Dr. Peter Lock
European Association for Research on Transformation e.V.

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letzte Änderung:03.01.2011
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Economic Factors of Conflict and Violence

Research note presented at the Erice Seminar on August 20, 2002.

The economics of armed conflicts

The economies sustaining, if not causing current armed conflict have slowly moved to the centre stage of research in recent years. Important multipliers in this evolving debate have been the macro-quantitative studies of Paul Collier, a high-ranking economist at the World Bank and a comprehensive book L'économie de guerre civile edited by Jean/Rufin (1996), two French scholars with a background in humanitarian work. In spite of the differences in their methodological approaches the diverse authors in this academic discourse unanimously report illegal economic transactions of some kind as a pervasive feature of the current forms of armed conflicts. These transactions link the current wars with the global economy, though often the economic and financial tracks start in shadow-economic spheres and emerge only in later stages in the regular economy. Nevertheless these wars are not sustainable without external economic collaboration, either legal or illegal. Though the coverage in the media is regularly dominated by discourses of identities, of ethnic or religious strife. These ideological discourses are identified as a major, if not the dominant stimulus of strategies of violent conflict resolution leading to internal wars. Unfortunately these views often guide the political reactions to on-going armed violence in the international arena as well. However, the recognition of underlying economic patterns necessarily linked to the global economy would enforce a radical rethink of the ways the international community should react to countries engaging in armed conflict. It will be argued in this paper that from this perspective the current approaches of the major actors in the international system towards on-going conflicts must profoundly change if policies of conflict prevention and resolution are to be effective.

The conceptualisation of armed conflicts as manifestations of economic processes weakens many idiosyncratic explanations which often dominate the rhetoric of actors involved in violent conflict. It facilitates an analytical tool allowing to decipher the logic of seemingly irrational violence and atrocities as strategies of economic dominance, in which the market is replaced by violence or the threat thereof. In the process of internal wars the economic logic often turns war fighting into a self-perpetuating "mode of production". In such circumstances the task to build peace becomes extremely difficult because the agents of war have long since learnt to pursue their interests at the level of media presentation and to adjust their fighting strategies accordingly. In some cases acts of war resemble a stage setting to extract support from international actors. With hindsight it has become evident that the script of the war in Bosnia was full of staged events while the parties to the war had engaged London-based public relations agents in order to favourably influence the public opinion throughout the world. The reading of the underlying logic is complicated by the fact, that violence is not only orchestrated to exclude the "enemy" from access to resources, but it also serves to prop up the absolute control the respective political entrepreneurs wield over "their" group. In the post-Dayton Bosnia this pattern led to a fragmented society dominated by organised crime deliberately nurturing rhetoric of ethnic and religious identity as a cover. The political entrepreneurs in former Yugoslavia who enforced the confrontation of identities as a means to stay in or gain power were certified by the Dayton agreement and have consolidated their position in spite of the presence of the UN-administration.

The argument elaborated in this text is not that armed conflicts are mono-causal events. But the economic dimension is of singular importance because it offers hitherto largely neglected possibilities of outside leverage. It also highlights structures of tacit, not always intended support through global economic networks, which operate within the political domain of industrial countries.

Globalisation and Social Polarization

The social reporting of various agencies, currently waving the neoliberal flag, such as among others the World Bank and the United Nations Development Programme, whose task is to contribute to the regulation of economic globalisation, cannot obscure the fact that at present, in large sections of the world, globalisation is marked simultaneously by economic growth and state collapse, coupled with social polarization within societies and between states and entire regions. In a situation of tension such as this, armed conflicts and zones of all-out violence begin to take shape within societies. This dynamic then radiates into the globally intermeshed black market as violent actors aim to resupply their arsenals and most importantly wash their revenue.

It has long been a matter of controversy within the social sciences whether the violent escalation of conflicts into internal social wars is attributable to social inequities and grievances or to the greed of a handful of actors. The answer to this question determines what measures the international community, and in particular humanitarian and development aid organizations, might reasonably take in order to proactively counter all forms of armed violence. Social inequity and greed are not, of course, mutually exclusive as causal factors. But on basis of our present knowledge, it is the greed of a few actors that would appear to be the driving force in many internal wars. What fosters the formation of black economies, in which economic exchange is ultimately regulated by recourse to violence, is not absolute poverty but aggressive competition for internationally marketable resources and the prospect of handsome, though unlawful profits.

In a social situation of absolute poverty, the actors involved have only minimal opportunities to acquire the instruments they would need to enforce a redistribution of income and chances. They do not have sufficient income for such a strategic investment, nor do their very small-scale activities on the informal markets generate the quantities of hard currency needed to be able to arm themselves. If member of the poorest of the poor within a society can be identified as an armed actor in internal social conflicts, the obvious question to be asked is who invested in this actor or for whom the arming of such an individual serves as a means to an end. The child soldiers, a pervasive feature in internal armed conflicts in many countries, are cases in point. There must be an entrepreneur in the background who invests his dollars in the purchase of automatic guns which are exclusively traded in convertible currency and arms child soldiers. We will only understand such atrocious scenarios if we can design a simulation showing as to why this particular investment appeared to the respective entrepreneur as his "rational" choice of investment.

If these problem-areas were confronted with a 'watertight', legally operating global economy, the criminal business-operators would have no chance to succeed, no chance to earn hard currency and in turn to operate as buyers on the illegal small-arms markets to resupply armed conflicts. In fact, however, globalisation is made up of three interconnected spheres which facilitates a broad range unregulated transactions:
The normal, legally operating economy: This is the only entity considered in the study of national economy (the traditional German terms are Nationaloekonomie or Volkswirtschaft). Only in this sphere taxes are raised, but taxes, it should not be forgotten at any time, form the basis of statehood. Neoliberal doctrine has transformed national economy into a global financial market that is beginning, in its turn, to undermine the state-based nature of national economies and societies.

The informal economy: This is the space where the majority of the world's population organizes its survival. This half of the world's population lives in a state of constant legal and physical insecurity. The state monopoly of the legitimate use of force offers them no protection. Security has to be organized on a private basis, often against corrupt state officials. The monopoly on force is usurped by criminal forces at local levels. The informal economy, in the shape of economic migration and migration for the purpose of survival (refugees), is proving to be one of the most dynamic factors within the current process of globalisation. Migration is operating on a huge scale in the twilight areas of all societies and has created labour markets which are illegal, but have become an indispensable segment in the host society.

The openly criminal economy: The criminal economy can be described as an unknown number of globally operating violence-based rather flexible networks. They are constantly reaching parasitically into the normal economy and are extorting protection-money in the informal economy among others. Drugs are perhaps the major driving-force of global networking in the criminal sphere. Experts estimate the global gross annual 'criminal' product to amount to at least 1500 billion US dollars. The diffuse global financial markets provide the operational medium for the activities of the criminal economy whose actors ultimately aim at washing their unlawful profits.
The present global economy can be schematised as a circularly escalating process embracing neo-liberal globalisation _ social fragmentation and polarization _ shadow globalisation. Internal armed conflicts articulate themselves in this environment and display the economic features observed, namely the necessary involvement in the global shadow economy. But the connectedness to the global shadow economy is not restricted to countries suffering armed conflict on their territory. In many other countries spheres other than the regular economy prevail as well without causing armed conflict to emerge.

Violence and economic regulation

As a further step in the analysis, based on evidence from a large number of countries, I propose to expand the analysis of societal violence to include forms of armed violence other than internal war as well. One might describe the transformation of the organisation and the forms of armed violence from war-like confrontations towards seemingly diffuse manifestations of violence as a consequence of social fragmentation and polarization which opens spaces for violence-based imposition by criminal actors. The ensuing homicide rates often exceed the balance sheet of violence in "wars". The post-conflict murder rates in El Salvador would be case in point. Conceptualising armed violence broader is a precondition for effective policies aiming at reducing the appalling number of casualties related to one or the other form of "economic regulation" whether they occur in the context of a war or in the context of a failed state. I suggest that our state-centric perspective, permanently reinforced by the redundant literature on the paradigm of "democratic peace", hinders us to account for the on-going transformation of the forms of violence and, even more importantly, the nature of the territoriality of conflicts.

War as hitherto defined is possibly being replaced by more targeted and decentralised acts of violence. In order to initiate this debate I would like to draw attention to the fact that the recent transformation of political regimes towards democracy appears to be associated with dramatic increases of homicide. The context is similar in all cases. The paradigm of liberal globalism delimits economic development strategies governments can pursue. The new democratic regimes regularly do not manage to reduce social fragmentation and polarisation. Brazil , South Africa , Nigeria , Russia as well as post-conflict countries are cases in point. The doubling of homicide rates, not officially documented in all cases, point in this direction. These situations easily exceed the casualty rates in many enduring "wars". Colombia appears to represent two cases in one: For many years an internal war lingers on, but Colombia remains a democratic country according to internationally accepted standards. But homicides not related to the internal war are clearly the dominant form of violence. There can be no doubt that these appalling homicide rates represent gun-related casualties. The pervasive diffusion of small arms and not proliferation is instrumental for the emergence of such massive violence. The largest share, though certainly not the all of this violence, represents "regulatory violence". It is employed to enforce economic and financial transactions at different levels, including protection, theft and illegal trade. In this respect this seemingly diffuse violence resembles many features of what has been identified as "economies of war" in many current conflicts, but with respect to its territoriality and perseverance this armed violence is distinct.

M. Duffield has introduced the concept of "network war" into the debate. This paradigm points in a direction which might be helpful in understanding the distinct territoriality of violence in cases such as South Africa and Brazil, where violence regulates large spheres of the economy without escalating into forms which would classify as war. Integrating "network warfare" into the schematic representation of the current globalisation process as schematised in this text possibly brings us closer to an understanding of the transformation of violence as (among other functions) a tool of competing strategies of violent economic regulation of the global shadow economy from war towards seemingly chaotic forms. The increasing emergence of transnational identities as a result of the current shadow globalisation which nurtures migration also points towards a deterritorialisation of potential conflicts.

Conceptualising globalisation as three antagonistic and at the same time symbiotic or at least interdependent dynamic spheres allows us to understand the different meaning of territoriality for the networks which constitute the three spheres. As already explained the three spheres can be identified as the regular economy, the informal and the criminal sphere. In the context of the currently dominant paradigm of liberal globalism all three spheres can be described as webs of interconnected networks with global reach. Hence the application of violence or the threat thereof as a means to impose the economic interest of the respective network does not create a territorial front. The need to apply "regulatory violence" may occur in geographically disparate locations. A network of drug traders may require the application of "regulatory violence" at any link of the chain from the plantation to the consumer in any of the markets around the globe. Traditional warfare about territorial control does not pay off for global networks operating in the shadow economy. They defend their operational space which may be quite flexible, if required under the circumstances, with targeted violence and even terror. The operational space is distinct from territorial control. It may amount to full territorial control, but the latter is not a necessary condition. Generating a certain level of insecurity may already provide for an optimal operational space, because every criminal network depends on the availability of a sphere and a location facilitating the symbiotic exchange with the regular economy.

A similar logic possibly applies to the global players among the transnational corporations. They require safe operational spaces which are often provided by private security firms in otherwise violent environments. In some cases transnational corporations contract even the armed forces for the special protection of their assets.
As a concomitant trend of fragmentation under global liberalism the privatisation of security enhances the separation of social spheres. It is a response to the pervasive, in some cases deliberate weakening of the state which can not any longer provide security as a free public good. The private security industry is globally one of the fastest growing economic sectors. If security is turned into a commodity, an intra-societal protection race ensues continuously enlarging its territorial range: It further enhances social fragmentation by creating peripheries where people lack the resources to purchase their security and fall prey to criminal rackets for their "protection".

Such spaces emerge not only in the context of "withering states". In continuously spreading spaces the state deserts its role as holder of the monopoly of legitimate violence. Instead private agents either provide security on a contractual basis or as is often the case impose "security" on those who can not afford to buy their security in the legal market. As social fragmentation surges in the footsteps of "liberal globalism" growing numbers of territories are controlled by local strongmen who vie for the monopoly of violence. However, often different networks operate on the same territory making such constellations highly instable.

However it is important not to focus exclusively on "failed states" or the Third World in general. By implication not only weak or failed states comprise large informal and criminal economic spheres, developed industrial economies have assimilated large informal as well as criminal networks. In Germany the presence of these largely invisible networks is reflected in posters decorating the entrance of post offices and many chain stores which inform the "invisible actors" in ten carefully selected languages that 'the safe can not be opened by the personnel'. Certain services are a domain of illegal qualified labour, health care in private homes for example. In Spain prostitution generates an estimated 12 billion ¤ per year, at least two thirds of the workforce in this sector are illegal immigrants from Central and Eastern Europe. Economists argue that during the recent boom in the United States inflationary pressures were significantly delayed because of the availability of illegal labour in large, almost unlimited supply. These examples should suffice to justify a systematic study of the global dynamics of the shadow economy which mirrors the current configuration of liberal globalism in the regular economy.

In many countries undergoing systemic transformation and a good number of developing countries, the economy is dominated by informal sectors and criminal actors. This goes hand in hand with the implosion of state structures. Those who form part of the state apparatus become highway-robbers to civil society. Their greed stifles any entrepreneurial initiative aimed at self-help. If a society has got itself into a situation where the façade of state authority, appropriated by the forces of economic criminality, and the protagonists of that authority, produce a feeling of generalized insecurity, the regulatory systems of civil society dissolve and are replaced by structures based on self-defence. Rival militant identities take shape, mostly based on the notion of the exclusion of others.

Mass flight and emigration—generally by the most productive individuals—are the rule in such situations, and they further blight the chances of overcoming the all-enveloping informalisation and criminalisation of economic activity. The diasporas that quickly take shape in the wake of crises, and which initially lives mainly in illegal conditions, ensures survival in the crisis regions by providing support. Examples of this are: the Lebanon (all groups), Kosovo (Albanians), Sri Lanka (Tamils), Chechnya (Chechens). At the same time, however, the diasporas provides a human infrastructure for lucrative illegal transactions of every kind. It is the diasporas that regularly fills the war-chest in cases of armed conflict. This is the case, for example, in Northern Ireland (Catholics) and in Nagorno-Karabakh (Armenians).

All over the world, crises and civil wars have led to the formation of transnational human-resource networks, some of which have already achieved global scope. In each case, only a tiny elite secures legal status in the diasporas. The total number of people involved is difficult to estimate. The United Nations High Commission for Refugees gives the total number of displaced persons and refugees in the world as approximately 50 million. But the number of people living illegally in foreign countries, hoping to secure survival or a better life, is much greater than this. The total very probably runs into the hundreds of millions. These people constitute an important blackmailable resource for managing the grey or criminal spheres of the globalisation process—spheres that have long since ceased to be confined to traffic in drugs and human beings. Even in states governed by the rule of law, these people often live in the shadows, beyond the scope of the law. In most cases, their precarious existence is dominated by hierarchies underpinned by violence. The state monopoly on force operating in the host country has no impact on their sphere of existence. Economically, they form a solid part of the relevant national economy, but they are excluded from political participation.

Whether it be ghettos of socially dependent minorities in the metropolises of the industrial nations, the huge poverty-stricken zones that surround every large city in the Third World, or abandoned industrial centres in the former Soviet Union: the experience which the inhabitants of these places have of state authority is essentially that of living in a collapsed state. In these 'exclaves of economic and social apartheid', parallel social structures take shape. The monopoly on force is held by territorially organized gangs, which—like nation-states—settle border disputes by armed force. Protection money replaces taxes. People living in such precarious circumstances are a resource for, amongst other things, arms and drugs trafficking and other risky activities in demand in the black economy. Anyone who is poor has no choice and accepts criminal risks.

Intergenerational apartheid

As all of this were not bad enough the current globalisation produces a social fragmentation which I describe as "intergenerational apartheid". Historically, the present time will probably be described as an age of mass youth unemployment. The economic (dis-) order that is currently unfolding in line with the neoliberal paradigm has nothing to offer the majority of the world's young people when they reach working age. There is no role for them, either in the present-day 'regular' economy or in traditional rural structures. These latter are in the process of disintegrating all over the world. The modern sector cannot absorb the up-and-coming generations into the labour force: it is part of the logic of global competition that rationalized, capital-intensive production-methods and marketing strategies should ultimately triumph on the markets.

All over the world, a large part of the rising generation of workers is thus being involuntarily driven into the no man's land of informal economies and is thereby becoming an inexhaustible resource for any and every kind of (economic) criminal. A clear example of this dilemma is provided by the present situation in Algeria. Algerian society, like many societies in the Third World, is a very youthful one. About half the population is less than 15 years old. It is estimated that at present about 60 per cent of those looking to enter the job market for the first time are unemployed. There is no prospect of any improvement. The young people in question (if male) are known as hitistes ('those who prop up/lean on the wall'). They are always on the look-out for a chance to do a good deal on the trabendo circuit—casual smuggling, mostly with France—or to bolster their identity, and thus also their existence, by some other means, mostly within the grey area of the informal economy or through services to criminal circles. In their life time liberal globalism for all its growth prospects is unlikely to provide a workplace in the regular economy. And increasingly young people in various countries understand their situation.

In many countries, more than half of all young people belong to this excluded group. In situations such as this, devoid of any prospects, having the use of instruments of force such as an automatic rifle becomes an extremely attractive proposition: with a weapon in his hand, for the first time in his life a young man has the experience of being respected by others—even if the sentiment in question is actually sheer terror on the part of the person under threat, perceived as respect. Force exerted through an automatic rifle becomes the means of resisting social exclusion. Force promises access to the world of industrial mass consumption—to which there is constant media exposure, even in the furthest corners of the world.

Following the end of the so-called liberation movements and the almost total disappearance of the concomitant utopian ideas of social equality, it is now almost exclusively young males that figure as violent protagonists in armed conflicts and armed violence. This is probably due in part to the fact that economic modernization brings with it a radical devaluation of those roles in the production process that were previously assigned exclusively to men. As a reaction to this, and in the absence of cultural-emancipatory and economic alternatives, male identity is construed in terms of acts of violence that give a feeling of superiority and autonomy. The lost position in the production process is replaced by participation in the social production of violence. This logic is also reflected in the crime figures of developed states and the prison population in developed countries where young males belonging to discriminated minority form the majority. Offences involving firearms are overwhelmingly the preserve of young men.

Political wheeler-dealers with criminal economic interests who operate in civil-war scenarios make cynical use of the impulsive urge of young men to take up arms to defend themselves against exclusion from the legal production-sphere and from society. Hence, at bottom the phenomenon of the child soldier in the Third World has more in common with youth-gangs in highly industrialized states than the mostly separate discussion of these two social pathologies would suggest.

The never-ending civil wars and the pervasive "regulatory" violence elsewhere are fuelled, amongst other things, by the total exclusion of the rising generations in the context of state collapse and of whatever economic catastrophes underlie the particular situation. The best way young men can participate in society is as 'soldiers'. Moreover, the chances of survival are probably much greater than in the chaos of the civil societies paralysed by the war. Working as a 'soldier' is therefore not just ighly attractive to rootless young men; in the jargon of modern economics, it is also a 'rational choice'.

Final remark

This text reflects an on-going research. I started out with identifying general features observed in the context of war economies. These features were modelled as part of the globalisation process which I stylise in three antagonistic and at the same time symbiotic spheres. However, when testing the findings it turned out that the economic features identified in the context of war economies were also present in many countries not affected by armed conflict. This was not entirely surprising since every illegal transaction geared to garner convertible currency (i.e. dollars) is bound to penetrate into global markets outside the conflict region either directly or via a chain of "shadow" traders. At the same time crime statistics and other information suggest that it will be possible to diagnose a dramatic increase of homicides in countries characterised by extensive informal and criminal economic sectors. Presently I am engaged in searching reliable data to validate this correlation, it is not an easy task and will require still some time.

Though the correlation between shadow economy and violent crime led me to hypothesize that the pervasive fragmentation and social polarisation developing in the footsteps of liberal globalism represented by the so-called Washington consensus manifests itself in a broad variety of forms of "regulatory violence": This violence is crowding out the market as a regulatory mechanism because the "failed" and weak states can not any longer protect markets protected by law as the mechanism of economic regulation. Thus, armed conflict is only the tip of the iceberg of "regulatory violence". Studying globalisation as a system of interacting networks in all three spheres leads to the hypothesis that "regulatory violence" used to protect the functioning of shadow-economic networks both internally and against competing networks requires acts of violence in distant geographical locations belonging to the operational space of the respective networks. It follows, as a trend at least, that we might expect a deterritorialisation of "regulatory violence", in other words social violence in form of internal warfare with traditional geographical fronts is likely to be replaced by seemingly chaotic, but growing levels of "regulatory violence" which should be measurable in growing homicide and crime rates.

The dynamics of shadow globalisation are self-perpetuating because the reproduction of the state depends on taxes which can only be extracted from the regular economy. In order to identify countries were the informal and criminal spheres actually dominate the economic activities it is important to look at the trends in tax collection. Because without tax there is no accountable state, instead there are only political entrepreneurs who have appropriated the state in order to pursue their business in the shadow economy.

As this is a note reflects an on-going unfinished research I apologise for the rather approximate explication of my exploratory ideas about the current direction of globalisation. I will eventually post a more elaborate version of my research on my website: www.Peter-Lock.de.