Economic Stability and Peace

Nobel committee gave the Peace Prize in 2006 to Mohammed Yunus and Grameen Bank.

The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights. 

The linkage between economic prosperity and peace was always there but Nobel Committee made it more pronounced.

IMF chief Dominique Strauss-Kahn revisits the issue in his recent speech. He says economic instability leads to poverty which then leads to worsening of peace prospects

Let me stress that the crisis is by no means over, and many risks remain. Economic activity is still dependent on policy support, and a premature withdrawal of this support could kill the recovery. And even as growth recovers, it will take some time for jobs to follow suit. This economic instability will continue to threaten social stability.

The stakes are particularly high in the low-income countries. Our colleagues at the United Nations and World Bank think that up to 90 million people might be pushed into extreme poverty as a result of this crisis. In many areas of the world, what is at stake is not only higher unemployment or lower purchasing power, but life and death itself. Economic marginalization and destitution could lead to social unrest, political instability, a breakdown of democracy, or war. In a sense, our collective efforts to fight the crisis cannot be separated from our efforts guard social stability and to secure peace. This is particularly important in low-income countries.

He points just as Wars devastate economy, the reverse also follows. A declining economy could lead to wars, civil conflicts etc.

The causality also runs the other way. Just as wars devastate the economy, a weak economy makes a country more prone to war. The evidence is quite clear on this point—low income or slow economic growth increases the risk of a country falling into civil conflict. Poverty and economic stagnation lead people to become marginalized, without a stake in the productive economy. With little hope of employment or a decent standard of living, they might turn instead to violent activities. Dependence on natural resources is also a risk factor—competition for control over these resources can trigger conflict and income from natural resources can finance war.

And so we can see a vicious circle—war makes economic conditions and prospects worse, and weakens institutions, and this in turn increases the likelihood of war. Once a war has started, it’s hard to stop. And even if it stops, it’s easy to slip back into conflict. During the first decade after a war, there is a 50 percent chance of returning to violence, partly because of weakened institutions.

So what can IMF/policymakers do? Maintain economic stability at all costs.

Just a different perspective on the crisis.

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One Response to “Economic Stability and Peace”

  1. Thinking about the crisis spiritually « Mostly Economics Says:

    […] By Amol Agrawal Charles Calomiris has an interesting take on the crisis. I had just pointed to the peace connection with the crisis, and here Calomiris talks about spiritual response to the crisis. He gives a speech at Greek […]

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