Peace as a profitable business – Econlib

World Wars, as we have known them, have come to an end. The ideological divide that polarized humanity and ordered world wars is behind us. And yet, the number of entrepreneurs and companies selling weapons or military know-how has increased. But is war a more lucrative business than peace?

Barbera (1973) argued that war and peace do not differ in the goals pursued but in the means used to achieve them. Although war represents human violence in its most intense form, it is more than violence. von Clausewitz (1911) define war as “an act of violence intended to compel our adversaries to do our will”.

The nature of warfare has changed over time. As the level of violence has decreased, the types of wars around the world seem to have taken on a new hue, such as economic or trade wars.

A trade war is an economic conflict that leads countries in conflict to impose protectionist trade policies through trade barriers. These barriers can be imposed in different ways, including tariffs, import quotas, domestic subsidies, currency devaluation and embargoes.

Another type of trade war involves weakening an adversary’s combat power by attacking its supply chain. For example, between 1944 and 1945, Germany had no natural oil reserves, which made Germany completely dependent on domestic sources. Repeated bombings of oil factories in the summer of 1944 permanently reduced supply, resulting in an inability to meet demand.

Undoubtedly, any type of war destroys physical assets and human capital. However, the impact of the war on GDP per capita is unclear. On the one hand, war can increase GDP per capita by reducing unemployment and shifting people from non-market activities to wartime production. On the other hand, war can reduce GDP per capita by affecting total factors and labor productivity by destroying existing physical and human capital and minimizing investment in new physical and human capital.

This ambiguity is due to the way national income accounting considers the death and destruction suffered during wars.

The economic impact of violence on the global economy in 2019 was $14.5 trillion. This equates to 10.6% of global economic activity, or $1,909 per person. Violence continues to have a significant impact on economic performance around the world.

Similarly, the overall economic impact of violence can be understood as the expenditures and economic effects associated with “containing, preventing and dealing with the consequences of violence”. Among the indicators that allow this impact to be calculated, the multiplier effect represents the effects of the direct costs of violence, such as the additional economic benefits that would result from an investment in business development or infrastructure improvements, rather than the less effective costs of containing or dealing with violence.

A dollar of expenditure can create more than a dollar of economic activity. The multiplier effect is a frequently used economic concept that describes how additional spending improves the overall economy. Thus, the resources used to confront and contain the violence end up disappearing. As the resources invested in peacebuilding and development multiply.

Considering this fact, Hobbes‘ raises an interesting question: can we define peace simply as the absence of war? (Grieves, 1977). Well, it’s not. We have observed how, despite the decreasing number of active wars, rates of violence have increased globally.

Violence and instability persist in much of the world, and the billions of dollars in annual military expenditure are unsustainable, necessitating the implementation of alternative methods to foster peace. The business community is a valuable but untapped asset. Business and peace are often understood as oppositesbut the growing evidence of their association suggests that corporations should not be excluded from the wide range of actors working for peace.

Attention has focused on understanding business as part of the problem in conflict-affected areas, underestimating its value as a possible solution. As engines of economic activity, businesses can foster peace in many ways and facilitate the transition from dependence on social programs to self-sustaining progress.

Companies play an essential role in creating wealth, promoting socio-economic development and contributing (directly or indirectly) to the prevention and resolution of conflicts. As market economies become more widespread and corporations become more important players than states, their role becomes increasingly important.

The corporate sector is increasingly aware of how its actions can have a positive or negative impact on society. Peter Sutherland, Chairman of BP and Goldman Sachs, said, “…It’s part of building good, sustainable businesses to help build safe, stable and peaceful societies. Business thrives where society thrives.” A truly prosperous and sustainable business sector needs peace to exist, just as peace needs private initiatives to be built.

Peace and conflict prevention have a direct positive impact on business. Peace represents a set of good opportunities, providing the private sector with customers, skilled employees, local suppliers and investors. Businesses may see reduced operating costs, as peaceful and stable conditions are most likely to reduce some of the key business operating costs, such as risk management, security, and personnel expenses.

The business sector’s contribution to peacebuilding is not only an ethical responsibility but also a lucrative opportunity. Through their management and concrete initiatives, companies have a positive impact on peacebuilding by contributing to the creation of inclusive social, political, environmental and cultural conditions. They also contribute to peace by building relationships of trust and promoting the peaceful resolution of disputes between social, public and private actors.

Recent research from the United Nations and the World Bank concluded that there is an urgent need for the international community to refocus on building peaceful societies and preventing violent conflicts; they estimate that this could save between $5 billion and $70 billion a year.

A peaceful society allows citizens to carry out their life projects. It facilitates free exchange between people, resulting in the growth and development of jobs, wealth, prosperity, opportunities and assets that become extremely difficult to access in violent contexts.

We can therefore agree that war is a business, but peace is even a best deals.


Bibliography

BARBERA, H. (1973). Rich and poor nations in peace and war. Lexington Books, Lexington, Massachusetts.

GRIEVES F. (1977) Conflict and order: an introduction to international relations. Houghton Mifflin, Boston.

Institute for Economics and Peace. (2020). Global Peace Index: Measuring Peace in a Complex World, Sydney.

The Prince of Wales Business Leaders Forum, International Alert, Council on Economic Priorities. (2020). The business of peace.

United Nations and World Bank. (2018). Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict. Executive summary booklet. World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO.

United States Strategic Bombing Survey (USSBS) (1946). Summary Report (European War), Washington DC: US ​​Government Printing Office.

VON CLAUSEWITZ, K. (1832). Vom Kriege. Ferdinand Dummler, Berlin. (English ed.: “On War”, London, 1911).

This article is translated from its original publication:

https://www.alianzaibero.com/por-que-la-paz-es-un-negocio-rentable-para-la-empresa-privada/


michelle bernier is a lawyer specializing in international law and commercial law. She is studying a master’s degree in law and international business with a double degree from the Universidad Internacional Iberoamericana in Mexico and the Universidad Europea del Atlántico. She is also part of the inaugural cohort of Students for Liberty India Freedom Fellowship.

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