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Economics of Conflict and Peace. Topic 4. The Political Economy of War and Peace: Selected Case Studies. Colombia. The Colombian conflict began in the early 1960s; Politico-ideological contest over state power and socio-economic governance between guerilla groups and central government;

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Economics of conflict and peace

Economics of Conflict and Peace

Topic 4. The Political Economy of War and Peace: Selected Case Studies


  • The Colombian conflict began in the early 1960s;

  • Politico-ideological contest over state power and socio-economic governance between guerilla groups and central government;

  • Access to both illegal and legal natural resources (coca, poppy and oil) prolonged and intensified the conflict;

  • Both the guerillas and the emerging right-wing paramilitary groups exploited the revenue-generating opportunities from the taxation, production, and trafficking of narcotics;

  • The guerillas groups benefited indirectly from the oil industry;

  • Classification of guerillas and paramilitary groups as terrorist organizations has changed the political economy by favoring a military counter-insurgency strategy over diplomatic efforts.


  • Socio-economic underdevelopment, massive unemployment, widening inter-ethnic inequalities brought by the policies of systematic discrimination and exclusion, led to the establishment of the shadow “Kosovo Republic”, a parallel government;

  • Two key events shifted the political economy of the Kosovo conflict towards the military separatism and mobilization against the Serbian state:

    1) The signing of the Dayton Accord in 1995;

    2) State collapse in Albania in 1997.

  • Regional political and economic dynamics can play a major role in the onset and transformation of violent conflict. In Kosovo, the conflicts in neighboring states and the spill-over effects generated significantly altered the political economy of the crisis from one of peaceful resistance to violent conflict. Ethnic and other forms of communal discrimination, exclusion, and insecurity can provide a potent basis for armed rebellion even in the absence of economic incentives and opportunities.

Kosovo lessons from conflict
Kosovo: lessons from conflict

  • In the case of the Kosovo conflict, for example, Albanian nationalist protest against Belgrade’s oppression was sufficiently compelling to attract volunteers from the relative comfort of émigré communities in Western Europe and North America to the ranks of the KLA

  • The prior existence of a widespread informal economy significantly facilitates rebellion and economic criminality. In Kosovo’s war economy, regional trading and smuggling networks established before the outbreak of the conflict were easily captured and transformed by the KLA to generate income and procure weapons necessary to launch and sustain its fight.

  • In the absence of effective law enforcement and judicial systems in post-conflict settings, criminalized networks can become entrenched in the sociopolitical system, strengthen peace-spoilers, and thus pose severe impediments to sustainable peace-building and post-conflict stability


  • The 20-year Afghan conflict created an open war economy;

  • the world’s largest opium producer and a centre for arms dealing;

  • criminalized economy funds both from the Taliban and their adversaries;

  • this transformed social relations and weakened states and legal economies throughout the region

    In your reader: Rubin R. Barlett. The Political Economy of War and Peace in Afghanistan


Criminal component of war in Bosnia: usage of smuggling networks and criminal actors to create and sustain the material base for warfare; access to supplies and involvement of quasi-private criminal actors as combatants;

Criminal actors are decisive in military conflict outbreak, longevity and outcome;

Criminality and private predation does not simply trump politics in wartime, but rather interacts with it in complex ways;

Many aspects of criminalized conflict are state sponsored and direct serve political interests;

For the Saraevo government the initial heave dependence on criminal combatants was more a survival strategy, providing a desperately needed substitute for a regular military force before a formal army with an operational command structure was fully in place.

In your reader: Andreas Peter. The Clandestine Political Economy of war and Peace in Bosnia. International Studies Quarterly, 2004

Conclusions and implication for policy
Conclusions and Implication for Policy

Economic factors can shape the cause, duration and character of armed intra-state conflict.

Causes of conflict:

  • Motives of self-enrichment (loot-seeking) and economic opportunities for mobilization created by access to natural and financial resources;

  • In separatist and non-separatist conflicts, the outbreak of conflict is triggered by the interaction of economic motives and opportunities with long-standing grievances over poor economic governance, exclusionary and repressive political systems, inter-ethnic disputes, and security dilemmas exacerbated by weak state.

Duration of conflict
Duration of conflict

Combatant access to lucrative economic resources has important impacts on the duration of civil conflict: access to resources contribute to protracted warfare:

  • Resources provide the means for continued warfare or incentives for elite enrichment;

  • Combatant predation of resources may provoke second-order grievances among civilians that multiply the points of conflict, adding to the duration of hostilities;

  • Rebel control of resources may serve to strengthen peace spoilers and their capacity to sabotage hard-won peace agreements (e.g. Angola or Sierra Leone)

Criminalization of conflict
Criminalization of conflict

  • Contemporary insurgency groups have increasingly engaged in illegal economic activities either directly or through links with international criminal networks engaged in the smuggling, trafficking of arms and drugs, and money laundering;

  • Shadow economies and informal cross-border trade networks (Burma, Sierra Leone, Kosovo and the DRC) their integration into the global criminal economy allow insurgents to transform illegally exploited natural resources, drugs, diaspora remittances into military capacity;

  • Whereas criminal organizations employ violence in the sole pursuit of profit, combatant groups engaged in illicit trade and economic predation to pursue military and political goals.

Resource control regimes limits and potential unintended humanitarian impact
Resource control regimes: limits and potential unintended humanitarian impact

The policies of curtailing resources flows to insurgent groups are unlikely to have a decisive impact.

  • When conflicts are motivated by a mix of political, security, ethnic and economic factors, curtailing resource flows to combatants may weaken capacity, but not resolve to continue fighting;

  • Sanctions did not directly induce a more rapid peaceful settlement. Their impact on outcomes has been indirect, at best, by raising the marginal costs of prosecuting war by the targeted groups, weakening their fighting capacity, and increasing intra-group fractionalisation (e.g. cases of the UN diamond and oil embargoes against UNITA and RUF);

  • Lootable resources (coca, poppy in Colombia, coltan in the DRC and diamonds in Sierra Leone and Angola, diaspora remittances in Sri Lanka and Kosovo) have not only generated substantive economic benefits for rebel groups, they have also become critical sources of survival for civilian population.