“Our study confirms that countries with abundant natural resources have a higher risk of conflict.”

Our article "Greed and grievance in civil war" is the first attempt by economists to analyze whether economic factors are important determinants in the outbreak of civil war. Typically this subject is the domain of political scientists and our findings are viewed by some as important new insights and by others as very controversial.

We use a global panel data set to analyze which factors make countries prone to civil war. This method is similar to the one used in epidemiological studies. In the past, research on civil war has been dominated by case studies which makes it impossible for policy makers to draw general lessons. Our study suggests that economic factors are important in the analysis of civil war and we base our policy recommendations on these findings.

Civil wars are now far more common than interstate wars. Globally there were 19 major armed conflicts recorded in 2004 and all of them were so called "civil wars." According to popular perceptions, grievances are often seen as the main causes of rebellion. However, we suggest that those factors that determine the financial and military viability of a rebellion are more important than objective grounds for grievance. In order to create and maintain a rebel organization, the rebels have to be paid and military equipment has to be purchased. To test these alternative hypotheses we constructed two competing models: a "grievance" and a "greed" model. The "grievance" model examines inequality, political oppression, and ethnic and religious divisions as causes of conflict, while the "greed" model focuses on the sources of finance for civil war. We found little evidence for grievances as a determinant of conflict. Our "greed" model provides much better explanatory power. We are able to identify several sources of finance for rebellions. Income from natural resource predation, such as diamonds in Angola, drugs in Columbia, and timber in Cambodia, are often quoted as important sources of finance for rebel movements. Our study confirms that countries with abundant natural resources have a higher risk of conflict. Furthermore, we find some evidence that countries with a large diaspora community experience more conflict. Overseas communities such as the Kurds in Europe, the Lebanese in West Africa, and the Tamils in North America often have the ability to use large financial resources and publicity to keep combatants active in their native countries. We also find strong evidence that poor countries are more likely to experience a civil war. We think that this is because opportunity costs for potential rebels are low and thus make recruitment easier. We also consider historical and geographic factors. Overall, our results are consistent with economic models of conflict risk in which the critical parameters are the financial opportunities for rebels, the social and geographic constraints they face, and the financial capability of the government to provide defense and other public services. They are harder to reconcile with accounts of conflict which stress ethnic, religious, political, or economic grievances.

We are development economists working at the Centre for the Study of African Economies. Sub-Saharan Africa is not only the poorest region, it is also the region that has experienced a lot of civil war. Thus, we became interested in studying the relationship between development and conflict.

Based on our work, we have developed a number of distinct policy recommendations. War retards development, but conversely, development retards war. This double causation gives rise to virtuous and vicious circles. Where development succeeds, countries become progressively safer from violent conflict, making subsequent development easier. Where development fails, countries are at high risk of becoming caught in a conflict trap, in which war wrecks the economy and increases the risk of further war. In addition to the important message that development is the key element in fostering local, regional, and global security, we have a number of more detailed policy recommendations.

Two examples of these are as follows:

1. Certification schemes such as the Kimberley process which help to curb opportunities for rebel finance and should be extended to cover other commodities. The Kimberley Process is an international certification scheme that regulates the trade in rough diamonds. Its aim is to prevent the trade in conflict diamonds, while helping to protect the legitimate trade in rough diamonds.
2. The Extractive Industries Transparency Initiative (EITI) will also help to account for income from natural resources, strengthen the state, and diversify the economy. The particular focus of the EITI is to promote disclosure by the corporate interests involved in extraction and disclosure by the national authorities. This initiative should be promoted and encouraged in a number of countries dependent on primary commodity exports.