Is there a correlation between peace and economic development?

Global Peace Index

Is there a correlation between peace and economic development? The answer is important because, in today’s world, societies mired in violent conflict are also characterized by lack of development and shortage of economic opportunities. Global Peace Index (GPI), produced by the Institute for Economics and Peace (IEP) is the world’s leading measure of global peacefulness. IEP’s 2018 report found that in the last 70 years, per capita growth has been three times higher in highly peaceful countries when compared to countries with low levels of peace.  Critics of this index might point to colonial legacy, low human development, inequality, geography, natural disasters, etc. as contributing factors for low levels of development in conflict-prone countries. There is no denying of the importance of these factors, but peace is also an essential prerequisite for economic development. It is nearly impossible for schools, hospitals, and businesses to operate when there is constant fear of violence and destruction of property. Moreover, highly peaceful countries have more than twice as high foreign direct investment. This is because peace creates a stable environment wherein businesses can flourish and government can function, ensuring the rule of law.

Afghanistan is a prime example of a country where the absence of peace has had a devasting impact on economic development. With a dismal ranking of 162 out of 163 countries in the Global Peace Index, Afghanistan incurred one of the largest economic cost of violence as a percentage of GDP at 63%. This country has been in a constant state of violence and civil war since the Soviet invasion of 1979. In recent decades, the Taliban has been jostling for power and constantly fighting the Afghan government and the NATO troops. There are almost 2.5 million registered Afghan refugees, the second largest refugee population in the world. Local businesses, hospitals, and schools cannot operate freely because of constant warfare, kidnappings, and assassinations. As a result, foreign companies are wary of investing in Afghanistan because they are not sure if their investments would be protected in this war prone country. Years of civil war have created a toxic environment which has left the country with low human development and has forced Afghans out of their homeland.

Kashmir in India is another region where decades of violent insurgency have negatively affected its economy, especially its tourism. Kashmir valley nestled between picturesque snowcapped Himalayas is famous for its lakes, Mughal gardens, and ski resorts. In the late 1980s, violent insurgency driven by domestic political grievances and external support from Pakistan-based militant groups has resulted in deaths of civilians, police, and military. In 1980, 595,000 tourists visited Kashmir, but by 1995, that number was reduced to 8,520. By 2005, tourists started increasing due to considerable peace and stability in the region. However, since 2008, militancy, massive protests, and stone-pelting skirmishes have again created instability and negatively impacted the tourism sector. Kashmir’s tourism has still not reached its true potential because of decades of violent insurgency. As a result, the region is still heavily dependent upon the Indian central government for money and resources.

Whether it is human development or a sector such as tourism, violence can negatively affect its prospects. As evidenced by the GPI data and the examples of Afghanistan and Kashmir, violence creates an unstable environment which can severely affect society’s chances for progress. Therefore, peace is one of the most important factors in the economic development of a society.

This blog post was contributed by Abhi Slathia, who is currently an intern at HasNa Inc.