Economic Growth and Conflict  | | USAID-financed road construction – In Afghanistan,
as in many post-conflict environments, economic
growth is critical for sustainable peace and
development. | The Issues Economic forces play a powerful role in shaping the potential for violence. Poverty, stagnant or negative economic growth, gross economic inequality, and widespread unemployment can all feed into a strong sense of social grievance. Deep poverty implies that governments will be unable to provide access to critical services such as infrastructure, education, and health care. Poverty also means that competition for the limited opportunities that exist will tend to be zero-sum. Competition for control of the state is likely to be intense, protracted, and deadly if economic opportunity is linked to political power through corruption and patronage.
Conflict Entreprenuers Attention has also begun to focus on how a growing number of actors – loosely termed ‘conflict entrepreneurs’ – use instability and violence as a tool for amassing significant economic power. In Liberia, for example, Charles Taylor is estimated to have made more than U.S. $400 million per year from the war. Similarly, UNITA controlled roughly 70 percent of Angola’s diamond trade at the height of the conflict, generating an estimated U.S. $3.7 billion in revenue. Apart from the high stakes world of controlling valuable natural commodities, young people – particularly young, unemployed men – often see participation in violence as route to status and personal enrichment. Livelihoods | |  | | Internally displaced women making palm mats as
a means of income. Photo curtesy of C. Reintsma | When conflict strikes, it usually has a major effect on access to essential resources and services. Conflict distills household or community priorities down to the most basic needs, namely the need for a safe haven protected from threats to lives and livelihoods. Affected populations adjust their livelihood strategies to mitigate the effect of the conflict, even if the adjustments themselves involve a violent response, such as fighting over access to scarce resources. Understanding the decisions and actions that people take to protect their livelihoods in times of conflict is crucial to providing effective support to affected populations. People never simply give up in the face of conflict, but rather try to find ways to survive and to minimize the
effects of the conflict on their livelihoods.
DCHA/CMM is exploring ways to build upon
this resilience in programming assistance.
Our Work
DCHA/CMM is working with USAID's overseas Missions and the Bureau for Economic Growth, Agriculture, and Trade (EGAT) to find ways to make economic assistance more effective in pre-conflict and post-conflict environments.
Micro-credit programs can be a valuable tool for providing young people with a sustainable livelihood, thereby reducing their vulnerability to economic appeals by militant and extremist groups. However, most existing micro-credit programs avoid making loans to young people since they are seen as a bad credit risk. A number of innovative programs attempt to overcome this obstacle by giving at-risk youth the skills they need to be seen as a better business ‘risk’. For example, in the West Bank/Gaza, a program developed together with local Palestinian businessmen provides young people with business training and uses small scale entrepreneurship as an engine for youth employment.
DCHA/CMM is also working to sensitize USAID’s missions to the obstacles that instability and conflict place in the way of effective economic development, so that they can design programs to surpass those obstacles more effectively. For example, even short of open violence, pervasive instability and lawlessness take a heavy toll on a country’s investment climate. New research suggests that a glut of illegal small arms and light weapons (SALW) in a region will price small and medium-sized enterprises out of the market since only large, politically connected companies will be able to afford the security and protection needed to continue operations. If USAID wants to encourage economic growth in places affected by violence it must find ways to design support to small and medium enterprises that consider the extra costs that must be born in such high-risk environments.
Together with USAID Missions, DCHA/CMM is supporting the work of local business associations that are looking for ways to discourage the use of violence and promote stability. For example, in Haiti, DCHA/CMM supported the efforts of the local business community to encourage more responsible behavior by political parties, and in particular, to discourage the use of violence as a tool for gaining and maintaining their hold on political power.
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