are involved. Therefore, we may have to go far beyond simple trade



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

flows in the definition of what constitutes real international economic inter-dependence. In particular, Gartzke et al’s important empirical work suggeststhat capital interdependence “contributes to peace independent of theeffects of trade, democracy, interest and other variables” and this observa-tion may well, ultimately, offer a more powerful deterrent to political break-down and ensuing conflict.

More often than not, the seeds of conflict are nurtured and disseminatedas a result of some long-standing real or perceived economic inequitybetween one community and another. The origin of the inequity may bereligious, ethnic, social or political but it is the economic impact, intensifiedover time, that can turn a real or apparent injustice into the kind of groupresentment which sparks genuine conflict, perhaps precipitating civil war.The interdependence here is that one side of a conflict views another asbeing largely responsible for its economic deprivation; its loss of territoryand power; and for the associated suffering of its people.

Within the realm of economics, of course, trade is perhaps the mostprominent form of interdependence. Cooper [2006] argues that, in the post-Cold War era, it has been primarily features of economic trade that havesparked the majority of civil wars; especially trade in resources such asdiamonds, drugs and people-trafficking. Cooper describes these as the“defining features of the ‘new wars’” and makes the key point that it is often“exclusion and peripheralization in the global economy” that drives theneed to create “shadow trade” in illicit markets. This exclusion needs to beproperly addressed by appropriate policy, if genuine progress towardspeace in many conflict regions is to be made, and civil wars are to beavoided.

Collier [2006] suggests that “civil war appears as an intense political con-test, fuelled by grievances which are so severe as to have burst the banks ofnormal political channels... In fact, most rebellions cannot be like this...when the main grievances – inequality, political repression, and ethnic andreligious divisions – are measured objectively, they provide little or noexplanatory power in predicting rebellion... objective grievances and hatredssimply cannot usually be the cause of such a distinctive phenomenon asviolent conflict.”

It is, Collier suggests, the economic dimensions of a particular conflictscenario that matter most. He notes that “economic characteristics, depen-dence on primary commodity exports, low average incomes, slow growth,and large diasporas are all significant and powerful predictors of civil war.These characteristics all make rebellion more materially feasible.”

The political focus on “objective grievances”, therefore tend to miss thepoint and little regard is usually paid to tackling these more fundamentalcauses of conflict related to economic interdependence. Collier commentsthat, as a result, “there is probably considerable scope for policy, bothdomestic and international, to prevent civil conflict more effectively.”

Unfortunately, once conflict has begun, these economic dimensions maybe brushed aside as the psychology and strategic management of war takesover with its need for securing “first mover advantage”, effective conflictresponse, national or group patriotism, revenge for years of suppression

Derek Braddon ——————————————————————————————————————————————————————— 303


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

and deprivation, and the drive for ultimate victory. Nevertheless, thereremain key moments during such conflicts when economic measures –implemented with positive intent (such as reducing income differentials) ornegative (such as the imposition of tough economic sanctions) may confrontinterdependence directly and help to move the conflict nearer to a peacefulsolution more effectively than simply the pursuit of a political peace agenda.

For example, Alamaro [2002] suggests that the conflict between Israel andthe Palestinians is perceived primarily “as a political problem requiring apolitical solution”. As a result, the peace process has had to focus on themajor – and highly controversial – individual political issues of land, gover-nance and security. Alamaro’s critique is that these areas of negotiationcannot by themselves ensure a lasting peace. Alamaro notes “true peacewill never take hold as long as a destitute third world nation stares across aborder at a prosperous modern democracy” (Alamaro, p. 26). We have herea clear example of a potential political settlement being impossible to imple-ment without proper attention to economic factors interdependence, espe-cially Israel’s potential role in the economic development of Palestine.

Alamaro draws an important historical comparison, suggesting that theprocess of conflict resolution between Japan and South Korea provides animportant example of what is possible, when the power and importance ofeconomic interdependence is recognised and appropriate action taken toaddress it. In order to obtain a peaceful and mutually beneficial relationshipwith a hostile South Korea in the 1950s, Japan took positive action to boostthe South Korean economy and increase its rate of economic development.Alamaro draws comparisons between this attempt at economic reconcilia-tion and the current situation in the Middle East. As with the Palestiniansand the Israelis, the Koreans and Japanese held “deep, long standing ani-mosities” against each other. In particular, the annexation of Korea by Japanin 1910 and the Japanese programme of cultural assimilation during the1930s ensured South Korea’s enduring hostility.

Once normal diplomatic relations were formally re-established in 1965,Japan took the bold and imaginative step of providing financial support tothe infant South Korean economy. In a remarkable example of the recogni-tion of economic interdependence, Japan agreed to help finance SouthKorean industrialisation, increasing loans, investments and trade. Under theguidance of the Japanese MITI (Ministry for International Trade and Indus-try), the Japanese business sector then sub-contracted labour intensive workto South Korean companies, both gaining themselves from the utilisation ofcheap labour, reducing unemployment, and helping drive forward theexpansion of the South Korean economy at a remarkable rate. Ultimatelythis rapprochement had significant economic benefits for both participantsand most certainly provided a crucial economic interdependence which, inturn, swept away the remaining seeds of conflict.

In effect, the two countries joined forces in an agreed division of labourand markets. Japan focused mainly on lucrative high-technology exports toWestern markets while South Korea, on the other hand, specialised in pro-ducing and exporting low and intermediate technology, labour intensive,goods to markets in the developing countries.



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

In turn, such has been the expansion and strength of the South Koreaneconomy in recent years that it, too, now sub-contracts labour intensivetasks to some of its poorer neighbours. This kind of mutual economic inter-action triggers a positive economic ripple effect helping boost prosperityacross the region and removing – or at least suppressing – the potential forrenewed conflict. Alamaro notes with interest that the impoverished NorthKorea gained nothing from the Japan–South Korea initiative and that it isprecisely this massive economic gap between the two countries (GDP percapita in North Korea is approximately one-sixteenth of South Korea) whichreflects zero economic interdependence and which unquestionably “feedsthe North’s enmity towards its southern neighbour and toward Japan”(Alamaro, op. cit., p. 27).

Illustrating the positive effect that harnessing economic interdependencemight have in resolving conflict, Alamaro suggests that ’with Israel’s activeparticipation, the West could create a peaceful regional oasis of free enter-prise and economic prosperity (in the Palestinian areas) that could serve asa model for other Middle Eastern countries’ (Alamaro, op. cit., p. 27). Assum-ing an independent Palestine can be created at some point in the future,Alamaro suggests that Israel would be well-advised to divert a share of theaid it receives from the USA into the rapid development of Palestine’s infra-structure. Israel should then help educate Palestinian students and doctors,just as Japan did with South Korea’s young professionals in the 1950s.Europe and America could support the process by encouraging Palestine toexport its new output to Arab countries and the developing world. Alamaronotes estimates which suggest that such an approach could create over500,000 new jobs in Palestine over a 5 year period, carrying decent wages,and that this would help ensure a slow but steady evolution towards a morepeaceful and certainly more inter-dependent future for the region.

No two conflicts around the world are ever identical but the role played byexternal financial support to sustain employment and the mobilisation of thebusiness community to drive forward economic and political reform, asnoted in Alamaro’s work above, appear to be key lessons to be drawn fromthe global experience. Balls & Cunliffe [2007] noted, for example, the expe-rience of Northern Ireland during the 1970s and 1980s where the provisionof externally-funded short term employment opportunities played a crucialrole in protecting workers against the powerful negative economic impact ofthe “troubles”. While this kind of essential short-term support did little toimprove long-term productivity or economic growth, it did eventually enablethe private sector in Northern Ireland to pick up the investment reins in duecourse and thereby play the crucial role in achieving these wider economicobjectives.

As Balls and Cunliffe [2007] comment: “the correlation between privatesector growth and political and security progress in Northern Ireland was,and continues to be, significant and mutually reinforcing. Economic growthin the provinces, which included an economic convergence between Catho-lics and Protestants, and between Northern Ireland and the Republic ofIreland, played a catalytic role in shifting political opinions and reducingeconomic incentives for violence”.

Derek Braddon ——————————————————————————————————————————————————————— 305


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

During the “troubles”, the Northern Ireland private sector continued tostrongly reassure voters that there would be a substantial peace dividend,following a political settlement. In practice, once this had been achieved, thelevel of investment in Northern Ireland did increase substantially and inparticular, significant overseas private investment was attracted to theregion creating a virtuous circle whereby unemployment (which stood at11.5% of the labour force in 1995) had fallen to 4.2% in the middle of 2007,paving the way for a genuine and long-lasting peace.

Barbieri [1996] is another paper which shares the view that, rather thanassuming that trade will always promote peace, the precise nature andappropriate context of a particular set of economic interdependencies mustbe taken into account when assessing whether such linkages encourage orward off potential military conflict. The study focuses upon a wide-ranginggroup of dyadic relationships for the period 1870-1938, covering some 270militarized interstate disputes and 14 actual wars. After controlling for anumber of important assumptions, Barbieri finds evidence that economicinterdependence does have a significant influence on whether or not dyadstake part in militarized disputes but, conversely, that they have no effect onthe outbreak of actual wars.

The evidence she provides suggests that extensive economic interdepen-dence makes it more likely that such dyads will engage in militarized inter-state disputes. Barbieri found that the achievement of peace via tradingrelationships worked best where the dyads were, in effect, mutually depen-dent trading partners. Even then, Barbieri noted that the relationshipbetween interdependence and conflict seemed to be curvilinear, with a lowor moderate degree of interdependence minimising the potential for dyadicdisputes, and deeper economic interdependence making militarized dis-putes more likely. Where interdependence is extreme, however, there seemsto exist the most significant likelihood of eventual conflict.

These different notions of interdependency may, therefore be crucial forthe future role of economics in peace-making. Once again, it may be that wehave to define economic interdependence in the broadest possible terms ifeconomics is to take on a more prominent role in conflict resolution.

So far we have established that economic interdependence can, in theory,be both an important source of conflict, albeit in a disguised form, and alsoan essential part of the peace-building process The following sections of thepaper take up these themes and explore the role and power of differentkinds of economic interdependence in conflict initiation and resolution inthree current and/or former conflict zones.

3. Economic Interdependence andConflict in the Horn of Africa

Between 1990 and 2000, the African continent experienced 19 majorarmed conflicts, including several civil wars and the 1998-2000 war between



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

Eritrea and Ethiopia with economic factors clearly lying at the heart of boththeir occurrence and eventual resolution. This combination of civil war andeconomic instability destroyed communities and eliminated critically-important human and social capital.

Despite the ravages of the African wars, however, during this period thereappears to be evidence that wartime economies can be managed to containpoverty and therefore to move more easily into post – conflict reconstructionprogrammes at a later date. Such effective management has to recognisethe importance of economic interdependence and utilise it to encouragestability, prosperity and growth for all conflict participants. This economicinterdependence reaches beyond government alone; it must also encom-pass the private business sector acting together with a government commit-ted to improving economic conditions for all. Real political commitment isessential and Addison notes, for example, that Angola’s governmentachieved much less for the poor during wartime than the government ofMozambique achieved, despite Angola’s enormous oil resources. Commit-ment and the recognition of the power of economic interdependence to givecombatants a strategic stake in peace is therefore crucial.

Recovering rapidly from a war scenario undoubtedly requires significantand sustained private investment both internal and external. It is here thatthe role of the business sector can be so effective in facilitating post-wareconomic recovery by providing the kind of external financial injection thathelps reinvigorate a wrecked economy. It was the investments made bylarge wholesale grain producers, re-establishing food markets in post-warMozambique, for example, that both improved food security and helpedgenerate economic prosperity. The government has a crucial role to playhere as well both in providing macro-economic stability in which investmentwill flourish, but also in reforming legal frameworks to ensure that propertyrights are fully respected, bringing in more people into the private sector.

Addison notes that the process of ending conflict and stimulating neweconomic recovery inevitably faces a challenging set of tasks such as “con-flict resolution, peace enforcement, demobilisation and refugee resettle-ment” (p. 4). Post conflict reconstruction cannot be seen as simply a matterof rebuilding damaged infrastructure and governments must act to ensurethat where pre-war economic policies may have contributed to conflict (e.g.through ethnic discrimination, religious persecution) these policies must beamended immediately with a consequent restructuring of relevant institu-tions, both public and private, to drive mutual interdependence deep intothe heart of the new emerging economy.

In a recent Chatham House briefing paper, Love [2009] highlights howeconomic motivations have been “ubiquitous and pervasive in promptingand sustaining conflict... while...at other times, economic drivers have exhib-ited a potential for peaceful cooperation”. Love states that the term “eco-nomic driver” in this context relates to the part played “by economic moti-vation and command over resources in causing or fuelling conflict and in itspotential for securing sustainable post-conflict stability”.

Furthermore, as Love notes “the degree to which economic dynamicscontributes to conflict thus depends on a range of overlapping contextualvariables such as previous history of conflict in a region, the strength or

Derek Braddon ——————————————————————————————————————————————————————— 307


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

fragility of political institutions, poverty levels, the agro-ecological environ-ment and the nature of resource endowment and its distribution amongcommunities” (Love [2009]). As a result, “economic drivers do not alwaysmanifest themselves directly but are often concealed in the politics ofnationalism, of religious ideology, or struggles between elites”. Globally,these economic drivers will differ, depending upon the particular conflictbeing analysed, the level of economic advancement of the countries con-cerned, and the sophistication of the trading and financial and other institu-tions that operate within them. All, however, involve a degree of interdepen-dence which needs to be explored and amended where necessary to themutual benefit of real or potential conflict parties.

Love explores the “concealed” role of economics in the conflict-ridden“horn” of Africa, a region where unstable governments come and go andinternational aid and development agencies attempt peace programmeswhile cross-border conflicts proliferate around them. In this region, thecountries of Sudan, Eritrea, Djibouti, Somalia and Ethiopia constitute themain players and conflict between any of these countries will inevitablyaffect the others. In practice, it is frequently the interdependence of theseconflicts in the region that makes their resolution so complex. Love identi-fies four zones of borderline security where economic (and especially trade)issues have either stimulated conflict or, more positively, offer the potentialfor post-conflict improvements (namely, (a) the Southern Somalia-NorthEast Kenya-South East Ethiopia region; (b) Somaliland, Ethiopia, Djiboutiand South East Eritrea; (c) Eritrea, Ethiopia and Sudan; and (d) Ethiopia,Sudan, North Uganda and North West Kenya. While each region has its owneconomic problems, the most important economic factors driving conflict inthe region are those where countries and their tribal groups share depen-dence on critical resources or facilities such as marine access, livestocktrade, energy supply, drought and water access, property rights, and finan-cial transactions.

As an example, a major regional economic issue concerns the substantialdegree of informal or illegal cross-border trading which occurs betweenthese countries, seeking to capitalise on long-established traditional tradingroutes. Love [2009] shows the impact of conflict here, noting that the conflictin south central Somalia has effectively diverted livestock trade from Soma-lia away from the region’s seaports replacing this with cross-border trekkinginto north east Kenya. In response, a new reverse trade has commencedfrom Kenya to Somalia, comprising clothing, household goods and signifi-cant numbers of small arms which then help to further fuel the conflict.

The “Horn” region provides a good example of economic interdepen-dence. Here we see the power of the market, formal and informal, to connectpeople across national borders where, as Love notes, there exist “long-established extensive networks of local markets and merchants, often clan-based or of immigrant descent from areas such as Yemen, Lebanon, Arme-nia, Italy, Greece, and with overlapping links to the wider region andbeyond. Market forces are therefore pervasive and universal, reaching outeven to remote livestock rangelands, disregarding national boundaries butsubject to transaction costs of different types and to local monopolies andcartels” (Love [2009]).



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

Even in a conflict situation, economic interdependence through marketscomes to the fore. Despite the disruption and danger associated with theconflict, the interdependence remains and where no formal market exists, anunofficial market will form which may or may not be legal. Consequently,persistent and extensive conflict has made necessary a high degree of infor-mal economic interconnectedness across the entire Horn region, underpin-ning the ability of market forces to adapt and connect across borders, and oftheir participants to establish mechanisms of payment and receipt of goodswhich can function outside the formal sector, including the transfer of remit-tances. Conflict cannot, it seems, entirely crush economic interdependence –indeed, in certain situations, it may thrive and offer a potential way forwardtoward peace.

Love argues that “this phenomenon is common to all l1 regions in theHorn and is fundamental to the monetization of resources which oils thewheels of economic drivers of both conflict and cooperation. The role ofmerchants is therefore critical: at times some will arrange the supply ofarms, ammunition and other logistic items to rebel groups, whose objec-tives they may support; at other times they will operate with their ownprivate security forces. But their ultimate common interest is in expandingpeaceful markets, and on a number of occasions in the Horn local merchantshave cooperated in order to assist political leaders in bringing about civilorder and a degree of economic security for the community”.

To achieve real and lasting peace through economic interdependencerequires a degree of benevolence from the victor in a conflict, albeit benevo-lence driven by self-interest. Love makes the point that restoring peacesaves lives but also eliminates much of the physical and human capital ofalready poor and deprived communities. Worse still, war often destroyscrucial family relationships that are central to the African way of life. Takentogether with the elimination of key services and infrastructure, a conflictsituation may affect the poor that they are unable to share in post-conflictnational economic recovery at all. Since economic interdependence cannotbe avoided, this will simply store up resentment and desire for revenge andpass it on to a future generation. There are also many examples, of course,where a narrow elite seizes power and deliberately prevents certain groupsin society from accessing their share of whatever peace dividend mayaccrue. An important study (Addison [2003]) examined precisely this issue –how to achieve a broad-based recovery from war that would not excludespecific communities. The study highlighted examples from Angola, Eritrea,Ethiopia, Guinea-Bissau, and Mozambique—all countries that have experi-enced terrible conflicts.

To achieve the kind of broad-based economic recovery that removes fun-damental poverty needs a further recognition of the power and relevance oneconomic interdependence. Post-conflict zones cannot succeed economi-cally without the combined and single-minded combination of effective gov-ernment, a powerful private sector and appropriate instiotutions of the state.As Addison notes: “aid donors, NGOs, and international business can help(or hinder) but success ultimately depends on the three national actors:communities, the private sector and the state”.

Derek Braddon ——————————————————————————————————————————————————————— 309


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

The focus of post-conflict reform by these key actors must be on corepriorities, with government programmes assisted where possible by aiddonors. Information will be required about community needs which willthen need to be embedded in the policy-making process and form the basisof public expenditure allocation and public goods provision. It is importantto recognise that different groups will be better placed than others to takeadvantage of post-conflict recovery due to their experiences during the con-flict phase. Addison noted that, for example, in Mozambique “householdswith access to the wartime shadow economy (such as the black-market infood aid) and connections to local-level elites gained and accumulatedassets which facilitated their post-war recovery. In contrast, poorer house-holds often fell further behind (losing land and livestock, for instance),thereby weakening their ability to participate effectively in reconstructionprojects and to adapt to economic reforms” (Addison [2003]).

The Addison study also cites the case of women in Eritrea who experi-enced discrimination in the post-conflict labour market as well as furtherdiscrimination with regard to land access despite formal legal equality withmen. Evidence from conflict-ridden Mozambique and Angola confirms thediscrimination against women in such situations. Where women are theheads of households in Mozambique, poverty levels are much higher and, inAngola, the human development indicators for Angola’s women are signifi-cantly worse than for men. It is precisely this kind of discrimination that failsto recognise economic interdependence and stores up conflict-inducingresentment for the future.

To deliver rapid recovery from war or other conflict also requires theapplication of significant and sustained private sector investment which,given the impact of conflict on the domestic economy, is most likely to beforeign direct investment. This may be difficult to attract into a war-tornbusiness environment initially but, where it can be successfully pursued – asin Mozambique, for example – the effect can be considerable. Foreign directinvestment can strengthen further the crucial symbiotic interdependence ofcountries, the financial institutions and markets and can help governmentsprovide the key element to support expansion – a stable macro-economicenvironment and guaranteed property rights.

Addison noted that: “the state must encourage private investment byproviding macroeconomic stability and reforming the legal framework sothat property rights are respected (including the rights of the poor who, asmicro-entrepreneurs and smallholders, are themselves active in the privatesector). Well-designed public investment can also do much to encourage(‘crowd-in’) private investment. One example is better telecommunicationsand road infrastructure for remote areas, which makes them more attractiveto potential investors, and strengthens community livelihoods” (Addison[2003]).

Evidence from African post-conflict experience also suggests that govern-ment needs to be aware of potential pitfalls that accompany this kind ofbroad-based recovery programme. The drive to emphasise economic inter-dependence as part of the recovery process may, in practice, come upagainst new forms of “crony capitalism” where favouritism dominatespolicy-making and special groups are given more of the rewards of peace.



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

Addison suggested that ‘commercial alliances of state and private actors canresult in market interventions that generate monopoly profits for influentialelites to the cost of small enterprises and consumers (including the poor).Such is the case with Angola’s empresarios de confianca – the “few trustedenterprises” – and the somewhat opaque privatization process in Angolaand Mozambique led to large asset transfers to the benefit of a few favouredand politically influential elites.

Private investment, therefore, is an absolute requirement for successfultransition to peace and future prosperity but the state must take care toprotect the public interest to ensure that economic interdependence isshared as widely as possible. Action against “money politics” will be crucialand, unfortunately, across Africa, there is strong evidence that private dona-tions to factions that win conflicts bring with them “tax breaks, mineralconcessions, media monopolies, regulatory capture, and the dilution of pru-dential bank regulation. Such concessions are against the public interest andmust be outlawed.

The Addison study made the key point that “strong private investment iscritical to recovery but the relationship between the post-war private sectorand the state must be set within a framework that protects the public interestand defends the poor. This capacity can be weak when democratic institu-tions to oversee and protect the public interest are only just emerging” butis essential if genuine economic interdependence is to form the basis of thenew peacetime economy. The African evidence suggests that care must betaken to ensure that economic reform does not weaken important groupssuch as trade unions that can act as countervailing powers to powerfuldomestic and foreign business interests and that new countervailing forces,such as an independent media, are not denied the funding they require to beeffective. Evidence in the early years of the last decade from Mozambique,Angola, Ethiopia, and Eritrea confirm that this is a serious potential hazardfor governments attempting broad-based economic recovery from conflictsituations.

Increasingly, the business sector in its global role has become moreprominent in understanding the economics of conflict. Over the last twodecades, for example, some eighteen violent conflicts have been initiated orexacerbated across the world by the increasingly desperate global search bythe business sector for natural resources. Indeed, almost two-thirds of allintra-state conflicts since 1950 have at their point of origin some kind of linkwith natural resources. Frequently, these conflicts have turned into pro-longed and, at times, barbaric civil wars as, for example, in Liberia, Angolaand the Democratic Republic of Congo where the conflict stimulus wasnatural resources at the “high value” end of the market, such as diamonds,gold, minerals, oil and timber. Recent conflicts which have taken a terribletoll in terms of human suffering are similarly resource-driven, at least ini-tially, such as Darfur where the battle still continues for control of life-criticalresources such as fertile land and access to fresh water.

According to UNDP data, these violent conflicts are most pronounced inthe poorest countries in the world with, since 2000, 15 of the world’s 20 leastdeveloped nations experiencing mass civil violence. It is particularly thiskind of violence that prevents markets from functioning effectively and exac-

Derek Braddon ——————————————————————————————————————————————————————— 311


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

erbates economic decline through the destruction of crucial infrastructure.Potential foreign commercial investors – and indeed, on occasions, even aidagencies – may be deterred from investing where conflict is too intense andwhere lives are at risk. In 2001, a mining industry survey explored the prin-cipal reasons why companies failed to invest in– or later withdrew from –otherwise appropriate investments internationally between 1996 and 2001.Almost four companies in five cited political instability with its attendantthreat of actual or potential armed conflict as the main reason.

4. The Balkan Conflict

Economic interdependence is a particularly important factor in helpingexplaining recent events in the Balkans too. The conflict which tore apart theBalkan region in the 1990s has long and deep historical roots. The state ofYugoslavia originated in a political compromise after World War 1, designedto reward the Serbian allies of the winning powers and effectively containedthe seeds of its own eventual destruction. Yugoslavia lay on several geo-political fault lines: religious, ethnic, cultural, ideological and political, anyone of which might have had the capacity to destroy it. The death of theunifying dictator, Marshall Tito, in 1980 ignited a train of events that culmi-nated in the eventual collapse of a coalition of nations with Serbia at itsheart. The use of Serbian nationalist sentiment for political ends by Slo-bodan Milosevic, the Serbian who became president in 1989, added to thedeep tensions that already existed and ultimately brought about the com-plete destruction of the Yugoslavian state.

In 1991, Slovenia, Croatia and Bosnia-Herzegovina declared indepen-dence. Then from 1992 there were bitter and destructive wars in Croatia andBosnia, eventually ended by UN/NATO intervention. Between 1996 and 1999further unrest was experienced involving guerrilla activity and then war inKosovo, culminating in NATO bombing and a massive refugee problem(Judah [2000]).

The issue of economic interdependence in this conflict was particularlyprominent as so many countries suddenly lost the coordinating effects of theYugoslav state. To lose the homogeneity, real or artificial, of the single“anchor” state and to experience the collapse in economic output and tradein many former Yugoslav states that followed created resentment anddeclining living standards that can so easily begin the slide into conflict. Inaddition, in response to Serbia’s role in the Balkan conflict of the 1990s, theUN applied economic sanctions of various forms to the country which,together with later economic disruption from NATO bombing, combined tocause massive economic dislocation across the entire region and exacer-bated already serious economic problems for individual states.

Sanctions and the military action of the Nato coalition may have ulti-mately forced regime change on Serbia but the economic effects of thataction also served to deepen and exacerbate existing economic disparities in



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

a region which had already lost much of its former prosperity, fracturingfurther economic interdependence and adding fuel to the Serbian nationalistsentiment.

It is important to recognise that the economy of Yugoslavia differed inter-nally from those of other Communist countries in the region, being muchless centralised and making more use of market mechanisms, and was moreopen to international trade. Economic interdependence, therefore, lay at theheart of the former Yugoslavia and its powerful inter-connectness had madeit an exemplar among Communist countries for prosperity generation andinternational acceptance. The events of the 1990s tore apart this interdepen-dence and, without question, underpinned the political and military conflictwhich followed.

5. The impact of economic sanctions

During the decade 1991 to 2001, the newly self-named Federal Republic ofYugoslavia (FRY) comprising Serbia and Montenegro was subject to a widerange of UN-imposed economic and diplomatic sanctions. As Braddon et al.[2011] note: “during this period, the conventional wisdom was that the sanc-tions seriously and adversely affected the living conditions of the popula-tion, and the economic and social infrastructure of the country. In practice,however, the inability of the UN to fully enforce sanctions also appears tohave mitigated their effects.”

Nevertheless, the economic impact of sanctions was still powerful enoughto retard economic recovery in Serbia and the Balkan region more generally.The destruction of interdependence was complete when the United Nations(UN) imposed cultural and social restrictions on people living within theconflict area. In effect, this strategy meant the intellectual and scientific, aswell as economic, isolation of Serbia (and Montenegro) for almost a decade.

Worse still, the actions of the Milosevic government in Serbia exacerbatedfurther the extent to which economic interdependence had been crushed inthe region. Milosevic imposed internal measures restricting access to spe-cific goods and services, while increasing profits for government-relatedimporters. It was here, particularly, that economic impacts were most severeand served to strengthen both ethnic resentment and nationalist fervour. AsUnicef (2001) noted:

“While essential drugs including insulin and basic antibiotics were in shortsupply, a smuggler’s market meant that certain expensive non-essential and’luxury’ products were widely available. The government’s internal controlson access to, and the price of goods – including humanitarian goods – wereperhaps as important as the international limits imposed by sanctions.These restrictions allowed access to basic entitlements and opportunities tobe abused, thus worsening economic and social discrimination. Rather thanresponding to the needs of vulnerable groups, sanctions thus contributed tovulnerability among women, those living on pensions, those not well con-

Derek Braddon ——————————————————————————————————————————————————————— 313


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

nected politically, and those earning only salaries in the formal sector of theeconomy.”

Sanctions, then, appear to hurt most those living within the conflict areasleast responsible for the problem and least able to change official govern-ment policy appear to experience the most significant adverse impacts. Fur-thermore, economic impacts (often detrimental, occasionally beneficial) mayalso be experienced by “neighbour” countries that border the conflict areaand therefore cannot avoid being caught up in the consequences of sanc-tions implementation. Slavov [2005] explored two theories about the “neigh-bour” impacts of UN economic sanctions: (a) that neighbour’ trade falls dueto disruption of trading ties and routes and increased transportation costs;and (b) that there might be some offsetting increase in their trade due tosmuggling (i.e. trading “on behalf” of the sanctioned country). Slavov useda gravity model of international trade to show that in sanction situations nettrade does fall overall, confirming the theory that “innocent bystanders” gethurt by embargoes and sanctions. In consequence, economic actions of thiskind may not only serve to deepen the animosity within a country that keepsconflict alive but may also help to spread the seeds of discontent and hatredbeyond its borders, thereby intensifying the collapse of regional economicinterdependence.

The “neighbour impact” effects of economic sanctions, identified bySlavov, were evident in this case with eight countries consulting the UNabout trade losses associated with the sanctions against former Yugoslavia.However, evidence suggests that some “neighbour” countries in the Balkanregion were also, usually unofficially, instrumental in assisting with sanctionbreaches, demonstrating perhaps that where economic interdependence isweakened in the formal economy, a black market quickily replaces it andallows the economy to funtionagaij. For example, the economic sanctionsimposed on Serbia that drastically curtailed access to gas and oil werepartially overcome by a massive smuggling operation involving gas andpetrol movements across the border from Rumania.

“Highway E-70 which passes through the area, became an oil and gaso-line pipeline. Petrol stations on that stretch of road pumped approximately21,000 gallons of gas a day into trucks, buses, and cars heading across theborder. Proprietors of these petrol stations report Serbian tour buses wereoutfitted to smuggle up to five tons of gas; and Russian-built Ladas havebeen retooled to hold up o 525 gallons or 2,000 litres of gas. Sixty litres werestored in the ordinary tank and the rest poured into the contrived tanksfound in the trunk, in the doorframes, under the seats, and into the gapunder the roof. The cars ended up being so full of gas that people pushedthem over the border at night, only to push them empty back the next dayand start the whole process over again.” (Unicef [2001]).

Initially, however, the economic effect of sanctions on Serbia and Mon-tenegro was devastating to industrial performance. The export market forindustrial goods was shattered by UN action and led to severe shortages ofimported spare parts and raw materials. National industrial output and retailsales both fell sharply by 40% and 70% respectively in 1993. As a directconsequence, it has been estimated that some 60% of the industrial labourforce was laid off at the time.



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

The damage inflicted by economic sanctions on the Serbian and Montene-grin economy was, somewhat ironically, seriously aggravated by the unan-ticipated impact of the initial withdrawal of UN sanctions in 1996. Mostpolitical and economic commentators anticipated that sanction withdrawalwould imply a return to “business as usual.” In practice, however, the out-come was frequently “no business at all”. During the sanctions episode,many companies had broken off their traditional trading link with FRY coun-tries and, with a more limited and unstable market after sanctions, greatinstability in relations with the FRY, and “on-again, off-again” sanctionsamong the states in the region, many companies were concerned aboutoperating in the region. Economic interdependence was well and truly bro-ken.

Within Serbia itself, estimates of the economic costs of eight years ofsanctions suggest considerable economic damage. The Federal Office forDevelopment and Economic Policy, for example, argued that the years ofsanctions reduced Gross National Product by some $69 billion. Including theadditional costs to Serbia of the secession of four of the states of the formerRepublic of Yugoslavia, the cost estimates associated with sanctions andsecession amount to over $95 billion. The Federal office has also estimatedspecific losses in key industrial sectors of the economy. For example, lossesof some $2.5 billion in the power industry; $317million in iron and steelproduction; $1.2 billion in non-ferrous metals; $213 million in constructionmaterials; and $3.2 billion in chemicals. Industries such as textiles, leather,and rubber, which were performing well before sanctions, also reportedlosses of over $6 billion.

The economic isolation and deprivation caused by the sanctions policy ofthe UN during the 1990s may well have served to further inflame ethnictensions and rekindle and strengthen nationalist fervour in Serbia. Kosovo,then an integral part of the Federal Republic of Yugoslavia (i.e. Serbia andMontenegro) attempted to break free from the Federal state and precipitatedthe Kosovan war at the end of the 1990s. Ultimately, it took the interventionof the UN and Nato and a short but devastating military campaign to end thewar and establish regime change in Serbia.

The economic damage inflicted during this stage of the recent Balkanconflict was simply immense. In Kosovo itself, Braddon et al. [2011] note, forexample, “the Nato bombing campaign, acts of local sabotage, and ethnicreprisals brought economic activity to a virtual standstill and wrought con-siderable physical damage to the social and economic infrastructure. Thegreatest destruction was to the housing stock. Damage to communications –especially the telephone system – as also considerable and some damage topower supply and distribution is adding to continuing problems of electricityblackouts. For the most part, factories were not targeted by the bombingcampaign, but many are no longer in functioning condition.”

The massive population movements that occurred during and after theconflict also created major economic disruption and weakened the potentialfor even medium-term economic recovery. First, the sheer size of the exodusbetween March and June 1999 of ethnic Albanian refugees – as many as900,000 or about half the population of Kosovo – and their subsequentreturn has proved to be extremely destabilizing. Moreover, many people

Derek Braddon ——————————————————————————————————————————————————————— 315


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

within Kosovo remain displaced because their housing has been destroyed.This has contributed to the neglect of agriculture, a key economic activityand the missing of planting periods – although a lack of seed was also amajor factor in this regard. Second, the departure of the majority of theethnic Serbs, who for the previous 10 year had reserved most of the keyadministrative and management positions for themselves, left Kosovo witha vacuum of experienced workers.

In Serbia itself, the damage inflicted by Nato bombing to the infrastructureand productive capacity of an already weakened economy was extensive.Large swathes of the transport and communications infrastructure weredestroyed, the electric power grid was severely damaged, and entire indus-tries effectively collapsed. An independent group of Yugoslav economists,Group-17, has estimated that the economic damage associated with 78 daysof Nato bombing of Serbia amount to some $30 billion, six times greaterthan Yugoslavia’s annual gross domestic product. The Economist Intelli-gence Unit puts the estimate as high as $60bn. Group-17 estimates thedecline in industrial production for 1999 at around 45 percent, yielding a percapita income for that year of only one third of its level in 1989. Owing to thedestruction of infrastructure and production capacity, unemployment hasalso increased, thus posing a number of important socioe-conomic conse-quences, including a possible wave of emigration.

The toll on the infrastructure was immense. The Nato campaign destroyed50 major bridges, 12 railway stations, 80 major industrial companies (chemi-cals, oil processing, metal manufacturing, power installations, telecommu-nications), 6 motorways, 5 airports, and most reserves of oil and oil deriva-tives. Over 150,000 people were left with no immediate means of earning aliving. By 2000, the combined impacts of war and sanctions on the Serbianeconomy was all too clear. The economy had been largely destroyed by:“war, sanctions, civil wars, international pariah status, bombing and refu-gees” (Vaknin [2000]). Between 1990 and 2000, two-thirds of GNP had effec-tively been eliminated, hyperinflation remained rampant (the inflation ratewas still at 100% in late 2000) and Serbia’s “infrastructure is decrepit, itsindustry obsolete, its agriculture shattered to smithereens, its internationaltrade criminalised. It is destitute.” (Vaknin [2000]).

Regime change ousted the Milosevic government and ushered in a newpolitical and economic opportunity for Serbia and the Balkan region. Eco-nomic interdependence both had to be rebuilt and protected from remainingfactions within Serbia for whom the conflict had never really ended. Theseanti-interdependence forces still operate there today but the fledgling politi-cal democracy has so far managed to prevent a return to former hostility.One very important factor underpinning renewed optimism about futureeconomic growth and prosperity in Serbia recently has been the drivetowards eventual European Union (EU) membership. While the EU has hadto confront its own financial and economic problems of late, for countrieslike Serbia and others in the Balkan region it promises a key means ofrestoring a much more widely based economic interdependence which, his-torical precedents suggest, will allow the country to move forward and buildprosperity in the future. This interdependence-based optimism has allowedthe government to pursue “unpopular” measures such as the capture and



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

committal for trial to the Hague of several key Serbian military commandersand political leaders for wartime offences.

In explaining the origin and unfolding of the Balkan conflict, it is clearagain that economic interdependence issues take centre stage. Ethnic, reli-gious and political tensions clearly exist in the region and have long historicsources. Nevertheless, it is economic inequity; declining living standards;economic rivalry and deprivation that lie just below the surface and gener-ated the enmity and hostility entrenched in such a society. For Serbia, prom-ise of eventual EU membership has already helped to diffuse what remains,even in 2012, a politically dangerous situation in the region. While not every-one in Serbia welcomes the prospect of eventual EU membership, bothgovernment and most interest groups in the country believe that it would bein the country’s best interests, opening up new credit and trading opportu-nities and enabling Serbia to share in any EU economic growth that mayemerge. Again, economic interdependence – this time through the auspicesof the EU – may well prove a vital element in developing a genuine andlong-lasting peace for those conflict-ridden zones in the Balkan region.Against a background of resentment at economic decline and social depri-vation, the desire and opportunity to become richer remains a powerfulcountervailing motivator.

6. Conclusion

The positive or negative linkages between peace, conflict and economicinterdependence have a very long history and we are, in effect, no nearer tofinding a comprehensive answer to the question: will greater economicinterdependency between nations lead to a more peaceful world. Onlyrecently has the relationship between economic interdependence and sce-narios of conflict or peace received the rigorous empirical investigation itmerits and the results so far have failed to reach any kind of consensus.However, one interesting conclusion to emerge from this research is that itmay be that economic interdependence helps to ensure that countries in atrading partnership better understand each other and are therefore lesslikely to resort to conflict through uncertainty. Reed [2003], for example,uses historical data to demonstrate that “interdependence and uncertaintyare related to each other and jointly related to the onset of militarized con-flict. Uncertainty appears to be reduced by economic interdependence, andthis leads to an enhanced probability of agreement short of a militarizedclash”.

Cross-border economic interaction can encourage democracy and stimu-late faster economic growth (as, for example, in China) or it can createinter-state resentment, rivalry and ultimately brutal conflict (as in the formerYugoslavia). Interestingly, as Rapkin and Thompson [2007] note, in the last500 years, no emerging great power has been able to avoid warfare aroundthe time of its entry into “elite status”. Evidence thus far suggests thateconomic interdependence of different kinds can encourage – but also

Derek Braddon ——————————————————————————————————————————————————————— 317


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

sometimes help to prevent – conflict at different points in time and in differ-ent political and economic situations. They comment that: “economic inter-dependence is hardly a ‘silver bullet’ guaranteed to pacify interstate con-flicts. Though it may constrain conflict escalation processes,interdependence also generates serious economic frictions that can easilyoffset or overwhelm its conflict-suppressing effects”.

At the very least, however, there seems to be a case for building andstrengthening economic interdependence to head off potentially threateningconflict situations. In particular, avoiding bilateral economic frictions may beimportant as the actions of one side to protect their economic interests maywell trigger antagonistic behaviour in the other side and bring military con-flict one step nearer. In the case of trade between China and the USA, forexample, the tendency for the USA to adopt protective measures for thesake of its own industries may, in practice, backfire. Having allowed China toenter the interdependent global economy, the adoption of punitive trademeasures, even where deemed appropriate, may actually exacerbate thesituation; cause China to expect less from that interdependent globaleconomy and bring the risk of political and military response much nearer.Ultimately, however, the long-standing battle between the views of Imman-uel Kant, who felt trade would prevent war, and Jean Jacques Rousseau,who held the contrary view, remains open for debate well into the 21stcentury.

References

ADDISON A. [2003], “Africa’s recovery from conflict: making peace work for thepoor”, United Nations University and the World Institute for Development Eco-nomics Research.

ALAMARO M. [2002], The Economics of Peace, Harvard Business Review, Novem-ber, p. 26-27.

BALLS E. and J. CUNLIFFE [2007], Economic Aspects of Peace in the Middle East,HM Government, London.

BARBIERI K. [1996], Economic Interdependence: A Path to Peace or Source of Inter-state Conflict? Journal of Peace Research 33.1.

BLANCHARD J.-M. F. and N. P. RIPSMAN [1996], Measuring economic interdepen-dence: A geopolitical perspective, Geopolitics and International Boundaries,vol. 1, Issue 3.

BLATTMAN C. and MIGUEL E. [2010], Civil War. Journal of Economic Literature,48(1), p. 3-57.

BRADDON D. L., BRADLEY N. J. and P. G. DOWDALL [2011], The Economic Impactof Conflict in the Balkans: The Case of Serbia, in Braddon D.L. and K. Hartley(eds), The Economics of Conflict, Edward Elgar.

CARUSO R. [2010], On the Nature of Peace Economics, Peace Economics, PeaceScience and Public Policy’, vol. 16, Issue 2, Article 2.

COLLIER P. [2006], Economic Causes of Civil Conflict and their Implications forPolicy, University of Oxford, accessed at: http://users.ox.ac.uk/~econpco/research/



© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

pdfs/ EconomicCausesofCivilConflict-ImplicationsforPolicy.pdf; accessed Decem-ber 2011.

COOPER N. [2006], Peaceful warriors and warring peacemakers, The Economics ofPeace and Security Journal, vol.1, no.1.

DUNNE P. [2011], Military Spending, Growth, Development and Conflict, DiscussionPapers, 1105, University of the West of England, Department of Economics.

FELGENHAUER K. [2007], Peace Economics: Private Sector Business Involvement inConflict Prevention, New School Economic Review, vol. 2(1),

GARTZKE E., QUAN LI and CHARLES BOEHMER [2001], Investing in the Peace:Economic interdependence and international conflict. International Organization,55 (2).

GILPIN R. [2001], Global Political Economy: Understanding the International Eco-nomic Order, Princeton University Press.

JUDAH T. [1997], The Serbs, History, Myth & the Destruction of Yugoslavia, YaleUniversity Press, New Haven and London.

LOVE R. [2009], Economic Drivers of Conflict and Cooperation in the Horn of Africa:a regional perspective and overview, Chatham House Briefing Paper, December.

MANSFIELD E. D. and B. M. POLLINS [2003], Economic Interdependence and Inter-national Conflict: New Perspectives on an Enduring Debate, University of Michi-gan Press.

MARTIN P., MAYER T. and THOENIG M. [2008], Make Trade Not War, The Review ofEconomic Studies, vol. 75, Issue 3, p. 865-900, July.

MEARSCHEIMER J. J. [1990], Why we will soon miss the Cold War, Atlantic MonthlyOnline, August, http://www.theatlantic.com/politics/foreign/mearsh.htm;accessed December 2011.

RAPKIN D. P. and W. R. THOMPSON [2007], Will Economic Interdependence Encour-age China’s and India’s Peaceful Ascent?, in Tellis A.J. and M. Wills (eds) Trade,Interdependence and Security, National Bureau of Asian Research.

REED W. J. [2003], Information and Economic Interdependence, The Journal of Con-flict Resolution, vol. 47, No. 1, February.

SLAVOV S. [2004], Innocent or not-so-innocent bystanders: evidence from the grav-ity model of international trade about the effects of UN sanctions on neighbourcountries, Department of Economics, Pomona College, Claremont CA, accessedDecember 2011 at http://129.3.20.41/eps/it/papers/0501/0501007.pdf

UNICEF [2001], Serbia Report, August.VAKNIN S. [2000], New Serbia’s Old Economy, United Press International.

Derek Braddon ——————————————————————————————————————————————————————— 319


© D

allo

z | T

éléc

harg

é le

09/

09/2

022

sur

ww

w.c

airn

.info

(IP

: 65.

21.2

29.8

4)©

Dalloz | T


w.cairn.info (IP

: 65.21.229.84)

The Role of Economic Interdependence in the Origins ... - Cairn

Documents

Transcript of The Role of Economic Interdependence in the Origins ... - Cairn