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Economics of Peace & Security

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Lecture for LNU - MPA Special Class
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Economics of Peace & Security

  1. 1. Economics of Peacemaking and Peacekeeping Jo B. Bitonio, DPA Discussant November 17, 2012 For PNP – MPA Class San Fernando City
  2. 2. It is little known, and therefore little appreciated, that economists have a long-standing history in making significant contributions to the analysis of security issues
  3. 3. The most famous of these contributions is Britain’s John Maynard Keynes’ The Economic consequences of the Peace (1920), his advise on how to treat Germany after its defeat in World War I. Likewise, the Frenchman Jean Monnet applied economic thinking to help him forge the European Coal and Steel Union, precursor to what has become a factious but nonetheless peaceful European Union. Cross-border investment, the locking-up of valuable assets in each other’s countries, makes war and mutual invasion rather more costly. 27 countries
  4. 4. The World's Top 5 military spenders in 2012
  5. 5. Stockholm International Peace Research Institute (SIPRI) is an independent International institute dedicated to research into conflicts, armaments arms control and disarmament. Established in 1966, SIPRI provides data, analysis and recommendations, based on open source, to policymakers, researchers, media and the interested public. SIPRI Military Expenditure Database 2012
  6. 6. The Defense-Growth Nexus Economists have long debated how military spending affects economic growth and whether causality runs from defense to growth or vice versa.  Military spending, as is the case with other government expenditure, may impede economic growth by crowding-out private investment.  May also result in distorted resource allocations, and the diversion of resources from productive activities to the accumulation of armaments and the maintenance of military forces.  Military spending could have a positive effect on growth by contributing to the civilian economy indirectly via enhanced accumulation of human capital and through spillovers of military R&D.  In principle, military spending can also affect economic growth positively through the expansion of aggregate demand (the Keynesian multiplier effect). The resulting increased demand leads to increased utilization of otherwise idle capital, higher employment and profits, and therefore higher investment. (Aamer S. Abu-Qarn:2008)
  7. 7. The Defense-Growth Nexus if any at all, of the decrease in military expenditure of the least developed countries (LDCs) may be channeled to productive investment. Therefore, reducing military spending per se may not necessarily enhance economic growth (Aamer S. Abu-Qarn:2008)
  8. 8. • For the major rivals in the Israeli-Arab conflict, only a few studies have addressed the relationship between defense and economic growth. • Often the analyses are conducted in the context of assessing the dividends of cutting military spending. The findings are inconclusive and vary depending on the countries, samples, and econometric methods.
  9. 9. Economic Growth and Defense • Causality may also run the other way around, from economic growth to defense. Joerding (1986), for instance, claimed that a growing country may want to strengthen itself against foreign or domestic threats by increasing its military spending. Also, a growing economy may choose to pour some of the resources generated by growth to enhance its military capabilities.
  10. 10. Major wars, 1,000+ deaths per year Minor wars and conflicts, fewer than 1000 deaths per year Wikipedia: List of ongoing military conflicts accessed Nov. 17, 2012
  11. 11. Does Development Assistance can reduce violence? • Evidence from Afghanistan CHOU, Tiffany Vol 7, No 2 - On Afghanistan, Rwanda, Punjab, July 2012
  12. 12. Ella Antonio (2012) Brain trust Inc. Financing Peace and Development: The Mindanao Budget
  13. 13. FORID:0 01654163 Executive Publica Databa Contac Refere Statist About Servic Prod Ne Ho Board tions nces ucts tme ses ws ics Us es Us
  14. 14. Does development assistance can reduce violence? • Current military doctrine emphasizes the importance of development spending in reducing insurgent violence. Using data from three distinct development programs, the Afghan National Solidarity Program, USAID’s Local Governance and Community Development Program, and the U.S. military’s Commander’s Emergency Response Program (CERP), combined with military records of insurgent-initiated events, this article explores whether development aid in Afghanistan is violence-reducing. I find that overall spending has no clear effect on rebel attacks. Moreover, the type of development program most effective at reducing violence in Iraq—small CERP projects—does not appear to do so in Afghanistan. Possible reasons include troop strength, conditionality of aid, effectiveness of aid in producing benign outcomes, and measurement issues. • Evidence from Afghanistan, CHOU, Tiffany Vol 7, No 2 - On Afghanistan, Rwanda, Punjab, July 2012
  15. 15. Current Conflict
  16. 16. Due to the strategic significance of the region, the Israeli-Arab conflict involved not only Israel and its neighbors but also other Arab countries as well as the superpowers that acted to maintain and strengthen their interests in the region by supporting one or more of the rivals. The United States and the former Soviet Union actively intervened in the region in the form of military and economic aid, in addition to providing top-of-the-line arms and training services. The region served as a battle ground in which American and Soviet arms and expertise competed against each other. Several studies have analyzed the role that foreign aid, in general, and of the in particular, have played in the conflict. Most studies have addressed the effects of American military and economic aid to Israel (totalling around $3 billion per annum).
  17. 17. Twitter online holy war News: Israel and Hamas wage Twitter war over Gaza conflict    The Associated Press BBC News - 19 hours ago Twitter War Erupts Between Israel and Hamas During Gaza Strikes  - 2 days ago As the Israeli Defense Forces waged a military  campaign on Hamas targets in Gaza today, a  different kind of war unfolded on Twitter  between ... ABC News (blog)
  18. 18. Peace dividends Bringing the conflict to a halt, and ceasing hostile operations and bloodshed, would by itself constitute a huge peace dividend. The region has suffered dearly from many wars and military activities and incurred considerable human losses. Furthermore, the conflict has entailed enormous economic costs for the countries in the region. These include, but not limited to, the opportunity cost of devoting scarce resources to defense, disincentives for foreign direct and portfolio investment inflows, the failure to fully exploit the potential of production and services such as tourism, the high risk premium that limits the ability to borrow from external sources, inappropriate factor specialization and restrictions on mobility, welfare losses in terms of inefficient regional trade and financial arrangements, and slow development of joint infrastructure projects (ElNaggar and El-Erian, 1993).
  19. 19. Costs of Reconstruction Along with the potentially hefty gains from peace are several costs, especially in the short-run. These include transitional bottlenecks caused by shifting resources from military to civilian production, higher transitory unemployment, increased social tensions that result from economic reforms, and the loss of technology spillovers from military to civilian industries.
  20. 20. Cost of Inaction is greater than the Cost of Action
  21. 21. Conflicts in the Philippines Moro National Liberation Front (MNLF) Moro Islamic Liberation front Abu Sayyaf New People’s Army (Communists Rebels) Moro national Liberation Front (MNLF) The Philippine government and the country’s largest Muslim rebel group signed a peace deal in October 2012 that many hope will end decades of fighting on the southern island of Mindanao. A second conflict with communist insurgents continues across the country. Hundreds of thousands have been uprooted by fighting Widespread poverty in war-torn areas Mindanao situation attracts Islamic extremists The Mindanao conflict first flared in the 1960s when the Muslim minority - known as the Moros - launched an armed struggle for their ancestral homeland in the south. After 15 years of stop-start peace talks, the government and the Moro Islamic Liberation Front (MILF) agreed to form a new autonomous region in the south before 2016
  22. 22. Zamboanga Crisis
  23. 23. The continuing fighting in Zamboanga City between government forces and rebels from the Moro National Liberation Front has resulted in the shutdown of commercial activity in Zamboanga City with large numbers of refugees fleeing from the city.
  24. 24. Conflict aftermath in Zamboanga City A Filipino soldier stands guard during clearing operation in the war ravage district of Zamboanga City
  25. 25. after a nearly three-weeks stand-off between government troops and rebels. Philippine soldiers were conducting a final search for Muslim rebel fighters' explosives and booby traps left behind after 20 days of fighting in Zamboanga City
  26. 26. A Filipino soldier stands guard during a clearing operation in the war ravage district of Zamboanga City
  27. 27. Zamboanga city Mayor Maria Isabelle ClimacoSalazar (C) and military commander General Carmelo Valmoria (L) are seen during clearing operation in the war ravage district of Zamboanga City
  28. 28. Why the Conflict in the Southern Philippines Is Far From Over. The roots of conflict in the Philippines' restive south run deep By Charlie Campbell Sept. 27, 2013 Moro National Liberation Front (MNLF) rebels marched on the City Hall there and tried to raise the “Bangsamoro Republik” flag to signal independence from the Manila government.
  29. 29. Since 2000, a significant proportion of the population of Mindanao have suffered periods of displacement due to the impact of the insurgency, which has resulted in a heavy economic toll on the population of the region as well as damaging its economic development potential. Rajiv Biswas, Asia-Pacific Chief Economist, IHS,
  30. 30. Are we a government of reactions than a government of anticipation? VP Binay (2012)
  31. 31. References The Economics of Peace and Security Journal, ISSN 1749-852X Abu-Qarn, Six decades of the Israeli-Arab conflict p. 8 © www.epsjournal.org.uk – Vol. 3, No. 2 (2008) Six decades of the Israeli-Arab conflict: an assessment of the economic aspects Aamer S. Abu-Qarn
  32. 32. References The Economics of Peace and Security Journal, ISSN 1749-852X J. Brauer and J.P. Dunne, Introduction: a new journal 4 © www.epsjournal.org.uk – Vol. 1, No. 1 (2006)