The economics and dynamics of resource wars

Abstract

The twentieth century was a convulsive one in terms of wars, political conflicts and terrorism. Crime is now more international than it has ever been before. These days, geographical borders do not limit any war; conflicts are cross-border. The nature of armed conflicts has suffered a deep transformation. The most relevant change is moving from state-financed wars to armed conflicts financed by private parties with dark financial interests. The end of the Cold War established the end of an era where the State had the central role in the establishment and financing of the conflict. We now speak about “New Wars” (Kaldor, 2012). State armies no longer characterise the conflicts of the post-Cold War era; states have lost the monopoly of violence (Munkler, 2002). The new actors leading the “new wars” are local warlords, paramilitary units, criminal gangs and mercenary groups who challenge the authority of the state (Kaldor, 2013). Currently, the figures by IISS (“Institute for International Strategic Studies”) reflect 42 active conflicts and two global, Al Qaeda and ISIS (Islamic State). Crime has expanded internationally and can affect directly or indirectly each single individual; and civil wars have not only national consequences but also international ones. These days, no matter where we are, we cannot hide and we can always be the targets of any type of crime. Fear lives among us in airports, in trains or even at our office. However, we should be aware of the moral, legal and political responsibility that we, developed world, have on the on-going conflicts in the developing countries. Despite the lack of acknowledgment in the official discourse, most of the natural resources nourishing the current conflicts are destined to the consumer market in the developed countries. We could be supporting financially an on-going civil war somewhere in the world with only the simplest act of buying a mobile phone. Mobile phones contain a very little portion of a mineral called Coltan, short for Columbite-Tantalite. This Coltan most probably has been extracted in Democratic Republic of Congo (DRC). Nonetheless, the phone producer might have bought the Coltan in Rwanda. The way our little portion of Coltan went from DRC to Rwanda was probably illegal. The consequences of this “conflict” trade are linked to the nature of the current armed conflicts and to the reasons for the contemporary conflicts. If we can analyse what are the causes, then, could we envisage what are the solutions? There is a large number of scholarly and political studies about the political economy of many of our contemporary armed conflicts, especially those characterised by the predatory exploitation of natural resources and the criminalisation of economic life (Berdal and Malone, 2000). The common point among these conflicts is mainly their “self-financing” nature. These war economies are based on the illegal trade of natural resources facilitated by the economic globalisation and the financial market liberalization. As we will see in this work, civil wars can have a contagion effect upon adjacent countries. It is this complicated reality of intra-state wars that presents policymakers with a twofold challenge. Firstly, to assess accurately the impact of resource predation on the economics and dynamics of the conflict. Secondly, to develop and implement effective policies of conflict prevention, conflict resolution and peacebuilding (Ballentine and Nitzsche, 2005). Traditionally, scholars focused on the study of the economic dimensions of inter-state wars. However after the Cold War, studies began to focus on the intra-state conflicts as it has been demonstrated that countries with an abundance of natural resources show macroeconomic instability, high level of corruption, oppressive elites and increasing level of poverty. This is known as the “paradox of plenty”, or the “resource curse”, as for these countries, resource wealth is more a curse than a blessing. This work intends to be an overview of the economics of armed conflicts. We focus on those conflicts that are financed by the exploitation of natural resources and we run some empirical analysis on the effect of governmental measures to control or promote war. We aim to raise awareness on the lack of social and political accountability from governments and international institutions of the developed world on the current conflicts financed by the illicit trade of natural resources in developing countries. Our first chapter provides the reader with a general background on the economics and dynamics of armed conflict and gives an update on the current theories and findings. We analyse what is an armed conflict and offer a comprehensive analysis of the dimensions that define the nature and type of war. We characterise the different types of wars as per location and scope; and we also examine the diverse opinions of scholars on the causal roles of economic factors in civil wars and how natural resources are linked to conflict. In the last section, we evaluate the possible solutions that United Nations might implement in order to achieve conflict resolution and peacebuilding. Chapter 2 provides a general overview of the political and economic environment in DRC, a country rich in natural resources, and especially in Coltan. That is the product to which we will pay special attention in Chapter 3 when we analyse the competitive interaction in the labour market between governments and producers. We introduce in Chapter 3 a different set of models, theoretical and empirical where we evaluate the effects of governmental responses (economic policy tools), which are often presented in the political discourse as mechanisms for conflict prevention and resolution. We analyse the effect of a tax on product and tax on profits in an economy where market and war activities exist at the same time. We suggest a novel approach to the interaction between markets and war activities. Specifically the former are assumed to both favour war by generating the resources necessary to sustain it, as well as compete with war activities in a labour market in which both workers and soldiers are recruited. We argue that war activities in two different countries may be interdependent as long as production and exports in an international market make the two countries’ producers interact with each other. In such a framework, strategic substitutability in the product market should be combined with strategic relations between economic and war activities in each country to determine the predicted strategic relation between war activities across countries.