The economics of civil strife

One of my graduate students, Oeindrila Dube, has written a fascinating paper (jointly with Juan Vargas) on the determinants of Colombia's civil war, and how world prices for its major exports (coffee and oil) affect the intensity of the conflict. 

The central question is this: do higher world prices enhance or reduce the conflict?  You could make arguments in both directions.  Lower prices increase reduce incomes, and may make it less difficult for individuals to be recruited into guerilla or militia forces.  On the other hand, lower prices make the underlying resource base less valuable and reduce  the spoils over which the two sides can fight.     

The paper has just been featured in Slate, and here is Ray Fisman's summary of it:

Given these two opposing forces, when should we expect price drops to trigger more violence, and when should we expect less? Dube and Vargas argue that the critical difference is the "labor intensity" of extracting a resource—that is, the value of workers relative to the cost of buildings and machines. For example, a farmer tending his land may need little more than a strong back and a shovel, but an oil rig may cost billions and a pipeline billions more. Subsistence farming is labor-intensive; oil drilling is capital-intensive.

When farm prices (or those of other labor-intensive resources) go up, the benefits are widespread, and many laborers see their incomes increase accordingly. But higher oil prices bring gains only to the privileged few who own the wells (and perhaps also their relatively small workforce), leading to even greater conflict over who controls the increasingly valuable oil.

The empirical analysis by Dube and Vargas shows that exactly this pattern holds.  When world prices for coffee and oil rise, there is less violence in the country's coffee regions and more violence in oil regions.  This is a very neat piece of work that greatly enhances our understanding of the economics of conflict.

Comments

[uke 61]

There are many possible connections between prices and (civil) war. The one mentioned above is for sure important and might explain the development in Cote d'Ivoire (cocoa).
However, the case of Rwanda (falling coffee prices) points in quite another direction: Nobody had to rely on the income from coffee to keep the genocide going - the connection worked the other way round: Falling income for many probably was one of the factors that triggered the slaughter off.
The link between easy oil money and civil war is empirically well established. However, that does not necessarily point to "labour intensity". The cases of Liberia and Sierra Leone (diamonds, timber and even rubber in Libera) point in a second direction as does DR Congo (tantalum et al): Easy transport, little processing and a small amount of skills required for production are additional factors that must not be underestimated.

[angus]

Coffee and oil, eh?? ummm, aren't they leaving out a pretty major Colombian export??

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This is actually pretty relevant to the current global economic mess, and to the much-vaunted rehabilitation of Keynes (an October surprise!). Perhaps because post-war economists have taken far less interest in the political context and consequences of the policies they advocate than many of their predecessors, certainly including Keynes himself, it is less well known that it deserves to be that the economic causes of conflict (domestic and international) and economic means of encouraging political (including international) harmony was a theme in Keynes' work. This is all discussed in D Markwell's book on "John Maynard Keynes and International Relations", revealingly subtitled "Economic Paths to War and Peace". It is an important question what the consequences will be for civil strife in various countries, and for international politics, of the current economic mess (and whatever it becomes). Keynes argued in some little-known passages in The General Theory that his economics would be more conducive to peace than the old economics had been. He was implicitly arguing against socialists who said that capitalism caused war. Keynes said it didn't have to, if it was managed so as to prevent the economic causes of conflict. His work during world war II to create a new international economic order for the post-war world was partly driven by the desire to prevent a recurrence of economic crises that led to war. Maybe we should all take a cold shower and read some of Keynes on this today?

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This is actually pretty relevant to the current global economic mess, and to the much-vaunted rehabilitation of Keynes (an October surprise!). Perhaps because post-war economists have taken far less interest in the political context and consequences of the policies they advocate than many of their predecessors, certainly including Keynes himself, it is less well known that it deserves to be that the economic causes of conflict (domestic and international) and economic means of encouraging political (including international) harmony was a theme in Keynes' work. This is all discussed in D Markwell's book on "John Maynard Keynes and International Relations", revealingly subtitled "Economic Paths to War and Peace". It is an important question what the consequences will be for civil strife in various countries, and for international politics, of the current economic mess (and whatever it becomes). Keynes argued in some little-known passages in The General Theory that his economics would be more conducive to peace than the old economics had been. He was implicitly arguing against socialists who said that capitalism caused war. Keynes said it didn't have to, if it was managed so as to prevent the economic causes of conflict. His work during world war II to create a new international economic order for the post-war world was partly driven by the desire to prevent a recurrence of economic crises that led to war. Maybe we should all take a cold shower and read some of Keynes on this today?

[Andres]

not trying to criticize in a bad way the work done..but i would like to share my vision of it..i think that the primary resource of the guerrilla in colombia are the cocain plantations and the process and divizas that they produce via ilegal exportation of cocain.. it is obvius that we can not make a regresion with the prices of the cocaine..for ethical and disponibility of information problems..and futhermore..i think that the colombian internal war it not has has as their primary objetives to control the natural resources of the country but to institute a diferent type of goverment (socialist-empiric comunism) for the guerrilla, and to mantain the statu-quo of the society, for the goverment..
Finally, i think it is important not to forget that some information says that the colombian guerrilla has financial suport from outside colombia..so i think that not only the prices of the natural resources that the country exports are relevant to study the war evolution in the country...

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Well said Angus...I think they are leaving out one of Colombia's biggest industries...that famous white powder. Might as well get realistic I think.

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Interesting theory - but it would be worthwhile expanding the effects of high oil prices in the neighbouring countries. Venezuela for one has fascinating internal eonomic and social issues with or without high oil prices - though the higher they go, the more extreme they go. Unless they have reached the point of no return where strife caused by lower oil prices equals oil financed strife.

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