economics

By Obadiah Mailafia

Economists have become increasingly interested in the factors underlying insecurity, war and violent conflict. These factors include the role of wealth, trade levels as well as the costs and possible benefits of violent conflict.

Public choice and game theory in particular has shifted the debate from the costs and benefits of war and conflict to the economic opportunities that they portend for individuals involved in the drama of violent conflict. A large body of statistical work and econometric analyses have also been done to better understand the determinants of civil war and violent conflict.

A recent World Bank study shows a strong correlation between the level of wealth of a country and its chances of succumbing to civil war. According to the study, a country with a per capita GDP of just $250 has a 15% probability of experiencing war or violent conflict over the next five years.

The probability reduces by half if the country has a per capita GDP of $600; going down to as low as 4% for a country with per capita income of $1250. Countries with per incomes of $5,000 have barely a one per cent chance of experiencing war.

Economists argue that this diametrical relationship between income and war is because wealthier countries have a better capacity to protect assets, thereby making violence less attractive.   It is also well established in the literature that poverty predisposes societies to higher levels of violence, as groups engage in a zero-sum struggle for scarce resources.

Several studies have also found a strong relationship between economic growth and lower incidences of conflict. High growth countries open up more opportunities for young people while expanding the possibility frontiers for collective welfare.

Another crucial element is natural resources. For countries with weak leadership and poor governance institutions where corruption and rent-seeking behaviour is rife, natural resources such as oil, diamond and gold can prove to be more of a curse than a blessing. This has been true of countries such as Nigeria, Sierra Leone, Liberia, Central African Republic, DRC and Angola.

In terms of the economic impact, the evolving economic literature shows that war and violent conflict undermine long-term growth, physical capital, population, human capital and total factor productivity, TFP.

Violent conflicts undermine long-term growth by taking away resources from investments into purchase of guns and other implements of warfare. They also undermine the business eco-system, while driving away foreign investors.

Violent conflicts destroy physical infrastructures – from bridges to schools, hospitals, rail tracks and electrical institutions — that have been built over decades. The uncertainty engendered by war leads to a higher structure of interest rates which in turn undermine long-term investments, while leading to capital flight and financial haemorrhaging.

War affects demographics in terms of loss of lives and massive build-up of refugees. Closure of schools and education institutions during war affect the build-up of critical skills needed for economic development. Reduced investments in education and health facilities further compound availability of kills and an able-bodied population that are so vital to long-term economic development.

Insecurity and violence negatively impact on total factor productivity that lies at the foundation of economic progress. There is evidence that war can spur technological innovation. But, overall, it dampens TPF, given that people stampeded by conflict cannot plan new investments or entrepreneurial projects. Rebel groups can build monopolies from which they reap immense profits at the expense of balanced growth and opportunities for the vast majority.

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Most economists would agree that globalisation has brought with it several positive fallouts in terms of improved international trade and investments; providing an impetus to growth and enhanced global welfare. Indeed, the emergence of new economic powers such as China, India and Brazil would not have been possible without the relaxation of domestic as well as global barriers to the movement of people, goods, services and capital.

Thanks to liberalisation and digital technologies, our world has become the proverbial ‘global village’. The internationalisation of world markets, the expansion in global trade and the movement of capital through instantaneous communication and the impact of electronic media such as CNN and Al-Jazeera have brought the world closer as never before.

On the negative side, however, globalisation has engendered new forms of vulnerabilities. Financial contagion and the spread of epidemic viral diseases pose greater risks than ever before in our borderless world. Communities that have hitherto lived in cultural cocoons have suddenly found themselves exposed to new habits and mindsets.

Terrorist networks such as al Qaeda and ISIS have become transnational organisations that thrive on the opportunities opened by new technologies and communications channels. Not only are they able to coordinate their activities through such channels, they are also able to raise funds, network and coordinate their activities across national borders with greater ease than would have been considered feasible just two decades ago.

There is no denying that sociological factors deriving from rapid urbanisation and modernisation contribute to spurring alienation and, ultimately, political violence. The French sociologist Emile Durkheim identified anomie as a major psychosocial malady in industrialising societies.

The sprawling slums of cities such as Kaduna, Abuja, Lagos and Maiduguri are cesspools of crime, prostitution and violence. When youths drift to cities and lose the traditional moorings that provided meaning and signification to their lives, they could fall easy prey to extremist ideologies.

It is clear that poverty is a major factor explaining the current wave of terrorist insurgency. The incidence of poverty at national level has grown from 27.2% in 1980 to 60% in 2020. When one realises that the population has more than doubled during those years, we get a better appreciation of the magnitude of the problem.

In Northern Nigeria, where over 70 percent of the population live under the internationally defined poverty line, it is easy to see how any demagogue or religious extremist can mobilise the poor and destitute as instruments for his own political goals.

There is the added factor of youth unemployment, especially within the growing stratum of university graduates.When people are pushed to the lowest levels of desperation and hopelessness, they can fall easy prey to religious demagogues who offer them a sense of belonging.

Another critical factor is state failure, where public institutions are no longer able to deliver positive political goods to citizens, particularly on a scale likely to undermine the legitimacy and the existence of the state itself.

Former American Ambassador to Nigeria, John Campbell and the eminent political scientist Robert Rotberg, recently co-authored an article in the influential journal, Foreign Affairs, designating Nigeria a failed state.According to them: “This designation of repeated failure is not a knee-jerk, casual labelling using emotive and pejorative words. Instead, it is a designation informed by a body of political theory developed at the turn of this century and elaborated upon, case by case, ever since”.

Most development experts have tended to dwell on vertical inequities as measured by the Gini Coefficient as the only real yardstick for determining socio-economic inequality. But it is also becoming more evident that inter-group inequities could prove to be even more explosive.

Professor Frances Stewart of Oxford, for example, has done important work on the dynamics of ‘horizontal inequities’. Cross-country cases from Burundi, Rwanda, Kenya, Nigeria and Malaysia show that decision-makers need to give more attention to issues of ‘horizontal inequities’ which have the potential of leading to group alienation and violent strife.

In the last decade, more than 100,000 people have perished due to insecurity in our country. More than three million have become internal refugees. Rural livelihoods have been wiped out.

A government that pursues an exclusionary, nepotistic agenda has systematically destroyed the residues of trust and social capital that once held our communities together. We have become more divided and poorer than ever. There is fear, hunger, anger and anxiety everywhere. We have reached breaking-point.

In tackling these challenges, economic science will provide some of the critical solutions. It is an important, but not a sufficient condition. The grundnorm will have to be changed, and, with it, the gestalt of our leadership traditions, public ethics and political order. It will require no less than the better angels of our nature.

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