Beyond Greed and Grievance: Policy Lessons from Studies in the … · 2011-03-01 · BEYOND GREED AND GRIEVANCE: POLICY LESSONS FROM STUDIES IN THE POLITICAL ECONOMY OF ARMED CONFLICT

October 2003

International Peace Academy

Beyond Greed and Grievance:Policy Lessons from Studies

in the Political Economyof Armed Conflict

IPA Policy Report

Karen Ballentine and Heiko Nitzschke

Program onEconomic Agendas in Civil Wars (EACW)

About the EACW Program

Economic Agendas in Civil Wars (EACW)Senior Associate: Karen Ballentine [email protected] Program Officer: Heiko Nitzschke [email protected] Officer: Kaysie Studdard [email protected]: September 2000 – December 2003

Initiated in September 2000, the EACW program follows from a conference held in London in 1999, whichproduced the seminal volume, Greed and Grievance: Economic Agendas in Civil Wars, Mats Berdal and David M.Malone (eds.) (Lynne Rienner, 2000). The program addresses the critical issue of how the economic agendas ofarmed factions sustain violent conflict and inhibit durable peace, while also assessing the role of globalization increating new opportunities for combatants to finance their military operations. This hitherto under-developed fieldof research holds particular promise of policy relevance for those international and national actors seeking moreeffective strategies for both conflict prevention and conflict termination.

Beginning with an overall commitment to durable conflict resolution, the broad aims of the program are:

• to improve understanding of the political economy of civil wars through a focused analysis of the economicbehaviors of competing factions, their followers, and external economic actors in conflict zones;

• to examine how globalization shapes the economic interests of belligerents as well as creates new opportuni-ties for competing factions to pursue their economic agendas through trade, investment and migration ties,both legal and illegal, to neighboring states and to more distant, industrialized economies; and

• to evaluate the effectiveness of existing and emerging policy responses used by external actors, includinggovernments, international organizations, private sector actors, and NGOs, to shift the economic agendas ofbelligerents from war towards peace and to promote greater economic accountability in conflict zones.

Policy research and development proceed along two tracks: four expert working groups (Advisory Group, WorkingGroup on Economic Behavior of Actors in Conflict Zones, Private Sector Working Group, and Policies andPractices Working Group) and commissioned research. EACW publications (all at Lynne Rienner Publishers)include: The Political Economy of Armed Conflict: Beyond Greed and Grievance, K. Ballentine and J. Sherman(eds.) 2003; War Economies in a Regional Context: The Challenge of Transformation , M. Pugh and N. Cooper withJ. Goodhand, forthcoming; and The Economic Dimensions of Conflict and Conflict Resolution in the DemocraticRepublic of Congo, K. Ballentine and M. Nest (eds.) forthcoming. A volume of analytic studies assessing policyresponses to the economic dimensions of armed conflict will be published in Spring 2004. Other products includeperiodic meeting reports, policy briefs and background papers, which are available electronically on our website.

Policy development also involves on-going consultations with international experts and practitioners, academicconferences, and workshops and briefings that bring together relevant UN actors, governments, private sectoractors, and NGOs. As part of a continuous outreach effort, the program has engaged in several partnerships,including with the Fafo Institute of Applied Social Science (Oslo); the Institute for Security Studies (Pretoria); theWoodrow Wilson International Center for Scholars (Washington, DC); the International Institute for StrategicStudies (London) and the World Bank’s Development Research Group (Washington, DC). We have also built avirtual network of experts and policy practitioners through sponsorship of an electronic list-serve,[email protected].

Acknowledgements:The EACW program enjoys the generous support of a number of donor states and private foundations, including:the Canadian Department of Foreign Affairs and International Trade (DFAIT), the Canadian InternationalDevelopment Agency (CIDA), the Department for International Development (DFID) of the United Kingdom, theInternational Development Research Centre (IDRC) of Canada, The Government of Norway, the Government ofSwitzerland, the Government of Sweden, the Rockefeller Foundation, and the United Nations Foundation.

More information on program events and all of the program reports are available on the program website athttp://www.ipacademy.org.

BEYOND GREED AND GRIEVANCE: POLICY LESSONS FROM STUDIES IN THE POLITICAL ECONOMY OF ARMED CONFLICT

Contents

Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Introduction: Beyond Greed and Grievance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II. Economics and Conflict: Exploring the Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3The Political Economy of Key African Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Different Resources - Different Conflicts?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III. The Political Economy of War and Peace: Lessons from Cases . . . . . . . . . . . . . . . . . . . . . . 5Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Bougainville (Papua New Guinea) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Kosovo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Burma/Myanmar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

IV. Conclusion: Lessons and Implications for Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Curtailing Resource Flows to Combatants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Resource Control Regimes: Limits and Potential UnintendedHumanitarian Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Economic Inducements and Peacemaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Criminalization of Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16“Bringing the State Back In” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17The Regional Dimension of Armed Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


Executive Summary 1

Executive SummaryThis policy report provides a synopsis of the key findingsfrom case studies on the political economy of armedintra-state conflicts, commissioned by the InternationalPeace Academy’s program on Economic Agendas in CivilWars (EAC W ) .1 These findings offer lessons for improvedpolicies for conflict prevention and resolution.

• Combatants’ incentives for self-enrichment and/oropportunities for insurgent mobilization created byaccess to natural and financial resources wereneither the primary nor sole cause of the separatistand non-separatist conflicts analyzed.Nevertheless, extensive combatant self-financingcomplicated and prolonged hostilities, in somecases creating serious impediments to their resolu-tion. In all cases, however, these factors interactedto varying degrees with long-standing socio-economic and political grievances, inter-ethnicdisputes, and security dilemmas brought about byweak and unaccountable systems of governance.

• Conflict analysis should avoid “resourcereductionist” models in favor of comprehensiveapproaches that not only account for the complexinterrelationship between economic and politicaldynamics, but also incorporate the politicaleconomy of both rebellion and state failure.Improved understanding is required of the role thatcombatant access to resources can play in shapinga permissive opportunity structure for separatistand non-separatist conflicts relative to other socio-political factors.

• Different resource endowments affect differentsorts of conflicts and benefit combatant parties indistinct ways, depending, inter alia, on the modeof exploitation and how proceeds are managed bythe state. “Lootable” resources, such as alluvialdiamonds and illegal narcotics are more likely tobe implicated in non-separatist insurgencies. Theyprolong conflict by benefiting rebels and conflict-dependent civilians, compromising battle disci-pline, and by multiplying the number of peace

spoilers. “Unlootable” resources, such as oil, gas,and deep-shaft mineral deposits tend to be associ-ated with separatist conflicts, which are oftencaused by ethno-political grievances overinequitable resource revenue-sharing andexclusionary government policies.

• Given the importance of lootable natural resourcesand easily captured diaspora remittances insustaining many of today’s armed conflicts,improved international regulatory efforts to curtailthese resource flows are both warranted andnecessary. Commodity control regimes need to bestrengthened and also complemented by morecomprehensive efforts that address the financialflows connected with those resources.

• However, even the most robust resource controlregimes are unlikely to have a decisive or evenfully positive impact. Where conflicts aremotivated by a mix of political, security, ethnic,and economic factors, curtailing resource flows tocombatants may weaken their military capacitybut not their resolve to continue fighting. Inaddition, regulatory regimes may have adversehumanitarian effects by increasing civilianpredation by rebels or by stifling civilian incomes.When designing and implementing regulatoryregimes, policy-makers need to distinguishbetween those who exploit armed conflict forprofit and power and those who participate in wareconomies to sustain their civilian livelihoods.

• The offer of “economic peace dividends” may co-opt belligerents into ceasefires or more formalpeace processes. Critically, however, economicinducements are unlikely to achieve these resultsin the absence of a credible military threat andmay risk the creation of “negative peace,” wherejustice and sustainability are deeply compromisedand the threat of renewed conflict remains high.Policy-makers need to identify and adequatelyintegrate economic incentives of combatants into awider set of political and strategic inducements forconflict resolution and peacebuilding.

1 Karen Ballentine and Jake Sherman, eds., The Political Economy of Armed Conflict: Beyond Greed and Grievance (Boulder: LynneRienner Publishers, 2003).

• Today’s insurgents increasingly engage in illegaleconomic activities either directly or through linkswith international criminal networks. However,insurgency groups have not unequivocallytransformed into mere criminal organizations asthey retain—albeit to varying degrees—military andpolitical goals. While improved interdiction andlaw enforcement are important policy tools,casting rebellion as a criminal rather than apolitical phenomenon may risk mischaracterizinglegitimate grievances, thereby foreclosing opportu-nities for negotiated resolution, and may lend defacto legitimacy to state actors, regardless of theirbehavior and role in the conflict.

• Poor economic governance and state weaknessare the critical mediating factors betweenresource abundance and vulnerability to armedconflict; the first engenders popular grievances,the second makes separatist and non-separatistinsurgencies politically and militarily feasible.Policy responses need to focus on structuralconflict prevention efforts by, inter alia,designing and supporting tools and strategies formore effective, equitable, and accountablesystems of resource management, complementedby longer-term strategies of economic diversifica-tion and poverty reduction.

• Contemporary intra-state conflicts have strongregional and even global linkages. By increasingthe number of potential war profiteers and peace-spoilers and multiplying the points of conflict,these broader dimensions not only affect thecharacter and duration of hostilities, but alsocomplicate the prospects for conflict resolutionand post-conflict stability. Both conflict analysis

and policymaking need to address these regionaldimensions by strengthening the economicmanagement capacities of formal regional organi-zations and ad hoc alliances, complementing—andthus strengthening—national and global conflictmanagement strategies.

I. Introduction: Beyond Greed andGrievance

Academic and policy research has produced importantfindings on the political economy of contemporaryintra-state conflicts, most importantly in drawingattention to the rise in combatant “self-financing”through access to regional and global networks of licitand illicit trade and finance and diaspora remittances. 2

Much of the academic debate on the economic causesof contemporary armed conflict has become polarizedaround the g r e e d versus g r i e v a n c e d i c h o t o m y,juxtaposing “loot-seeking” with “justice-seeking”rebellions, and, more generally, the significance ofeconomic versus socio-political drivers of civil war.3

There is growing recognition, however, of the analyt-ical limits that this dichotomy imposes on what are inreality highly complex systems of social interaction.While there is overall agreement that economic factorsmatter to conflict dynamics, there is little consensus asto how they matter and how much they matter relativeto other political and socio-cultural factors.4 T h eanswers to these questions are not merely academic.Improved understanding of the causes, character, anddynamics of intra-state conflict can lead to moreeffective policies for conflict prevention and resolu-tion; conversely, inadequate analysis may result ininappropriate policy responses and ill-conceivedsolutions.


2 Introduction

2 Mats Berdal and David Keen, “Violence and Economic Agendas in Civil Wars: Some Policy Implications,” Millennium: Journal ofInternational Studies 26(3), 1997; David Keen, The Economic Functions of Violence in Civil Wars, Adelphi Paper no. 320, Oxford:IISS/Oxford University Press 1998; Paul Collier and Anke Hoeffler, “On the Economic Causes of Civil War,” Oxford Economic Papers50 (4), 1998, 563-573.3 Paul Collier and Anke Hoeffler, Greed and Grievance in Civil War . Policy Research Working Paper no. 2355, Washington, DC: TheWorld Bank, 2001; Mats Berdal and David M. Malone, eds., Greed and Grievance: Economic Agendas in Civil Wars (Boulder: LynneRienner Publishers, 2000). 4 See João Gomes Porto, “Contemporary Conflict Analysis in Perspective,” in Jeremy Lind and Kathryn Sturman, eds., Scarcity andSurfeit: The Ecology of African Conflicts (Institute of Security Studies, 2002) 1-49; Jeffrey Herbst, “Economic Incentives, NaturalResources, and Conflict in Africa,” Journal of African Economies 9(3), 2000: 270-294; C. Cramer, “Homo Economicus Goes to War:Methodological Individualism, Rational Choice and the Political Economy of War.” World Development 30(11), 2002: 1845-1864.

Against this background, the International Pe a c eAcademy’s program on Economic Agendas in CivilWars (EACW) commissioned a series of analytical andcountry-based case studies on the political economy ofcontemporary intra-state conflicts, seeking to providea clearer understanding of what role economicmotives, opportunities, and grievances play in shapingthe incidence, duration, and character of specificarmed conflicts.5 To allow for more geographicalrepresentation in an area of research thus farconcerned predominantly with African conflicts, thecountry case studies in this volume also cover conflictsin South America (Colombia), Europe (Kosovo), Southand East Asia (Nepal, Sri Lanka, and Burma), and thePacific (Papua New Guinea). The studies also includean examination of the economic dimensions ofseparatist conflicts, typically analyzed underparadigms in which identity politics, group dynamics,and state behavior, rather than economic factors, arethe predominant explanatory variable. This report willdraw out key findings from the cases and highlight theimplications they have for international policy effortsfor preventing and resolving armed conflicts.

II. Economics and Conflict:Exploring the Relationship

The Political Economy of Key African Conflicts6

The so-called “resource wars” in Angola, Sierra Leone,and the Democratic Republic of the Congo (DRC) havesignificantly shaped current scholarly and policyperspectives on the role that economic factors, partic-ularly rebel exploitation of natural resources, play incontemporary armed conflict.7 Charles Cater suggests,however, that these conflicts were both caused and

sustained by a complex and shifting interplay betweenpolitical and economic factors. He strongly cautionsagainst reductionist causal models of conflict andstrategies of conflict management directed solely atputative economic factors. Cater also examines a rangeof contemporary theoretical approaches to the causesof armed conflict, which provide different explanatorymodels according to their subject of analysis—rebellionor state failure—and respective focus on economic orpolitical factors. While each approach has someanalytic utility, he argues that an accurateunderstanding of the broad political economy ofconflict requires a synthetic approach.

“Rebel-centric” approaches seek to explain why, how,and when people rebel. The dominant role that violentcontests over natural resources have played in theconflicts in Angola, Sierra Leone and the DRC lendssome support to the econometric “greed model” ofrebellion, according to which the statistical correlationbetween resource abundance and the risk of armedconflict is explained by rebel aspirations for self-enrichment and/or by the opportunity for rebellionthat easy access to natural resources provides towould-be insurgents.8 Yet while access to diamondsand other valuable natural resources did contribute tothe feasibility of rebellion in both Sierra Leone and theDRC, Cater suggests that these insurgencies were notundertaken simply to capture lucrative economic assetsfor self-enrichment. Rather, resource exploitation wasalso a means to finance insurgencies driven by socio-economic and political grievances. Here, theories ofconflict that explain group mobilization for rebellionin terms of inter-group or “horizontal” socio-economicor political inequalities also have significant explana-tory power.9 Angola’s decades-long civil war, forexample, started as an anti-colonial struggle long


Economics and Conflict: Exploring the Relationship 3

5 Karen Ballentine and Jake Sherman, eds., The Political Economy of Armed Conflict: Beyond Greed and Grievance (Boulder: LynneRienner Publishers, 2003).6 Chapter 2: Charles Cater, “The Political Economy of Conflict and UN Intervention: Rethinking the Critical Cases of Africa” pp. 19-45.7 See Jakkie Cilliers and Christian Dietrich, eds., Angola’s War Economy: The Role of Oil and Diamonds (Institute for Security Studies,2000); Michael Renner, The Anatomy of Resource Wars, WorldWatch Paper 162, 2002. 8 Paul Collier, “Economic Causes of Civil Conflict and Their Implications for Policy,” in Chester A. Crocker, Fen Osler Hampson, andPamela Aall, eds. Turbulent Peace: The Challenges of Managing International Conflict (US Institute of Peace Press, 2001), pp. 143-162. Earlier versions of the “greed theory” focused on the economic motivation of combatants, while later versions place increasedemphasis on the opportunity (economic feasibility) for organized violence.9 See Frances Stewart, “Horizontal Inequalities as a Source of Conflict,” in Fen Osler Hampson and David M. Malone, eds., FromReaction to Conflict Prevention: Opportunities for the UN System (Boulder: Lynne Rienner Publishers, 2002), pp. 105-136.


before natural resource exploitation became thedominant source of belligerent funding for both theUNITA rebels and the government. In Sierra Leone,horizontal inequalities obtained in the form ofpervasive unemployment and lack of access toeducation among the youth; and in the DRC in theform of regionally and ethnically defined identity,poverty, and insecurity.

“State-centric” theoretical approaches focus on the rolethat the weakness or failure of the state plays inproviding a favorable opportunity structure for armedconflict. Political approaches see conflict as a result ofstate weakness, which is characterized by the lack ofability to monopolize force, maintain order within itsterritory, and generate resources to provide publicgoods, which can lead to the erosion of legitimateauthority and capacity for effective governance.10

According to those focusing on the economic factors instate failure, the systematic diversion of public rentsthrough corrupt patronage networks fosters the growthof “shadow states,” which in turn become the prey ofarmed warlords as governments are no longer able tomaintain control over these channels of wealthaccumulation and distribution.11 This was the case inSierra Leone and the DRC, where the outbreak ofconflict was preceded by decades of political misruleand corruption by a parasitical state elite that exacer-bated socio-economic deterioration and institutionaldecay in both countries, ultimately resulting in violentstate collapse.

The way in which a given conflict is characterized canstrongly influence the selection of policy choices forconflict management by the international community.UN policymaking with regard to Angola, Sierra Leone,and the DRC appears to have been largely guided by

assumptions based on the greed paradigm.Consequently, strategies for intervention have focusedon a limited range of measures intended to curtail theflow of natural resources and influence the decision-making calculus of elites, rather than on more compre-hensive approaches that address the structural factorsthat generate and sustain intrastate wars. As Catersuggests, policies for conflict management shouldinstead be based on a modified “political economy”approach that integrates both the interrelationshipbetween economic and political factors and thecomplementary rebel-centric and state-centric modelsof conflict analysis. Only a holistic analytical approachcan serve as a reliable basis for conflict prevention andresolution efforts advanced by the UN and others thatmore accurately reflect the complex realities ofcontemporary conflicts in Africa and beyond.

Different Resources – Different Conflicts?12

Recent quantitative research indicates a strong correla-tion between natural resource abundance in a givencountry (measured as the ratio of primary commodityexports to gross domestic product) and the risk ofarmed conflict.13 However, based on empirical evidencefrom fifteen recent conflicts, Michael Ross suggeststhat different natural resources can have variedimpacts on key conflict dynamics and figure differ-ently in separatist and non-separatist conflicts.14

Different resources tend to have different beneficiaries,depending on the mode of exploitation and the wayproceeds are managed by the state. Lootable resourcessuch as alluvial diamonds and narcotics can beextracted and transported by individuals or smallgroups of unskilled workers. Not only do suchresources provide direct rents for combatants, they also

4 Economics and Conflict: Exploring the Relationship

10 Mohammed Ayoob, “State Making, State Breaking, and State Failure”, in Chester Crocker, Fen Osler Hampson, and Pamela Aall,eds., Turbulent Peace: The Challenges of Managing International Conflict (US Institute of Peace Press, 2001), pp. 37-51; WilliamZartman, ed., Collapsed States: The Disintegration and Restoration of Legitimate Authority (Boulder: Lynne Rienner Publishers, 1995).11 See William Reno, Warlord Politics and African States (Boulder: Lynne Rienner Publishers, 1998); William Reno, “Shadow Statesand the Political Economy of Civil Wars,” in Mats Berdal and David M. Malone, eds., Greed and Grievance: Economic Agendas inCivil Wars (Boulder: Lynne Rienner Publishers, 2000), pp. 43-68.12 Chapter 3: Michael L. Ross, “Oil, Drugs, and Diamonds: The Varying Roles of Natural Resources in Civil Wars,” pp. 47-70. 13 Paul Collier and Anke Hoeffler, Greed and Grievance , 2001. op. cit.14 See also Philippe Le Billon, “The Political Ecology of War: Natural Resources and Armed Conflicts.” Political Geography 10(5),2001: 561-584.


tend to generate incomes for local communities.Empirical data indicates that lootable resources tend tobe associated with non-separatist conflicts. Bycontrast, oil, deep-shaft minerals, and other unlootableresources extracted in ethnically distinct areas aremore likely to be associated with separatist conflicts.Benefits accrue primarily to extractive firms andcentral governments that provide the required skilledworkers, security, and capital. Inequitable sharing ofthese revenues by corrupt or oppressive governments,as well as negative environmental and social impactsof extractive operations, may cause popular grievancesin resource-rich areas. Not only may these grievancesexacerbate existing ethno-political tensions, separatistscan also view natural resource endowment as apotential economic base for an independent state.

The way in which natural resources provide rents tocombatants is also relevant to the duration of conflict.Access to lootable resources appears to prolong non-separatist conflicts by disproportionately benefitinginsurgents—typically the weaker side of the conflict—and thereby averting their military defeat. Lootableresources can also create internal discipline problemswithin armed groups, making it harder forcommanding officers to impose terms of a settlementon their own forces. Finally, these resources can renderwartime exploitation so profitable that combatantsprefer protracted war to peace. Whether unlootableresources prolong separatist or non-separatist conflictsseems to depend largely on the strength of the govern-ment. On the one hand, unlootable resources provideimportant revenues for the government that can helpto bring about a quicker military victory. On the otherhand, they can provide a lifeline for a weak govern-ment—hence averting its defeat at the hand of rebels.Resources that require pipelines or ground transportare vulnerable to sabotage, holdups, and extortion byrebels, thereby providing finances to insurgents andw e a kening the state’s coercive power, and thusincreasing the duration of conflicts. At the same time,government efforts to protect the extractive infrastruc-ture by force might aggravate existing localgrievances, further intensifying and prolongingconflict.

III. The Political Economy of Warand Peace: Lessons from Cases

Colombia15

The Colombian conflict began in the early 1960s as aprofoundly politico-ideological contest over statepower and socio-economic governance between left-wing guerrilla groups and the central government.Combatant access to lucrative natural resources playedno significant role in its onset. However, access to bothillegal and legal natural resources (coca, poppy, andoil) significantly prolonged and intensified the conflict,which, after decades of relatively contained confronta-tions, saw a drastic escalation of violence in the late1990s. With successful anti-drug policies inneighboring countries and a domestic agriculturalcrisis making coca and poppy cultivation an attractivesource of income for Colombia farmers, both theguerrillas and the emerging right-wing paramilitarygroups increasingly exploited the revenue-generatingopportunities from the taxation, production, andtrafficking of narcotics. The rise in profits allowed forthe rapid recruitment of combatants and the procure-ment of sophisticated weaponry. Colombia’s growingoil industry provided a source of income for thegovernment in the form of royalties and taxes. Theguerrilla groups benefited indirectly from the oilindustry by kidnapping oil and engineering companyemployees and threatening to sabotage oil installa-tions. In addition, they gained de facto control overlocal administration—and with it spending decisions—in the oil-producing regions, which had benefited fromincreased intra-governmental revenue transfers andadministrative decentralization.

The growing economic—and hence military—strengthof the guerillas and paramilitary groups provided themwith powerful incentives to defect from peace negotia-tions, which were held frequently during the earlierphases of the conflict. According to AlexandraGuáqueta, however, the government’s counter-narcotics and counter-insurgency operations,financially and militarily supported by the US, have

The Political Economy of War and Peace: Lessons from Cases 5

15 Chapter 4 – Alexandra Guáqueta, “The Colombian Conflict: Political and Economic Dimensions,” pp. 73-106.

16 Chapter 5 – John Bray, Leiv Lunde, and S. Mansoob Murshed, “Nepal: Economic Drivers of the Maoist Insurgency,” pp. 107-132.


6 The Political Economy of War and Peace: Lessons from Cases

had little success so far in reducing drug production ortrafficking, and appear to have further complicated theprospects of a negotiated settlement. Not only did thesepolicies add economic value to the already profitablecoca and poppy cultivation, they also raised theincentives for guerrillas and paramilitaries tostrengthen military and territorial power to increasetheir potential bargaining power vis-à-vis the govern-ment. The recent classification of both guerrillas andparamilitary groups as terrorist organizations hasfurther changed the political economy of peace-making in Colombia by favoring a military counter-insurgency strategy over diplomatic efforts that couldlure guerrillas into demobilization by addressing theirgrievances and political goals.

Lessons from Colombia:

• Drug cultivation provides large parts of the ruralpopulation in Colombia with important liveli-hoods. Interdiction and eradication efforts aimedat curtailing the income for guerrillas and paramil-itaries, complemented by poorly implementedalternative development programs, not only raisethe profitability of, and thus the incentives for,increased narcotics cultivation, they also dispro-portionately hurt the poor, causing furthergrievances and increasing local support to guerrillamovements.

• Intra-governmental revenue-sharing schemes,such as those implemented in Colombia toredistribute oil rents according to regionaleconomic development plans, can help prevent ormitigate conflict by addressing popular grievancesover the inequitable distribution of wealthgenerated from natural resource exploitation.H o w e v e r, in the absence of effective centralgovernment control over resource-rich areas,rebels can capture local administrations, therebyprolonging conflict.

• Even though the conflict has been primarily politi-cally and ideologically driven, access to lootableresources and obstruction of unlootable resources

may have shifted the interests of guerrillas andparamilitaries from ideological to more pecuniarygoals, affecting their military strategies, choices ofterritorial expansion, and their proclivity to usecriminal methods to generate revenues and procureweaponry.

• Policy-makers’ view of the legitimacy and motivesof armed groups has profound implications forconflict resolution in determining the choice ofpolicy responses. For example, the depiction of theguerrillas and paramilitaries as mere criminals and,more recently, terrorists by the Colombian govern-ment and the U.S. calls for a military defeat ratherthan diplomatic negotiation.

Nepal16

The conflict in Nepal stands well outside the “resourcewar” model, as the poor natural resource endowmentof this impoverished, aid-dependent country precludedself-enrichment motives and economic opportunitiesas a cause of the Maoist insurgency that started in1996. Instead, as John Bray, Leiv Lunde, and MansoobMurshed argue, the most prominent economic factorsshaping the objectives of the insurgencies appear to beaccumulated socio-economic grievances emanatingfrom chronic poverty, extreme levels of landlessness,and the burdens of the bonded labor system on thelower castes. These frustrations were further exacer-bated by systemic government corruption, as well asthe as yet unrealized promises of democratic reform ofthe feudal system. Drawing on a long history of radicalleft-wing activism and the Chinese Maoist model of a“protracted people’s war,” the insurgency’s primaryobjectives have been the redistribution of land,planned national industrialization, and the abolition ofthe monarchy.

Despite the insurgency movement’s strong supportamong the rural population and their initial ability torecruit supporters, the government was slow to react.By the time the army was mobilized, the insurgencywas already well-entrenched and economicallysustained by contributions of local supporters, extortion

17 Chapter 6 – Anthony J. Regan, “The Bougainville Conflict: Political and Economic Agendas,” pp. 133-166.



of businesses in urban areas, and substantial revenuesfrom diaspora remittances. However, facing increasingmilitary pressure and a resulting reduction of itsrevenues, the insurgency has begun to show some signof diminishing ideological and social appeal, asindividual factions have begun to rely on civilianpredation and the forced conscription of children togenerate the necessary military means and personnel.H o w e v e r, the Maoist insurgency has not—or not yet—degenerated into wider predatory violence as seen inother contemporary conflicts. So far, the rebels’command structure remains largely intact and central-ized, as demonstrated by the movement’s adherence tothe cease-fire of January 2003. As neither the govern-ment nor the rebels have realistic prospects of outrightmilitary victory in the foreseeable future, the recentagreement to hold peace talks was made possible, inpart, by the rebels’ softening of their initial demands forthe abolition of the monarchy, and the government’swillingness to de-criminalize the Maoist guerrillas,earlier depicted as a terrorist movement. Whether thesetalks will resolve the seven-year insurgency, however,will largely depend on the government’s dedication topolitical and economic reform.

Lessons from Nepal:

• As the Nepal conflict demonstrates, groupgrievances over systematic socio-economicexclusion and widespread poverty can provide animportant impetus for armed rebellion when fusedwith political and ideological agendas aimed at aviolent campaign for state power.

• Military operations by the government are, at best,only part of the solution to the conflict in Nepal.Not only does an outright military victory foreither side remain unlikely, the counter-insurgencyoperations show an increased incidence of humanrights abuses by the Nepalese armed forces, whichthreatens to undermine local public support for thegovernment’s stance.

• Given Nepal’s strong dependence on foreigndevelopment aid, international assistance can play

a major role in long-term conflict resolutionefforts by reducing general poverty and tacklinginequalities through technical assistance in suchareas as land reform, administrative devolution,and social-sector expenditure.

• A major challenge for the future of the peaceprocess is the rebel leadership’s ability to ensurediscipline among the rank-and-file rebels. Whilethe Maoist rebels’ campaign of a people’s war is, bytheir own definition, expected to be “protracted,”the first signs of fragmentation among the rebelsand recourse to predatory violence by somefactions may yet complicate negotiations andconflict resolution.

Bougainville (Papua New Guinea)17

Despite the centrality of the Panguna copper mine toBougainville’s violent ethno-separatist conflict (1988to 1997), economic, political and socio-culturalagendas were closely interwoven in the onset andduration of the conflict. Long-standing popular resent-ments over the mining operation’s negative impact ontraditional systems of landholding and the environ-ment fused with and amplified ethno-nationalistaspirations rooted in a history of Bougainvillan resist-ance against outside rule. Economic grievances relatedto the inequitable sharing of mining revenues were animportant source of ongoing contention, with violentprotest—or the threat thereof—proving to be asuccessful strategy to wring economic concessionsfrom the otherwise reluctant central authorities. Withsocio-economic conditions for Bougainvillans dramat-ically eroding during the 1980s, more favorableredistribution of mining wealth appeared to be themain motive of the forceful disruption of the miningoperations by marginalized landowners and mineworkers in 1988—the prelude to the wider conflict. AsAnthony Regan notes, however, even those within thenationalist movement supporting secession weredivided over what role, if any, mining should have inthe future of an independent state: while some aimedat the capture of the mine as the economic foundationfor a future independent Bougainville, other, more

traditionalist elements sought the permanent closure ofthe mine, consistent with their rejection of industrial-ization and its perceived corrosive impact upontraditional social order.

The central government’s reaction to the crisis provedto be inept. The deployment of the brutal riot police inan effort to restore mining operations led to an escala-tion of the crisis and served as the catalyst for popularmobilization behind a wider ethno-nationalistrebellion, strengthening support for the emergingBougainville Revolutionary Army (BRA) and itsmilitant secessionist agenda. As the mine was forciblyclosed shortly after the outbreak of the rebellion, itsrevenues did not contribute to the persistence of theconflict nor did it make the rebellion more economi-cally feasible. With few economic and financialresources to draw upon, the BRA instead capitalized onmilitary resources and other assets made available bythe popular support it enjoyed in key regions of theisland to sustain its guerrilla campaign. Even a navalblockade imposed by the PNG government in the mid-1990s, while remarkably effective in preventing armsand resources from reaching the insurgents, had littleeffect in weakening the BRA. The negotiated peaceaccord of 2001 was the product of a combination offactors, including accumulated war-weariness on allsides, the ability of the BRA to negotiate from aposition of strength, and a mounting economic crisisthat confronted the PNG government after 1994.Perhaps most critical was the gradual recognition bythe PNG government that the legitimate economic andpolitical grievances of Bougainvillans could no longergo unattended.

Lessons from Bougainville:

• Socio-economic grievances related to the Pangunamine rather than the opportunities it created forrebel self-enrichment were the predominant factorin triggering Bougainville’s violent separatistconflict. The successful attempt by some of theseparatists to permanently close the mine furthercontradicts the “greed model,” suggesting that insome cases, insurgents might willingly forego

potential economic benefits from rebellion if thenegative socio-cultural and environmental impactrelated to resource extraction is perceived tooutweigh its potential pecuniary benefits.

• Access to natural resources for combatant self-financing need not play a major role in theduration of separatist conflicts, particularly wherethey have a strong ethnic dimension. Curtailingcombatant access to resources might thus do littleor nothing to end these conflicts. The BRA, forexample, managed to sustain an effective guerrillacampaign for nearly a decade, despite the absenceof lootable or obstructable resources and thepresence of an effective naval blockade imposedby the PNG government.

• The capacity of the state is critical in terms of itsability to develop coherent policies to preventconflicts from occurring and to resolve themshould they arise. In the Bougainville case, thecentral government failed to adequately addressgrowing popular grievances, while its dispropor-tionately brutal response increased rather thanreduced militant support for secession.

• Rebel discourse of ethno-cultural grievances may,as some have claimed, serve to mask self-servingeconomic motives of rebel leaders. However, thereverse may be equally true. For some of the BRA,protests against inequitable distribution of miningrevenues appear to have been a conscious effort toenhance the legitimacy of ethno-separatist claims,which predated the mining operations begun in the1960s.

Kosovo18

The Kosovo conflict, which escalated from a protractedpolitical conflict between the majority KosovoAlbanians and the ruling minority Serbs in the early1990s to a violent secessionist conflict by 1998-99, canonly be understood in the context of its historical rootsand regional setting. Driven by long-standing nation-alism and the ever multiplying political and socio-



18 Chapter 7 – Alexandros Yannis, “Kosovo: The Political Economy of Conflict and Peacebuilding,” pp. 167-195.

economic grievances of Kosovo Albanians, the crisiswas sparked by destabilizing processes resulting fromthe disintegration of the Socialist Federal Republic ofYugoslavia. Socioeconomic underdevelopment,massive unemployment, and widening inter-ethnicinequalities brought about by the policies of systematicdiscrimination and exclusion carried out by theMilosevic regime led to the establishment of theshadow “Kosovo Republic,” a parallel governmentunder the leadership of Ibrahim Rugova. Advocatingpeaceful resistance to the regime in Belgrade andeconomically sustained by a widespread informaleconomy and significant diaspora remittances, thisparallel governance structure provided a considerablemeasure of order and restraint until the mid-1990s.

According to Alexandros Yannis, two key contingentevents shifted the political economy of the Kosovoconflict towards the militant separatism of the KosovoLiberation Army (KLA), enhancing its determinationand its capacity to mobilize against the Serbian state.First, the signing of the Dayton Accord in 1995, whichrewarded those who forcibly had redrawn the ethnicand political map of neighboring Bosnia-Herzegovina,encouraged Kosovo Albanian militancy and increasedpopular support for the KLA. Dayton’s impact alsochanged the role that diaspora remittances played inthe conflict. As long as remittances were controlled byRugova’s Kosovo Republic, they appear to have playeda conflict-averting role in underwriting badly neededsocial welfare services, thereby enhancing the attrac-tion of Rugova’s non-violent approach to independ-ence. Once captured by the KLA, however, remittanceflows helped finance armed struggle. The second eventwas state collapse in neighboring Albania in 1997,which provided the KLA with ready access to largestores of weapons. This not only strengthened theKLA’s military power but also allowed it to control thewidespread shadow economy and cross-bordersmuggling networks, which had sustained Kosovosociety in the wake of Belgrade’s economic withdrawal.The resulting criminalization of the informal economyalso posed a problematic legacy for post-conflictKosovo, as the internationally managed transitionaladministration, installed after the NATO interventionin 1999, was slow to address widespread economiccriminality and the illicit networks that continued to

provide Albanian militants with money and arms.Benefiting from the lack of a functioning judicial andlaw enforcement system, these networks became firmlyentrenched in Kosovo’s post-conflict politics andsociety, posing serious challenges to internationalpeacebuilding efforts. Despite their adoption ofcriminal methods, however, the former KLA fightersdid not abandon their ethno-nationalist campaign, astheir involvement in the subsequent unrest inneighboring Macedonia and southern Serbia indicates.

Lessons from Kosovo:

• Regional political and economic dynamics canplay a major role in the onset and transformationof violent conflict. In Kosovo, the conflicts inneighboring states and the spill-over effects theygenerated significantly altered the politicaleconomy of the crisis from one of peaceful resist-ance to violent conflict.

• Ethnic and other forms of communal discrimina-tion, exclusion, and insecurity can provide apotent basis for armed rebellion even in theabsence of economic incentives and opportunities.In the case of the Kosovo conflict, for example,Albanian nationalist protest against Belgrade’soppression was sufficiently compelling to attractvolunteers from the relative comfort of émigrécommunities in Western Europe and NorthAmerica to the ranks of the KLA.

• Diaspora remittances appear to have an ambivalentimpact on conflict. By mitigating economichardships for excluded groups otherwise suscep-tible to insurgent recruitment or support, they canbe conflict-averting. However, when captured byarmed groups to procure arms and recruitpersonnel, remittances can both promote andprolong armed conflict.

• The prior existence of a widespread informaleconomy significantly facilitates rebellion andeconomic criminality. In Kosovo’s war economy,regional trading and smuggling networksestablished before the outbreak of the conflict wereeasily captured and transformed by the KLA to



19 Chapter 8 – Rohan Gunaratna, “Sri Lanka: Feeding the Tamil Tigers,” pp. 197-223.

generate income and procure weapons necessary tolaunch and sustain its fight.

• In the absence of effective law enforcement andjudicial systems in post-conflict settings, criminal-ized networks can become entrenched in the socio-political system, strengthen peace-spoilers, andthus pose severe impediments to sustainablepeacebuilding and post-conflict stability.

Sri Lanka19

The separatist conflict in Sri Lanka between theLiberation Tigers of Tamil Eelam (LTTE) and thegovernment in Colombo is rooted in historical inter-ethnic imbalances between the island's majoritySinhalese and minority Tamil population. The post-independence Sinhalese government’s attempt torectify the disproportionate favoring of the minorityTamils by the former colonialists through increasingly‘Sinhala only’ cultural policies fueled the Tamils’initially non-violent political struggle for anindependent, monoethnic Tamil state. In the 1970s, thisstruggle gave way to an increasingly violentsecessionist campaign led by the LTTE. Lacking accessto lucrative natural resources, the LTTE turned to Tamildiaspora organizations and immigrant communities inthe West as a critical source of political and economicsupport for its militant, ethno-separatist agenda. Overthe years, the LTTE established a sophisticated andintegrated international support network built ondiaspora organizations, legal and illegal businessventures, and voluntary and coerced contributionsfrom Tamil émigrés, which complemented the system-atic taxation and extortion of civilians and businessesin Tamil-held areas of Sri Lanka. As Rohan Gunaratnadetails, with this increased integration into nationaland international markets, the border between licit andillicit resources generated by the LTTE organizationand its supporters has become blurred. Moneygenerated through coercion or illegal trade is increas-ingly laundered through investments in a broad rangeof legitimate enterprises.

The support that Tamil communities in the West lent tothe LTTE's campaign depended largely upon the

conditions in Sri Lanka under which each wave ofemigration was triggered. While earlier, economicallymotivated waves of emigrants manifested littlesolidarity or active support for the LTTE's violent brandof nationalism, the most militant supporters of Tamilseparatism have come from more recent waves ofemigrants and refugees—those who personally experi-enced persecution and conflict. However, through thesystematic permeation and cooptation of Ta m i ldiaspora organizations, the LTTE gained influence inmany Tamil communities abroad, generating substan-tial revenues to purchase sophisticated weaponry andmateriel for its violent campaign at home. The LTTE’sability to expand its support network was also facili-tated by host government support for immigrantorganizations and by their policies of benign neglect ofradical Tamil groups, provided that these groups didnot adversely affect domestic security or foreign policyinterests.

With the conflict in Sri Lanka having already reacheda “hurting stalemate,” two factors appear to haveinfluenced both sides of the conflict in their decision toparticipate in peace negotiations in 2001. First, in thewake of the Asian economic crisis of the late 1990’s,the Sri Lankan economy outside the LTTE-held areasshrunk for the first time since the war began. This ledthe influential Sri Lankan business sector to exertpressure on the government to find a diplomaticsolution, as business leaders feared further losses as aresult of the conflict. Second, in 2000 the UK joinedwith the US in designating the LTTE as a terroristgroup. Within the wider context of the post-9/11 US-led “war on terror,” two other countries with signifi-cant Tamil diasporas—Canada and Australia—followedsuit. Faced with a possible curtailment of theirfinancial resource flows and the prospect of greaterinternational sympathy and backing for Colombo, theLTTE leadership may have calculated that, from theLTTE’s present position of strength, it stood to obtaingreater political gains at the bargaining table.

Lessons from Sri Lanka:

• The ability of the LTTE to sustain its fight againstthe well-equipped and highly disciplined Sri



20 Chapter 9 – Jake Sherman, “Burma: Lessons from the Cease-Fires,” pp. 225-255.

Lankan military depended primarily on its system-atic use of coercion, propaganda, and extortion athome and, especially, abroad to capture significantamounts of remittances from the Tamil diaspora.

• The disposition of diaspora communities towardshomeland conflicts is highly variable and thusneeds to be adequately understood by policy-makers seeking to regulate diaspora remittances.The case of the Tamil diaspora suggests that thedirection and intensity of homeland attachmentsare shaped not only by the relative size of thediaspora and members’ geographic concentrationbut also by the circumstances under which individ-uals emigrated, their socio-economic status, andthe prevailing conditions in which they findthemselves in their host countries.

• Importantly, the ability of politicized diasporagroups to extend moral and material support tohomeland struggles is also shaped by the policiesof host states regarding citizenship and minorityrights. The LTTE proved adept at manipulating hostcountry political and economic support forimmigrant cultural and other self-help organiza-tions.

• Host government efforts to curtail financial flowsthat support rebels face severe legal and politicalproblems, as it is difficult to discern which fundsgenuinely support humanitarian goals at home andwhich support militant campaigns, particularly if—as was the case with the LTTE—migrant communi-ties and their organizations are systematicallypenetrated by rebel sympathizers.

Burma/Myanmar20

Since its independence in 1948, Burma has experi-enced armed rebellion by no fewer than thirty armedethnic-minority groups. Faced with systematic politicaland socio-economic exclusion, growing militaryrepression, and human rights abuses by successiveBurman majority governments and the military, thevarious groups’ armed struggles were aimed at self-

determination and ethnic rights in the form of politicalpower-sharing or local autonomy arrangements.Benefiting from the central government’s lack ofauthority and administrative reach in the country’speripheral hill tract regions, insurgent groups progres-sively controlled the local economies and systemati-cally engaged in regional black-market trade in opium,the exploitation of natural resources and othervaluable commodities, and the taxation of informalcross-border trade to finance their respective militarypursuits. While combatant access to economicresources has thus played a dominant role insustaining the insurgencies, according to JakeSherman, it has in some cases also allowed for conflictreduction in the form of cease-fire agreements betweenthe government and some twenty insurgent groupssince 1989.

Following its takeover in 1988, the military regimesupplemented its counter-insurgency strategy withpolitical and economic incentives aimed at co-optinginsurgent groups’ leaderships to accept military truces.By granting insurgent leaders lucrative business deals,such as timber concessions, and by tolerating theirdrug trade, often in collusion with the military, thesecease-fire agreements proved a useful means for thegovernment to consolidate its power in previouslycontested border regions. Not only have overt militarychallenges to Rangoon’s authority from ethnicinsurgents eased considerably; the government’s‘divide and rule’ strategy appears to have paid off byprovoking the defection of several rebel factions to thegovernment, sparking inter-group rivalries, andundermining rebel groups’ internal coherence. Whilethe majority of Burma’s armed insurgency groups havecontinued to subordinate economic activity to the goalof securing greater political and cultural autonomy, anumber of groups, particularly those engaged in theillegal drug trade, have become more of an armedbusiness venture than a political movement. Suchorganizational transformation is also visible in parts ofthe armed forces, which, authorized by the governmentto conduct all types of licit and illicit businessventures, have become self-financing entities. Despiteshort-term security for those rebel groups accepting



21 Conclusion – Karen Ballentine, “Beyond Greed and Grievance: Reconsidering the Economic Dynamics of Armed Conflict”, pp. 259-283.

the cease-fires, long-term benefits in the form ofpromised political dialogue and economic developmenthave not been forthcoming. Rather, the absence of acomprehensive and durable settlement in the form ofpower-sharing arrangements or legally guaranteedconcessions of autonomy has yielded “negative peace”at best, characterized by the absence of hostilities. Aslong as the underlying political and ethnic grievancesare not addressed, Burma will remain vulnerable torenewed cycles of armed conflict.

Lessons from Burma:

• Informal cross-border trade in the peripheral hillareas of Burma, which emerged largely as a resultof both the central government’s weak authorityand economic neglect, proved highly susceptible tocapture by various insurgent groups by affordingthem a ready avenue for transforming lootednatural resources and contraband into militarystrength.

• Combatants’ prospects of financial benefits fromcontinued access to natural resources and otherbusiness opportunities may in special circum-stances be conducive to conflict reduction. Thecease-fire arrangements in Burma have been drivenand maintained both by the economic self-interestof rebel leaders eager to guard and possibly expandtheir accumulated assets and by the credible threatof a robust counter-insurgency policy.

• Such arrangements, however, involve risks andtrade-offs which may run counter to sustainablepeace: they de facto condone illicit economicactivity; they may create incentives for groups leftout of the negotiating process to continue orresume fighting in the hope of securing similarlylucrative arrangements; they may spark violentintra- or inter-group contests over spoils; and theymay consolidate the position of armed groupswhose power may be antithetical to the state.

• The economic deals underlying the cease-fires inBurma tend to disproportionately benefit

autocratic rebel leaders, while excluding theirrank-and-file and local supporters. Not only doesthis seem to undermine the groups’ social capitaland internal coherence by creating intra-grouptensions, it also highlights the need for policy-makers to avoid treating rebel groups as unitaryactors and to integrate internal group dynamicsinto policy analysis and responses.

IV. Conclusion: Lessons andImplications for Policy21

The findings of these studies indicate that economicfactors can shape the cause, duration, and character ofarmed intra-state conflict in consequential ways,although not necessarily in the ways that some theorieswould predict.

Causes of Conflict

Most important, combatant motives of self-enrichment(“loot-seeking”) and economic opportunities forinsurgent mobilization created by access to natural andfinancial resources were not the sole or even primarycause of the separatist and non-separatist conflictsanalyzed. Even where rebel capture of lucrativeresources or diaspora remittances obtained in thecourse of these conflicts, these were less a motive forrebellion in themselves than a means to financemilitary campaigns initiated for other, non-pecuniaryreasons. Particularly in separatist conflicts, and to alesser extent in non-separatist insurgencies, theoutbreak of conflict was triggered by the interaction ofeconomic motives and opportunities with long-standing grievances over poor economic governance(particularly the inequitable distribution of resourcewealth), exclusionary and repressive political systems,inter-ethnic disputes, and security dilemmas furtherexacerbated by unaccountable, weak states. Thisfinding cautions against reducing the causes of armedconflict to economic calculations alone. Like w i s e ,while access to lucrative economic resources andtrading routes does contribute to the feasibility ofarmed insurgency, the opportunity structure for civil


12 Conclusion: Lessons and Implications for Policy

22 Paul Collier: “Doing Well Out of War” in Mats Berdal and David Malone (eds.): Greed and Grievance, op. cit., p. 92.

strife is also shaped by numerous other variables,including the presence of mobilizeable social andkinship bonds and the relative military, economic, andpolitical weakness of the state being challenged.

Duration of Conflicts

Just as clearly, however, these studies also show thatcombatant access to lucrative economic resources hashad important impacts on the duration of civil conflict.As Michael Ross observes, there is no strong relation-ship between easy access to lucrative resources andseparatist conflicts—even though these types ofconflicts, on the whole, last longer than insurgencies.In the case of non-separatist insurgencies, however,access to lootable resources does appear to contributeto protracted warfare for a number of reasons. Lootableresources may provide the means for continuedwarfare or incentives for elite enrichment. Further,where lootable resources can be accessed directly byrank and file soldiers rather than through the chain ofcommand, they may prolong conflict by creatingdiscipline problems that impede the capacity of leadersto impose settlements on followers. Combatantpredation of these resources may provoke second-ordergrievances among civilians that multiply the points ofconflict, thereby adding to the duration of hostilities.Finally, rebel control of lootable resources may serve tostrengthen peace spoilers and their capacity tosabotage hard-won peace agreements, such as inAngola and Sierra Leone. It may also provide a majordisincentive to good faith negotiations for a compre-hensive peace settlement, as occurred in Colombia.

Character of Conflicts

A key question that has dominated the greed versusgrievance debate is whether conflicts that have begunwith political aims have, as a result of resource captureby combatants, mutated into conflicts in whichsecuring short-term economic benefits is paramount.Here, the findings are less conclusive. In large part, thisis due to the inherent methodological difficulties thatoutside observers encounter in ascertaining the precisebalance of combatant groups’ economic and politicalpriorities at any given time or their changing balance

over time. Elsewhere, Paul Collier has noted themethodological problems associated with basing thesejudgments on combatants’ “self-described purposes”;rebel discourses, he notes, cannot be trusted becausecombatants will always seek to justify their actionsusing “a narrative of grievance.”2 2 H o w e v e r, thealternative approach of imputing motive from behaviorhas its own shortcomings. The mere fact that combat-ants engage in predatory economic activities is seldoma reliable guide to their central dispositions. Suchactivities may indeed be evidence of pure “loot-seeking,” but they may also be undertaken as a meansfor financing wars being fought for other reasons or toredistribute wealth among those who combatants claimto represent. Efforts to distinguish economic frompolitical behavior are further complicated by the factthat, where the state has already been extensivelypenetrated and privatized by particular patron-clientrelations, state capture can be both a political and aneconomic goal. In these cases, political and economicagendas of combatants appear to be mutuallyreinforcing rather than mutually exclusive.

Regardless of whether economic interests are primaryor secondary, when non-separatist insurgents haveaccess to lootable resources, the character of conflict isaffected in consequential ways. Not only do theseconflicts last longer, they are also messier and moredifficult to resolve through diplomatic means.Combatant groups that depend on lootable resources tofinance their campaigns appear to be more prone tointernal fragmentation, while the wars they fight areless centralized and less territorially contained. In thesecases, combatants may display their own variant ofrent-seeking long associated with resource-richgovernments: the greater their windfalls from availablelucrative resources and clandestine trade networks, theweaker are their incentives to generate and maintainsocial capital among putative supporters and the fewerare their restraints against indiscriminate predation ofcivilians. Easy access to income-generating opportuni-ties also may weaken their acquired social capital, bothby enabling quicker rates of recruitment that maystrain the groups’ ability to socialize new recruits totheir ideological cause and by attracting recruits forwhom financial gain is more important than ideolog-


Conclusion: Lessons and Implications for Policy 13

23 See also Charles Cater, “The Political Economy of War and Peace.” IPA Policy Report, 2002. Available at www.ipacademy.org.24 George Downs and Stephen J. Stedman, “Evaluation Issues in Peace Implementation,” in Stephen J. Stedman, Donald Rothchild,and Elizabeth M. Cousens, eds., Ending Civil Wars: The Implementation of Peace Agreements (Boulder: Lynne Rienner Publishers,2003) 43-69.25 See also Jake Sherman, “Policies and Practices for Regulating Resource Flows to Armed Conflict,” IPA Conference Report, 2002;and Philippe Le Billon, Jake Sherman and Marcia Hartwell, “Controlling Resource Flows to Civil Wars: A Review and Analysis ofCurrent Policies and Legal Instruments,” IPA Background Paper. Both are available at www.ipacademy.org.26 See Jonathan Winer, “Illicit Finance and Global Conflict,” Fafo Report 380, Oslo, 2002.

ical or political conviction. In either case, the result isthe emergence of principal-agent problems that erodeinternal discipline and coherence among combatantgroups.

Curtailing Resource Flows to Combatants

Some analysts have argued that conflicts that come tobe driven by contests over economic resources shouldbe relatively more amenable to resolution than otherethnic, religious, or ideological conflicts. This isbecause economic goods are, in principle, divisible,while identity issues are not. Rather than by long andarduous efforts to negotiate a political compromise, oreven by direct intervention, peace can thus be achievedthrough technical measures that in the short tomedium term will reduce both the accessibility andprofitability of lucrative economic resources tocombatant groups. Such an understanding also informscurrent international efforts to curtail resource flows tocombatants through “supply-side” regulatorymechanisms such as targeted sanctions, commoditycertification regimes, and interdiction strategies aimedat transnational organized crime, money laundering,and drug trafficking.

As these studies show, untrammeled resource flows toand from combatant groups can prolong conflict andcomplicate efforts at resolution. All too often, theamount of wealth available to combatant groupsdwarfs both the amount of humanitarian aid and theresources of notoriously under-funded UNp e a c e keeping missions, thereby diminishing theirpotential to induce peace and deter violence.2 3

M o r e o v e r, combatant access to lootable resourcescomplicates the brokering of peace-processes andimplementation of peace agreements by strengtheningpeace-spoilers both inside and outside the country withvested interest in conflict perpetuation.24 For these

reasons, improved international efforts to curtail orcontrol the flow of conflict goods and finances areboth warranted and necessary.25

• International regulatory efforts to curtail the tradein conflict goods by combatants can be a usefultool of conflict management and one that needsstrengthening. These efforts require improvedinternational cooperation on the enforcement oftargeted commodity sanctions (such as embargoesagainst the export of rough diamonds and timber);more robust systems of monitoring and tracking ofhigh-risk conflict goods, of which the KimberleyProcess for diamonds is an important beginning;and measures to ensure increased corporatetransparency in financial dealings with corruptand repressive governments, such as the ExtractiveIndustries Transparency Initiative and the PublishWhat You Pay Campaign.

• The very lootability of many conflict goods makescontrolling their physical movement highlyresistant to effective regulation, particularly wheretechnical and regulatory capacities are weak ornon-existent. Therefore, existing regulatory andinterdiction efforts aimed at affecting the financialnetworks underpinning war economies need to bestrengthened and adapted as complementarymeasures. This will require more sustained engage-ment and coordination between the UN, the OECD,international financial institutions and lawenforcement agencies in the areas of moneylaundering, terrorist finance, and anti-corruption.26

Resource Control Regimes: Limits and PotentialUnintended Humanitarian Impacts

Based on the findings of these studies, however, eventhe most robust policies of curtailing resource flows to



insurgent groups are unlikely to have a decisiveimpact. Likewise, their impact on outcomes may not bewholly positive. In fact, the self-financing nature ofboth separatist and non-separatist conflicts may forvarious reasons create more complex and thusintractable conflicts, which not only limit the effective-ness of such global regulatory regimes as mechanismsfor conflict resolution and peacebuilding, but alsorequire special care to anticipate and mitigate potentialunintended, negative impacts that regulation canentail.

First, where conflicts are motivated by a mix ofpolitical, security, ethnic, and economic factors,curtailing resource flows to combatants may weakentheir capacity but not their resolve to continuefighting. For example, the impact of the UN diamondand oil embargoes against UNITA and the RUF on thesubsequent end of conflict in both of these countries isfar from definitive. While the sanctions did lead tosignificant reductions in financial flows to theseinsurgents, they did not directly induce a more rapidpeaceful settlement, as some had envisioned. Theirimpact on outcomes has been indirect, at best, byraising the marginal costs of prosecuting war by thetargeted groups, weakening their fighting capacity, andincreasing intra-group fractionalization by intensi-fying rivalries over spoils. Most importantly, in bothcases, economic sanctions were accompanied bymilitary support to the beleaguered governments andhelped to break military stalemates by shifting themilitary balance in favor of government forces.Ultimately, war only ended with the death or capture ofrebel leaders Jonah Savimbi and Foday Sankoh. Thisshows that sanctions should not be viewed as apeaceful, technocratic alternative to military interven-tion and support, but rather as a complementaryinstrument.

Second, conflicts in which lootable resources figureprominently appear to be associated with increasedpredation of civilians by armed groups in the form offorced labor, extortion, pillaging, and looting, ascontrol over lootable natural resources relievescombatants of the need to generate and maintain socialcapital among putative supporters. Where lootableresources do not exist, extortion of local and interna-

tional enterprises and the capture of relief aid anddiaspora remittances may instead provide thenecessary resources for combatants, as was the case inNepal, Sri Lanka, and Kosovo. Policies aimed atdenying rebels access to these resources may, however,shift their behavior and strategies towards increasedpredation of civilians to compensate for lost revenuesnecessary to sustain their war effort—with significanthumanitarian consequences.

Third, lootable resources such as coca and poppy inColombia, coltan in the DRC, and alluvial diamonds inSierra Leone and Angola, as well as diasporaremittances in Sri Lanka, Kosovo, and Nepal have notonly generated substantive economic benefits for rebelgroups who use them for their armed struggle;frequently, they have also become critical sources ofsurvival for the civilian population. While often underthe predatory control of rebel forces, civilian incomesfrom these activities can sustain livelihoods and hencecompensate for the state’s failure or incapacity toprovide basic services. Efforts to curtail such resourceflows may, thus, not only face strong local oppositionand increase civilian support for rebel movements, butalso exacerbate civilian hardships, thereby multiplyingthe points of conflict.

Fourth, in almost all cases presented here the opportu-nity to generate income through the exploitation of ortrade in lootable resources and/or combatant remuner-ation in the form of licenses to loot and pillage has ledto increased fragmentation and fractionalization ofboth state and rebel combatant groups. Regulatorypolicies might further increase fractionalization bycausing violent intra-group competition over the“shrinking pie,” making it difficult for rebel leaders toimpose a potential peace settlement on their followersand multiplying the number of potential peace-spoilers.

• Targeted commodity sanctions and armsembargoes against rebel groups may help breakmilitary stalemates by shifting the military balancein favor of government forces. In the short-term,however, this may lead to increased violence. Inthe case of Angola, while sanctions weakenedUNITA’s military capacity, they also transformed



UNITA from a potent conventional army into aguerrilla force with increasingly predatorybehavior towards the civilian population. Inconsidering sanctions as a conflict resolution tool,then, policy-makers should understand that, farfrom being neutral and non-violent, sanctions canbe a highly coercive and partisan policy instru-ment.

• When designing and implementing regulatorypolicy approaches aimed at curtailing resourceflows to zones of conflict, policy-makers need todistinguish between those actors and groups whoengage in armed conflict for profit and power(conflict exploiters), and civilians who participatein war economies to sustain their livelihoods(conflict dependents) and who may suffer as muchfrom indiscriminate rebel predation as from ill-conceived efforts to end it. It is also important toadequately identify those who are fighting wars forother reasons than pure self-enrichment and whothus might be more impervious to economicsanctions and inducements.

• The ambivalent role that diaspora remittances playin conflict highlights the need to create regulatoryand monitoring mechanisms to deny such funds tocombatant groups, while still allowing them tosupport legitimate, humanitarian ends. Rather thanengaging in blanket freezes, this may requiregovernments to be more proactive in creatingmechanisms for identifying, supporting, andengaging pacific and transparent diaspora organi-zations, while also showing greater determinationto sanction those proven to fund insurgents orterrorist groups.

Economic Inducements and Peacemaking

Economic agendas of belligerents need not be viewedas exclusively conflict promoting. In some instances,the promise of continued access to lucrative resourcesmight provide putative adversaries with a compellingincentive for collusion rather than forceful competi-tion. This can lead to temporary, localized, andinformal cease-fire arrangements between rank-and-file combatants, such as occurred in the diamond fields

of Sierra Leone and Angola. Extending this logic, somehave argued that commitment to more robust peaceaccords may be bought, provided that the economiccompensations to warring parties are sufficientlyattractive. This strategy failed, however, in the case ofrebel leaders Foday Sankoh and Jonah Savimbi.

The case of Burma, however, provides an instructivecontrast. Here, the informal business ventures grantedby the military regime to ethnic insurgents aseconomic compensation for the cessation of hostilitiesresulted in a set of informal but remarkably robustceasefires, despite the continued absence of a formal orcomprehensive peace accord. Importantly, however,these inducements operated alongside the govern-ment’s continued and credible threat of resumedcounter-insurgency, a factor that was missing fromsimilar efforts in Sierra Leone and Angola. Yet, evenwhere successful in the short term, securing ceasefiresthrough a combination of economic inducement andmilitary threat does not guarantee a sustainable or justpeace, particularly where, as in Burma, the entrepre-neurs of violence and corruption are rewarded at theexpense of civilian well-being and where the rootcauses of conflict remain unaddressed.

• Policy-makers need to identify and adequatelyintegrate economic incentives of combatantswithin a wider set of political and strategicinducements for conflict resolution andpeacebuilding. Whether such “economic peacedividends” can co-opt potential peace spoilers intosustainable peace depends on other factors, such asa credible threat of punishment in the case ofresumed hostilities, the reintegration of formercombatants, and – in specific circumstances - thea posteriori 'legitimization' of illegal activities inwar times.

Criminalization of Conflict

With fewer alternatives to self-financing, contempo-rary insurgency groups have increasingly engaged inillegal economic activities either directly or throughlinks with international criminal networks engaged inthe smuggling of valuable resources, trafficking ofarms and drugs, and money laundering. The capture of



27 See Phil Williams and John Picarelli, Organized Crime, Conflict and Terrorism: Combating the Relationships. Paper prepared forthe IPA Conference on Policies and Practices for Controlling Resource Flows in Armed Conflict, Bellagio, Italy, 21-23 May 2002.

pre-existing shadow economies and informal cross-border trade networks, such as occurred in Burma,Sierra Leone, Kosovo and the DRC, and their integra-tion into the global criminal economy allowsinsurgents to transform illegally exploited naturalresources, drugs or contraband, as well as diasporaremittances into military capacity.

For some observers, contemporary insurgencies havethereby transformed into mere criminal organizationsand should be treated as such. Policy-makers, however,should treat this conclusion with caution. What distin-guishes combatant groups from criminal organizationsis not the economic activities pursued nor even themethods employed. Rather, it is the purposes for whichthese activities are undertaken.27 Whereas criminalorganizations employ violence in the sole pursuit ofprofit, combatant groups in the conflicts analyzed have– albeit to varying degrees - engaged in illicit tradeand economic predation to pursue military andpolitical goals.

• Policy-makers should seek to criminalize activitiesrather than actors. Casting rebellion as a criminalrather than a political phenomenon may mischar-acterize legitimate grievances and forecloseopportunities for negotiated resolution to theconflict by calling for criminal prosecution ormilitary defeat rather than diplomatic mediationand inclusionary peace processes. It also lends defacto legitimacy to state actors, regardless of theirbehavior and role in the conflict.

• Interdiction policies can in fact increasecriminality by raising the value of the commoditytargeted by international interdiction efforts orsanction regimes, and hence the profitability ofsanctions-busting and trade in conflict commodi-ties for less-scrupulous war profiteers specializedin the circumvention of rules and regulations.Improved interdiction requires more comprehen-sive yet flexible policy responses that take intoaccount both the demand and supply-side ofcriminal activities. In the case of illicit drugcultivation, provision of alternative livelihoods

rather than criminalization alone may enhancethe prospects of peace by releasing civilians oftheir dependence on combatant-controlled ware c o n o m i e s .

“Bringing the State Back In”

Importantly, the cases in this volume demonstrate thatthe high risk of conflict attributed to natural resourceabundance in a given country is not a direct relation-ship, but rather one that is mediated by criticalgovernance failures by the state. Systemic corruptionand economic mismanagement, patrimonial rule, andpolitical and socio-economic exclusion of ethnic orother minority groups may create conditions conduciveto the onset of both separatist and non-separatistconflicts. They may also fuel political and economicgrievances by undermining the state's legitimacy andweakening its capacity to perform core functions, suchas the provision of security, the management of publicresources, and the equitable and efficient provision ofbasic goods and services.

Poor governance, particularly the state’s failure tomanage natural resource exploitation effectively andequitably, also affects the relative strength of the statebeing challenged and thus strongly influences theopportunity for and feasibility of rebellion. The weakerthe state’s legitimacy and coercive capacity, the lowerthe opportunity costs borne by potential challengers.The more widespread the informal economy, the lessresources accrue to the state and the easier it is forrebels to capture resources and networks that givethem access to the finances and weapons necessary tochallenge the state. In Kosovo, the DRC, and SierraLeone, for example, the outbreak of rebellion occurredat a time when both the legitimacy and militarycapacity of the governments were severely diminished,and access to resources and weapons in cross-borderinformal war economies made armed rebellionmilitarily feasible.

• Research and policy need to go beyond a narrow“rebel-centric” approach to more adequatelyanalyze and address the role of the state both as an



institution and as a central actor in the politicaleconomy of armed conflict. Outside interventionsshould focus on structural conflict prevention byaddressing the underlying problems of weakeconomic governance and state failure in conflict-prone regions that make armed insurgency politi-cally and economically feasible. Importantly, thisincludes designing and supporting tools andstrategies for more effective, equitable, andaccountable systems of natural resource manage-ment, complemented with longer-term strategies ofeconomic diversification and poverty reduction.

• Post-conflict state-building efforts should befocused on redressing popular grievances byexpanding political and economic opportunities tomarginalized groups through more inclusive andaccountable politics. Yet, efforts should also bedirected at strengthening the technical and regula-tory capacities of the state to provide the necessarys e c u r i t y, reestablishing control over naturalresources to generate income from taxation,licensing, and export, and effectively addressingcriminalized shadow economies as the sources offinance and military materiel for potential peace-spoilers.

The Regional Dimension of Armed Conflict

The terms “civil war” or “intra-state conflict” areinadequate descriptors for most contemporaryconflicts, as key actors and dynamics driving suchconflicts are generally not confined to nationalboundaries. In particular, the war economiessustaining these conflicts tend to have strong regionaland even global dimensions, including the predatorymilitary involvement of neighboring states, interna-tional criminal networks trading in licit and illicitcommodities and arms, private security firms andmercenaries, diaspora communities, and internation-ally operating private companies. These linkages notonly significantly influence the character and durationof hostilities; they also complicate the prospects for

conflict resolution and post-conflict stability byincreasing the number of potential war profiteers andp e a c e - s p o i l e r s .

• Contemporary armed conflicts need to be analyzedand addressed within their regional politicale c o n o m y, incorporating a wider range ofstakeholders than typically considered relevant tounderstanding and resolving conflict. Regionalapproaches to conflict management, including UNSecurity Council sanctions enforcement, need to bedeveloped to complement and thus strengthennational and global strategies to control regionalflows of arms and resources.

• Regional organizations need to receive greatertechnical and financial support to improve cooper-ation on customs controls and border policingnecessary to curtail cross-border trafficking ofarms, drugs and commodities. Such regulatoryefforts need to be complemented with regionalcooperation on key economic and trade policies(tax and pricing differentials, customs duties, etc.)as a means to make informal cross-border tradeless profitable, to generate income for the govern-ments, as well as to avoid diverting shadow tradeto neighboring countries.

Ta ken together, these studies suggest that globalregulatory and interdiction regimes for managingresource flows from and to conflict zones areimportant mechanisms for improved conflict preven-tion and resolution. However, they require substantialstrengthening and adaptation to be more effective, andmore responsive to potential unintended consequences.The analysis of these conflicts shows that “supply-side”measures of regulation are necessary yet insufficientsolutions to the problem. As long as the structural,“demand-side” factors of underdevelopment and stateweakness remain unaddressed, international effortswill continue to treat the symptoms rather than thecomplex range of causes of contemporary armedconflicts.




The Political Economy of Armed Conflict: Beyond Greed and Grievance

Karen Ballentine and Jake Sherman (eds.)

Lynne Rienner Publishers, 2003

A Project of the International Peace Academy

Contributors

Karen Ballentine is Senior Associate for the International Peace Academy’s Program on Economic Agendas inCivil Wars (EACW).

John Bray is Director of Analysis at the Control Risks Group, an international business risk consultancy.

Charles Cater is a doctoral candidate in International Relations at St. Antony’s College, University of Oxford.

Alexandra Guáqueta is Analyst in the Department of Government Affairs for Occidental Petroleum in Colombia.

Rohan Gunaratna is Associate Professor at the Institute of Defence and Strategic Studies, NanyangTechnological University in Singapore.

Leiv Lunde is Senior Policy Analyst at the ECON Centre for Economic Analysis in Oslo, Norway.

S. Mansoob Murshed is Associate Professor of International Economics and Conflict Studies at the Institute ofSocial Studies (ISS) in The Hague, Netherlands.

Anthony Regan is a constitutional lawyer who advised the Bougainvillan parties in the negotiations with thePapua New Guinea government.

Michael L. Ross is Assistant Professor of Political Science at the University of California, Los Angeles.

Jake Sherman, is Political Affairs Officer in the Office of the Special Representative of the UN Secretary-General, UN Assistance Mission to Afghanistan (UNAMA).

Alexandros Yannis is a Research Fellow in the Programme for Strategic and International Security Studies inGeneva and in the Hellenic Foundation for European and Foreign Policy in Athens.

Contributors 19

International Peace Academy777 United Nations PlazaNew York, NY 10017-3521Tel: (212) 687-4300Fax: (212) 983-8246www.ipacademy.org

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