Africa: ECA on Economy and War
Date distributed (ymd): 990710
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +economy/development+ +security/peace+
Summary Contents:
This posting contains a condensed version of the July 8
address by ECA Executive Secretary K. Y. Amoako to the
Organization of African Unity, stressing the two-way linkages
between development strategies and resolution of the
continent's conflicts.

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"The Economic Causes and Consequences of
Civil Wars and Unrest in Africa"

Address to the 70th Ordinary Session of the Council of
Ministers of the Organization of African Unity

by

K. Y. Amoako,
UN Under-Secretary-General and
Executive Secretary of Economic Commission for Africa

Algiers, Algeria, 8 July 1999

[condensed: full speech available on ECA web site at
http://www.un.org/depts/eca]

For the last few years, I have emphasized the significance of
the economic recovery of Africa, but I have also warned that
our growth needs to be stronger. ECA's review of the past year
confirmed our conclusions at my last meeting with you, that
African countries have continued to make significant progress
towards economic and political liberalization. This, in turn,
has sustained the very encouraging growth performance,
particularly over the past four years. We found that out of
the 50 countries for which we have data, 32 experienced some
improvement in 1998, while 17 were worse off at the start of
1999 than they had been a year before.

However, almost without exception, the countries in the region
are growing at less than 7 percent per annum, the rate needed
for Africa to meet the international development target of
reducing poverty in half by the year 2015. What is more, there
are significant sub-regional differences in Africa's growth
performance. The majority of Africans live in countries where
performance fared poorly or declined last year.

Of the five sub-regions, only two, accounting for only about
25 percent of the continent's population -- enjoyed a
positive growth performance. Growth decelerated in the
remaining three sub-regions where the overwhelming 75 percent
of the population reside. The evidence also clearly shows that
a key factor accounting for this sub-regional differences in
economic performance was the incidence of war and civil
unrest.

This, Mr. Chairman, brings me back to the theme we discussed
together two years ago, when in Harare I shared with you my
thoughts on the relationship between the fields of diplomacy
and economic policy. Foremost, I urged us to seek synergies
between conflict prevention and conflict management on the one
hand and economic reconstruction, recovery and development on
the other.

Since that address two years ago, Africa's political stability
has deteriorated, with 20 percent of Sub-Saharan Africa's
population affected by civil war today. And now, of course, we
have interstate conflicts. It is obvious that the damage of
conflict is going up.

It is against this background that I would like to continue
today the dialogue I started with you in Harare, by briefly
discussing the causes of conflict, particularly its linkages
with poverty; the economic consequences of war; and the
imperatives for coordinated and holistic action for
post-conflict rehabilitation and reconstruction.

There continue to be common misperceptions as to what are the
fundamental causes of the conflicts, which have set back
national development in so many African countries. We owe
ourselves a closer look at their causes -- as well as, if you
will, the determinants of peace. Various analysts in political
science, anthropology and other sciences have looked at the
causes of all our conflict, so perhaps it is only fair that we
economists are having our turn, aided by regression analysis
and other tools of our trade.

At least four hypotheses have been advanced to explain why
civil wars happen:

The first is innate ethnic and religious hatred, where these
hatreds are then exploited by ambitious leaders;

The second is national grievance, where the performance of a
government is held to be against the national interest;

The third is distributional grievance, where government
performance is held as having been particularly
discriminatory against a given group or groups in society;

The fourth is employment, where rebellion is an employment
choice motivated by the opportunity cost of employment and the
prospective gains from capturing the state and its resource
base.

Each one of these hypotheses has been subjected to rigorous
econometric testing where appropriate proxy variables are used
for the occurrence of war and for the implied explanatory
variables. Since the most significant and crosscutting
explanatory variables are socio-economic, let me briefly run
you through some of those that deserve your attention:

First, conflict is inextricably related to poverty,
particularly the lack of human capital, which influences the
probability of a civil war. Poverty means that young men have
no stake in staying where they are. Joining a rebel army
becomes a viable employment opportunity where job markets do
n ot incorporate youth.

Second, conflict is related to the inequitable sharing of
valuable natural resources. This failure has led to a number
of conflicts and exacerbated many others. And, whenever
territories rich in natural resources are captured by
marauding militias, these resources are most often looted,
providing the private funding to continue conflict.

Third, conflicts are more likely to break out where there are
dysfunctional governments - characterized by weak,
undemocratic economic and political institutions.

There are many cases where the failure by governments to
address national grievances has led to conflict and war.
Clearly, civil conflict is less probable in a full democracy.
The more democratic the society, the more it has outlets for
frustration and ways to seek solutions. The more governments
respond to the issues people have, the lower the risk of civil
war.

Fourth, polarized societies risk fracture. Contrary to what so
many analysts have said about how Africa can never be stable
with so many ethnicities, the evidence is that ethnic and
religious diversity is a stabilizing force. There is a higher
risk of civil wars in polarized societies (even if they are
ethnically more homogeneous) than in more diverse societies.
Diversity makes societies safer by reducing the probability of
ethnic conflicts, as it is simply more expensive and
complicated to foment trouble in diverse societies. Even if
conflicts do break out in pluralistic societies, they tend to
last for shorter periods, as it is harder for rebels to be
cohesive.

Mr. Chairman, Excellencies

We know the results when poverty is high, natural resource
endowments are not managed equitably, governments are
undemocratic and societies are polarized. The results are
conflicts and the costs are terrible.

War is undoubtedly the destroyer of economic development on
our continent. As we saw so tragically in Rwanda, Liberia and
Sierra Leone, civil war not only devastates the lives of
civilians: it damages the environment; it wreaks havoc on
social, education and health services; it traumatizes whole
generations of youth; and it forces people to abandon homes
and farming land, engulfing once stable family units in a
flood of refugees.

Indeed, the empirical evidence is now overwhelming that:

Armed conflict destroys capital, leaving shattered
infrastructure in its wake;

Armed conflict, being as it is a negative shock on economic
systems, reduces savings even when the levels of these savings
are most fragile;

Armed conflict diverts portfolios away from domestic
investment, and triggers massive capital flight - which, by
the way, relative to GDP, is higher in Africa than in any
other region of the world;

Armed conflict also distorts foreign aid budgets which now
increasingly are devoted to emergencies; and, most
fundamentally,

Armed conflict massively diverts government expenditures away
from provision of economic services towards military
expenditure. In one far from worst case, a current conflict is
estimated to be consuming 50% of a country's GDP.

I also know that there is a theory that wars can reap high
rewards, be they in the form of gold, diamonds or oil. But I
would submit that almost any economist would come to a
different conclusion if all the costs to the populations
involved were added up against the gains from such looting. In
any case, the gains of wars are generally illegally siphoned
off so they usually should be counted as a loss to the public.
All loss, no gain.

Mr. Chairman, Excellencies,

When we all took economic courses, our professors would talk
to us about the choice between "guns and butter". Well, we
face that choice daily throughout our continent. And more
often than not the winners are guns for civil and
international conflict.

These reflections on the causes and economic consequences of
civil strife and warfare should lead us to a wider
appreciation of the inter-linkages between development and
peace. It is with this new evidence in hand that I would like
to revisit the recommendations I presented to you two years
ago.

At that time I emphasized that the fight against poverty was
a battle for peace, and recommended that:

* donors and national resource managers invest more in the
peace process;

* peace building and conflict prevention efforts be
under-girded by more equitable development;

* cooperation between Africa's three main regional
organizations be enhanced to promote recovery of economies;

* the Abuja process be considered as important for the
political rationale for peace, as for growth and development;
and the United Nations be reinvigorated to play an even more
effective role in peace building in Africa.

Given the new evidence of what increases the chances for
conflict and what strengthens the chances for peace, plus our
history over the last year, I hope you agree that these
recommendations are even more timely now that they were in
Harare two years ago.

Mr. Chairman, Excellencies,

The central conclusion of our most recent economic assessment
of the continent is that despite recent positive economic
trends, most African countries do not as yet have the
conditions to sustain growth, at a level required to meet the
target of reducing poverty, by half by the year 2015. We also
know that growth alone will not be sufficient.

Growth must be coupled with policies that deliberately attack
poverty and promote education, health, and social safety nets.
This requires an appropriate balance between short-term
stabilization and adjustment measures, and longer-term
considerations, including capacity building, institutional
reform, human resources development and good stewardship of
the environment. These are all points we elaborate in our most
recent Economic Report on Africa, which I commend to your
attention.

But being able to concentrate on reducing poverty and
expanding growth depends upon meeting a set of shorter-term
challenges. We need to end ongoing conflicts, prevent new
ones, build a sustained peace and rebuild countries that have
been in conflict.

The international community has not been particularly well
prepared for these tasks, and frankly, neither have we here in
Africa. The international community has been caught off guard
by conflicts. Relief organizations like UNHCR, the
international committee of the Red Cross and the World Food
Programme have had to stretch their mandates by building roads
and water supplies. There have been overlaps between
peacekeeping and providing basic services in conflict and
post-conflict situations.

Development banks and similar long-term development donors are
in a bind because they often depend upon the re-establishment
of basic services and on a reviving financial system before
they can operate. In addition, lenders find that disrupted
loan repayments cause eligibility issues.

All of this calls for a level of seamless co-ordination and
programme innovation beyond traditional mandates and
practices. Out of the agony of experience and the prospect
that many countries may well soon be emerging from emergency
situations, there is a new consensus arising on how to better
manage the transition form crisis to development. Three
underlying principles are now generally understood.

First, there is a continuum between pre-conflict, where there
is normal development; conflict, which requires humanitarian
relief; and post-conflict, where rehabilitation of physical
and institutional foundations and transformation from a war
economy to a developing economy takes place. There are
economic, social and political aspects to all of this.

Second, while conceptually separate, these three phases
actually overlap and it is critical that we manage the
bridging of these phases far better. This overlap underscores
the need for a holistic approach to assisting countries
emerging out of conflict. It is clear that the tasks at hand
in all these phases are so multi-dimensional,
multi-disciplinary and inter-linked that they go beyond the
capabilities of any one agency.

Third, since most conflicts spread across borders no matter
how internal they seem, any effort to assist affected
countries must necessarily factor in the sub-regional and
regional dimension of the problems they confront. Yet most
agencies wanting to be of help are geared to act only within
national legal and operational frameworks.

These issues have been studied and experience has been
collated in order to design an appropriate framework for
multi-agency assistance to countries and regions in, or
emerging out of conflict. This is reflected in the UN
Secretary-General's April 1998 report on the "Causes of
Conflict and the Promotion of Durable Peace and Sustainable
Development in Africa", and in subsequent guidelines issued
towards implementing this framework.

In that strategy, and in view of the sub-regional and regional
dimensions I referred to earlier, regional organizations have
been explicitly enjoined to play a lead role in ensuring
co-operation among States and in guiding support from the
international community. ...

In the last few years, the world has seen a greater
willingness among our countries and sub-regional groupings
towards committing human and material resources to putting out
fires in their own backyards in the interests of peace and
economic development. Africa's leaders show an increasing
sensitivity to the sub-regional and regional dimensions of
conflict, to the realization that what affects our neighbours
today may be our undoing tomorrow. ...

Let me now turn to what role ECA can play and intends to do in
this field. Taking into account our regional mandate and
comparative advantage, the overall objectives of ECA's work in
this area are to assist countries emerging out of conflict to
undertake economic rehabilitation and reconstruction, as well
as social integration.

In this vein, Mr. Chairman, often in cooperation with other
agencies, we plan to carry out activities that focus on:

* Assisting countries in rehabilitating and strengthening
national capacity and institutions for economic policy-making
and management, including reorienting new leadership in basics
of governance and economic relationships with international
financial institutions;

* Facilitating the sharing of experiences in post-conflict
peace-building, with particular emphasis on economic
rehabilitation, reconstruction and development;

* Identifying national and regional expertise on the
continent, as well as globally, who could participate in
post-conflict peace-building and development activities in a
country or sub-region emerging out of conflict; and

* Addressing and supporting regional and sub-regional
dimensions of post-conflict rehabilitation, reconstruction and
development - activities that will also provide an entry point
for our bilateral and multilateral partners, whose programmes
tend to be country focused, so they can contribute to
sub-regional rehabilitation and reconstruction programmes.

In this framework, Mr. Chairman, as a first step, ECA is
organizing a preparatory workshop this Fall to bring together
stakeholders including representatives of governments, UN
agencies, bilateral and multilateral organizations, and civil
society. The workshop will forge a consensus, develop a
strategy and design steps towards a programme of post-conflict
economic rehabilitation and social integration in response to
the emerging peace prospects in the continent. We are very
much encouraged by the outcome of the intensive consultations
we have had to date in this regard.

Mr. Chairman, Excellencies, Ladies and Gentlemen,

The world has come to understand that the making of peace in
Africa must be led by Africa's leaders and institutions. I
believe we are on the threshold of understanding that the
making of economic recovery and reconstruction must also be
defined and led within Africa. This is a key development as we
seize the future with both hands.

For more information:
Peter K.A. da Costa
Senior Communication Adviser
Economic Commission for Africa (ECA)
United Nations P.O. Box 3001 (official mail)
Addis Ababa Ethiopia
Tel: +251-1-51 58 26 Cell: +251-9-20 17 94
Fax: +251-1-51 03 65
E-Mail: [log in to unmask]; [log in to unmask]
Web: http://www.un.org/depts/eca

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