War is hell but profit is possible

About 17.5 million people are estimated to have died from war-related causes between 1960 and 1995. War and Underdevelopment examines the nature and impacts of some of these wars. The authors define war as systematic and sustained violence for political purposes and put forward a set of hypotheses about the economic and social impacts of civil wars.

The book starts from the hypotheses that civil wars lead to reductions in gross domestic product and many of its core components - exports and imports, savings and investment, tax revenue and non-military government expenditure - and to a worsening of human-welfare indicators such as infant mortality, life expectancy and educational attainment. Market transactions and production of tradables decline. Foreign debt rises. Production of non-tradables and, in particular, subsistence production increase. Even while many suffer, some groups gain. Throughout the two volumes, there is a sustained effort to describe the scale of the decline in basic human welfare and to identify the beneficiaries in civil wars. The latter are important in explaining why some civil wars continue for so long.

The material in volume two (country studies of Afghanistan, Mozambique, Nicaragua, Sierra Leone, Sri Lanka, Sudan and Uganda), as well as in the first volume's chapters, highlights the diverse economic and social impacts of civil war - a diversity that does not always sustain the book's starting hypotheses.

The proportion of the population directly affected through death, displacement or destruction of home and property ranges from 5 per cent or less in Sri Lanka and Nicaragua to more than 30 per cent in Afghanistan and Mozambique. There are also notable variations in GDP performance and in delivery of welfare services to conflict zones. GDP growth was strong in Sri Lanka throughout the civil war and in Uganda after 1986. Both experiences suggest that when civil conflict is localised, it does less damage to the national economy. Basic welfare services were maintained within conflict zones in Sri Lanka and, to some extent, Nicaragua. Sri Lanka outperformed other South Asian economies in terms of GDP growth and social indicators.

However, the country studies show that the level of basic human welfare within and outside conflict zones depends on actions taken by a range of agents apart from the state: the combatants, people directly affected by the war, civil society and international aid agencies. Because they received external aid, the 6 million people displaced from Afghanistan to Iran and to refugee camps in Pakistan between 1980 and 1995 experienced better welfare, including education opportunities, than the 2 to 3 million people who were displaced but stayed in Afghanistan. But when the political situation changed after 1995, aid to Afghan refugees in Pakistan was cut.

Aid agencies sometimes play into the hands of one or other warring side. When food aid was sent to the war destitute in southern Sudan, aid agencies worked through, and under the control of, the northern government. Little aid reached the intended beneficiaries. As David Keen shows, such interventions will not necessarily speed the end of war, and may strengthen the interest of unintended beneficiaries in perpetuating it.

Writing on Mozambique, Mark Chingono highlights the role of individual initiative in the survival of the displaced. Although the conflict in Mozambique had the expected effect on economic aggregates, Chingono argues that at the micro level, the picture is much more complex. Basing his account on individual experiences among displaced people in and around the city of Chimoio, he argues that one positive outcome of the conflict has been to encourage small-scale entrepreneurship in production and trade.

As some of the country studies graphically illustrate, civil wars may also provide scope for economic gain directly linked to engagement in violence. In the chapter on Sierra Leone, Keen emphasises the economic attraction of enrolling in the military when civil employment opportunities are low: better access to food and basic medical care, plus opportunities for looting.

In Sierra Leone, the military on both sides have also recognised the opportunities for profit in controlling mineral-rich regions. In Sudan, opportunities for northerners to benefit from the war with the south include, in addition to discovery of substantial oil reserves in the south, northern profiteering from distress livestock sales and the opportunity to exploit cheap, even slave, labour displaced from the south.

Keen argues that where one or both sides of the conflict have a strong economic interest in its perpetuation, it is meaningless to analyse prospects for peace solely in terms of attainment of stated political goals such as replacement of a corrupt regime. The search for long-term solutions must start from a recognition of opportunities for economic gain experienced by influential groups during the conflict. To secure a lasting peace, proposals for conflict resolution must provide alternative opportunities in the peacetime economy, including enhanced education and employment opportunities for young males.

The authors of War and Underdevelopment reject the view that civil war creates economic chaos in which policy is ineffective, and, the view that civil war can be treated like any other exogenous shock to the economy. They argue instead that rational economic activity continues during war, including civil war, although the nature of this activity is transformed.

It follows that economic policies have a role during as well as after the war, but these are likely to differ from those that are appropriate for stabilisation and structural adjustment in peacetime. For instance, import rationing is more likely to be appropriate than import liberalisation.

However, the very success of these volumes in highlighting the diversity of civil-war experiences limits the scope for identifying generally valid policy recommendations. As the country studies confirm, economic impacts of civil war vary widely. They depend on the nature of the war, the structure of the prewar economy and polity and the pattern of any foreign intervention. These factors influence and constrain the range of viable economic and social policy options during wartime. This study is more successful in identifying the constraints on policy than in generating policy guidelines that are likely to be generally viable.

Given that the country studies explore the causes of conflict, it is disappointing that these volumes do not also contain some systematic discussion of policies for conflict prevention. There are countries, such as Malaysia in the 1970s, where the preconditions for conflict have been present but the state has contained or reduced underlying tensions. As Ravi Kanbur has suggested, there is an outstanding need for a systematic comparison of these countries with others, including those reviewed in War and Underdevelopment , where such policies have not been tried or have failed.

Diana Hunt is lecturer in economics, School of African and Asian Studies, University of Sussex.