Conflict is a major source of poverty in many developing countries and it also affects neighbouring countries. Why not try and avoid the human and economic costs during conflict? What economic strategies would be most fruitful? Research from the University of Oxford examined how Afghanistan, Mozambique, Nicaragua, Sierra Leone, Sri Lanka, Sudan and Uganda ran their economies during war. The research analysed the interaction between economic and political forces during conflict and how the economic effects could result in indirect effects which magnified the direct costs of war. By what mechanisms does war affect the economic and political status of a nation and the wellbeing of individuals? What strategies would best reduce economic and social damage during conflict?

The study shows that the economic and social costs of war are far greater than those arising directly from deaths and military destruction. The results of the disarticulation of markets and the consequences of forced migration can be much more serious for disease and malnutrition. This means that well-designed public policies can significantly reduce the economic and social costs of conflict. Wars have powerful and mostly negative economic effects, arising from loss of production capacity, movement of manpower, reduced foreign exchange earnings and subsequently imports. Governments may switch resources into defence expenditure and away from social and economic sectors.

The distortion and manipulation of economic processes during conflict, however, have beneficial effects for some groups but detrimental ones for others. Loss and vulnerability is generally unevenly distributed. In Mozambique, for example, conflict removed state constraints on entrepreneurial innovation, resulting in a flourishing grass-roots war-economy which lessened the extent of suffering for some. In Afghanistan, mass movement of people outside the country helped to sustain their lives and livelihoods; poppy production also became a major source of survival. In Sudan and Sierra Leone, emphasis on the ethnic and religious bases of conflict masked the significance of economic policies and outcomes.

Key research findings include:

• Indirect costs of war such as famine or disease or increased child mortality are generally considerably higher than direct costs of physical destruction and death from fighting.
• Negative aggregate effects on output, food production, investment, and exports are almost invariable.
• The efficacy of public action is a key determinant of the human costs of conflict: strong governments with social commitment can sustain social sectors and distribute food to those in need even during war; weak governments do not; but strong governments may deliberately undermine the resource bases of vulnerable ‘enemy’ groups.
• The pre-war state of the economy is a key determinant of the economic and social impact of a conflict.
• There are a wide range of survival strategies that people adopt during conflict; groups may change their economic strategies during a conflict to adapt to new conditions, often using unorthodox methods such as protection or raiding. Some groups gain from conflict and then have a motive for sustaining it. But others (generally weaker) lose.
• External financial support that ignores the political economy of a conflict can mask the macroeconomic costs of war, increase benefits to those with a vested interest in prolonging conflict, and make assistance ineffective.

Both donor and government policy can lessen the economic and social costs of war, during a conflict. It is crucial to follow policies which will permit people to sustain their entitlements. This involves policies that avoid major macro-economic disruptions, sustain public services, and ensure that households gain adequate access to food.

The report suggests specific policies for donors such as:

• keeping international markets open to sustain export earnings
• supporting key institutions to maintain internal markets with small scale and decentralised projects
• supporting essential health services
• keeping access open to adequate food supplies.

Suggestions for government policies include:

• supporting production in key sectors, particularly agriculture, including in rebel-held areas
• rationing foreign exchange to ensure that it goes to priority objectives
• reinforcing the credibility and predictability of government policy by adopting consistent war aims
• supporting new economic ventures arising in the informal sector
• sustaining a preventative health network and monitoring food entitlements, with policies (including public works, food distribution and food subsidies) to ensure they are adequate.

Source(s):
'War and Underdevelopment’, Vol. I ‘The Economic and Social Consequences'; Vol. II 'Country experiences’, Oxford University Press, by Frances Stewart and Valpy Fitzgerald and associates (forthcoming, January 2001)

Funded by: Department for International Development (ESCOR) 1995-1996

id21 Research Highlight: 7 December 2000

Further Information:
Frances Stewart and Valpy Fitzgerald
Queen Elizabeth House
21 St. Giles
Oxford OX1 3LA
UK

Tel: +44 (0)1865 273600
Fax: +44 (0)1865 273607
Contact the contributor: frances.stewart@qeh.ox.ac.uk

Queen Elizabeth House (QEH), UK

Department for International Development

Other related links:
Check the lateset update on the world refugee situation

War Child helps the innocent victims of war

Read the latest information from the humanitarian relief community

Read about the World Food Programme's methods of fighting hunger