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Neoliberalism and the Political Economy of War
By Bruce K. Guenther
60.4100/3 Senior Seminar in International Development Studies
Jerry Buckland
Menno Simons CollegeUniversity of Winnipeg
April 15, 2005
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2
Neoliberalism and the Political Economy of War
If somebody hides a thing behind a bush, seeks it again and finds it in the selfsame place, then there is notmuch to boast of, respecting this seeking and finding; thus, however matters stand with the seeking and
finding of truth within the realm of reason. Friedrich Nietzshe, On Truth and Lie in an Extra-Moral
Sense, 1911
Violence always rides on the back of lies. Stanley Hauerwas, 2004
Chapter 1: Neoliberalism SAPs and Conflict
Though the topic of this essay is quite broad, its thesis emerges out of my
practicum experience working for a human rights organization, Jamaicans for Justice, in
Kingston, Jamaica. The main area of focus during my one year term through Mennonite
Central Committee was responding to complaints of human rights violations by the state
(i.e. police, military, prison officials). Dealing daily with the cycle of violence in Jamaica
caused me to ask questions about the source of this pervasive violence.
Though there are a variety of root causes associated with Jamaicas poverty and
violence including the legacy of colonialism and the plantation system, many Kingston
inner-city residents point to the 1970s as a time when a large shift occurred.1 In the 1970s
to 1980s, the conditionality of Structural Adjustment Programs (SAPs) imposed by
organizations such as the International Monetary Fund (IMF) shifted economic and social
burdens on the poor through layoffs and less investment in social services.2 For inner-
city residents this time period was characterized by a sharp increase in the cost of living
(due to high inflation and currency devaluation) as well as high unemployment. 3 One
1 Horace Levy, They Cry 'Respect'!: Urban Violence and Poverty in Jamaica, (Kingston, Jamaica:
Centre for Population, Community and Social Change, University of the West Indies, 1996), 10.2 Anthony Harriott,Police and Crime Control: Problems of Reforming Ex-Colonial
Constabularies, (Kingston, Jamaica: The University of the West Indies Press, 2000), 3.3 Levy, They Cry 'Respect'!: Urban Violence and Poverty in Jamaica,, 10. For an excellent
documentary on the affects of the SAPs on Jamaica, see Life and Debt by Stephanie Black (New Yorker
Video), 2001.
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Jamaican academic, Anthony Harriot, describes SAPs as a globally dominant neoliberal
paradigm which associates inequality and individualism with efficiency and economic
progress.4 This neoliberal paradigm, through cuts in government spending, currency
devaluation, trade and finance liberalization, caused polarization between the rich and the
poor in Jamaica.5
According to Harriot, this deregulation of the economy in Jamaica has a
tendency towards rent-seeking rather than wealth creating activities. The consequence of
this increased marginalization and inequality has generated powerful, socially
destructive tendencies and induced the use of greater (but ineffective) coercive force by a
weakened state in support of this mode of development.
6
Through studying the
pervasive violence in Jamaica, he concluded that this high level of inequality and
competitive individualism are associated with high rates of violent crime.7 It is this
observation by both Jamaican academics and inner-city residents regarding the
correlation between increases in violence and neoliberalism which has spurred me to
further explore these linkages.
Using a global political economy approach which attempts to analyze the power
embedded in economic relationships, this essay will argue that neoliberal policies rather
than fostering peace and prosperity, have actually created global instability by fuelling
armed conflict. This happened in three significant ways: 1) the increasing influence of
transnational corporations, 2) the widening of income inequality and 3) the dismantling
of the state.
4 Harriott,Police and Crime Control: Problems of Reforming Ex-Colonial Constabularies,, 4.5 Patrick Bryan,Inside Out and Outside In: Factors in the Creation of Contemporary Jamaica,
(Kingston, Jamaica: Grace Kennedy Foundation, 2000), 81.6 Harriott,Police and Crime Control: Problems of Reforming Ex-Colonial Constabularies,
xxviii..7 ibid., 4.
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This is an essay about the causes of armed conflict, but I must be clear about what
I am and am not saying. My argument is that neoliberalism and its policies such as
Structural Adjustment Programs have in many cases engendered and fueled conflict. The
intention of this paper is not to gloss over historical and contextual particularities but
rather to explore the ways in which neoliberalism feeds armed conflict in the Global
South. Nationalist, independence, political and ideological struggles, ethnic and religious
divisions, as well as other historical grievances and marginalization, all play a role in
contemporary conflict. Yet, it is my contention that often contemporary conflicts have
more to do with struggles over resources and are thus related to neoliberal economic
globalization.8
In John Bowens article, The Myth of Global Ethnic Conflict, he argues
that when conflict gets pinned on religious or ethnic differences we see those in conflict
as tribal and less modern, making it easier for us to tolerate suffering because conflict
is natural of a people or region: it distracts us from the central and difficult question of
just how and why people are sometimes led to commit such horrifying deeds.9
However, the North is involved in this process of neoliberal globalization often
benefiting from this new imperialism. While benefiting the North, neoliberal policies
continue to allow for the exploitation and marginalization of already peripheral regions
causing further suffering and violence.
It is also important to clarify that my intention is not to replace one universal
claim for another that is, while neoliberal policies have been implemented in a one size
fits all fashion, my argument is not that in every instance neoliberalism has led to
8 John R. Bowen, "The myth of global ethnic conflict," Journal of Democracy 7, no. 4 (1996): 3.9 ibid.
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approaches. Despite widespread criticism of these policies, these market-friendly
reforms continue to be advocated by the international financial institutions.
In the second chapter of this essay, the global political economy framework will
be presented. This will be followed by the third chapter, where through using a political
economy lens, we will analyze how neoliberalism has contributed to armed conflict. The
fourth chapter will conclude with a reflection on neoliberal hegemony. Despite the
narrowness of this pure economic approach for development and peace-building,
proponents still point to the rationalism of neoliberal policies. Unfortunately, in many
cases, the continual aggrandizement of market driven development breeds and fuels
violence and conflict around the world.
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Chapter 2: Global Political Economy
The beginning of the global political economy discourse can be traced back to an
influential article by Susan Strange entitled International Economics and International
Relations: A Case of Mutual Neglect where she notes that there has been little
interaction between the disciplines of international relations (politics) and economics.11
Strange notes that a lack of developing a study of international political economy at the
university is allowing the gulf between international economics and international
politics to grow yearly wider and deeper and more unbridgeable than ever.12
Martin
Staniland, in outlining the political economy discussion states that the study of political
economy generally arises out of the radically incompatible perspectives of economics and
political science with economics (in its classical/neoclassical sense) emphasizing market
and with politics emphasizing power: the assumptions and working logics of economics
cannot easily accommodate, except as externalities, the phenomenon of coercive power,
since they rest on the axiom of the freely choosing individual.13
Recent literature also points to a continued lack of cooperation between
disciplines, particularly between international development studies and economics. John
Harris in his article The Case for Cross-Disciplinary Approaches in International
Development, indicates that this cooperation between disciplines, as in the case of
global political economy, is essential in order to save disciplines from themselves.14
Harris points to the limitations of an economic methodology which is based on an
11 Susan Strange, "International Economics and International Relations: A Case of Mutual
Neglect," International Affairs (Royal Institute of International Affairs 1944-) 46, no. 2 (1970): 304-315.12 ibid., 307.13 Martin Staniland, What is Political Economy?: A Study of Social Theory and
Underdevelopment, (New Haven, CO: Yale University Press, 1985), 4.14 John Harris, "The Case for Cross-Disciplinary Approaches in International Development,"
World Development30, no. 3 (2002): 487.
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traditional approaches to the discipline of international relations or, indeed, economics.19
Recently however, a number of economics scholars have stated that political economy
itself is just a methodology of formal economics that falls within the rational actor
model; this is obviously inadequate in that it once again marginalizes political and non-
economic factors.20
In contrast, Robert Cox notes that the contribution of political
economy has highlighted economic foundations of power.21 Political Economy or Global
Political Economy, has not merely expanded the subject matter of international relations
but has changed the way we think about power and the world order.22
In discussing political economy, the literature typically compares it to three
different theoretical frameworks: realism, liberalism and Marxism.23
The realist tradition in international relations theory focuses primarily on the
competition between state actors.24 Realism believes that nation-states pursue power and
shape the economy to this end. Unlike Marxists and liberals, realists assume the primacy
of politics over economics: the state is the dominant actor in the global political
economy.25 For Realists, politics underlies economics. In the pursuit of power, nation-
states shape the international economy to best serve their desired ends.26 The
19 Geoffrey R. D. Underhill, "Conceptualizing the Changing Global Order," in Political Economy
and the Changing Global Order, ed. Richard Stubbs and Geoffrey R.D. Underhill. (Toronto, ON: Oxford
University Press, 2000), 3-21.20 Gilpin, The Nature of Political Economy, 1021 Robert W. Cox, "Political Economy and World Order: Problems of Power and Knowledge at
the Turn of the Millenium," in Political Economy and the Changing Global Order, ed. Richard Stubbs and
Geoffrey R.D. Underhill. (Toronto, ON: Oxford University Press, 2000), 32.22 ibid., 32.23 See Jeffry A. Frieden and David A. Lake, "International Politics and International Economics,"
inInternational Political Economy: State-Market Relations in a Changing Global Order, ed. Goddard, C.
Roe, Patrick Cronin and Kishore C. Dash. (Boulder, CO: Lynne Rienner Publishers, 2003), 25-7.;Underhill, Conceptualizing the Changing Global Order, 3-21.; Staniland, What is Political Economy?: A
Study of Social Theory and Underdevelopment, 229.24 Underhill, Conceptualizing the Changing Global Order, 3-21., 9.25 Frieden and Lake,International Politics and International Economics, 30.26 ibid., 31
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international system is anarchical under which nation-states are sovereign and, through
rational self-interested actions, states maintain a balance of power. This stark
separation between the political and economic factors contrasts a global political
economy perspective which understands those spheres to be an integrated whole.27
Security becomes the primary issue from a Realist perspective which clashes with a
global political economy approach where security has just as much to do with economic
factors of who gets what, when and how.28 In summary, realism is inadequate as it
attempts to divorce the interplay between the state and the economy.
A liberal approach, in contrast to the realist perspective, sees the individual, not
the state, as the primary actor in society. Liberalism is thus permeated with a concern
for enhancing the freedom and welfare of individuals; it proposes that humankind can
employ reason better to develop a sense of harmony of interest among individual and
groups within the wider community, domestic or international.29 The liberal approach
assumes that individuals are rational, utility maximizing actors making cost-benefit
calculations across a wide range of possible options. Individuals maximize their utility
when they choose the result which yields the highest rate of subjective satisfaction.30 The
interaction between individuals occurs within the economic sphere. If individuals are
free to interact as economic agents, this will ensure the most beneficial distribution of
wealth.31 The state exists primarily to facilitate the free exchange of goods between
individuals within the market.32 At first glance, liberalism seems diametrically opposed
27 Underhill, Conceptualizing the Changing Global Order, 10.28 ibid., 11.29 ibid., 13.30 Frieden and Lake,International Politics and International Economics, 26.31 Underhill, Conceptualizing the Changing Global Order, 13.32 Frieden and Lake,International Politics and International Economics, 27.
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to realism however they share the same problematic assumption: that the realm of politics
and economics are separate and governed by their own laws and relationships.33 Markets
cannot be separated from the political institutions in which they exist and are formed.
Moreover, one cannot understand the behaviour of economic agents outside of their
particular socio-political location and their particular historical developments.34
A neoliberal strategy flows logically from the liberal framework. Neoliberalism
sees actions of the state as a market distortion which inhibits economic growth.
Neoliberalism, as outlined in chapter 1, is characterized by the rise of transnational
capital, the decline of the state and emphasis on global market-friendly policies.
35
Neoliberalism has become the dominant paradigm thus representing the context for our
discussion of the global political economy of war.
Marxism emerged as a response to liberalism in the late 19th century. Karl Marx
developed a new discourse where capitalism and the market were seen as creating
extremes of wealth for capitalists and poverty for workers.36 The basis of the capitalist
economy is the exploitation of labour for the sake of capital. According to Marx
capitalism is an inherently conflictual system that will be overthrown and replaced by the
classless society.37 From a political economy perspective the principal strength of the
Marxist approach, as opposed to that of liberalism and realism, is that it focuses
precisely on the connection between the social and economic structures of the capitalist
33 Underhill, Conceptualizing the Changing Global Order, 13.34 ibid., 14.35 See Jorge Nef and Wilder Robles, "Globalization, Neoliberalism, and the State of
Underdevelopment in the New Periphery," Journal of Developing Socities 16, no. 1 (2000): 27-21.36 Frieden and Lake,International Politics and International Economics, 25-7., 28.37 ibid., 27
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economic system, on the one hand and the exercise of the political power in the
international system, on the other.38
Just as Marxism arose in response to liberalism, the Dependency school arose
alongside and in response to modernization theory articulated most clearly by Walt W.
Rostow.39
Dependency theorists postulated that development is not simply dependent on
a countrys endowments and the ability of the economy to take off; rather, development
and underdevelopment is determined by relationships of power. According to
Dependency theory, development, or a lack of, is a product of those who set the rules of
the international economic game: industrialized nations (the core/metropolis) expand at
the expense of the developing world (the periphery/satellite).40
What Marxism, Dependency and Neo-Marxist approaches contribute to the
political economy approach is how intimately power is tied up with economic
globalization. These approaches take into account the complex interdependence among
states, their societies, and economic structures at domestic and global levels of analysis. 41
It is in not questioning these global structures of power, where many approaches to
development and peace-building fall short. A political economy approach sees power
embedded in both economic and political spheres.
It is thus interesting to look at approaches that have emerged as a result of
widespread criticism of the neoliberal agenda. Doug Porter and Patrick Craig argue that
neoliberalism has moved beyond its more market phase (as through Structural
38 Underhill, Conceptualizing the Changing Global Order, 14.39 See Rostow, The Stages of Economic Growth: A Non-Communist Manifesto, 93. Though
Rostow was a strong advocate of the linear growth model, he differs from neoliberals in that his approach is
remains quite state-driven.40 Patrice Franko, The Puzzle of Latin American Economic Development, 2nded. (New York, NY:
Rowman and Littlefield Publishers Inc., 2002), 53 & 74.41 Underhill, Conceptualizing the Changing Global Order, 19.
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Adjustment Programmes) and has turned toward embedding, legitimizing and securing
liberal reform by promoting an inclusive liberalism.42 In reaction to widespread
distrust and angst toward neoliberal globalization, inclusive liberalism seeks to cloak its
market policies under the veil of poverty alleviation, security, and participation. 43
Instead of questioning the current power and exploitive nature of the current market
system, like Marxists and radical political economy approaches, this liberal
inclusiveness recommends policies which attempt to tweak and manage economic
globalization (i.e. good governance and democratization).
The Human Security approach, made popular by persons such as Lloyd
Axworthy, is a good example of a theory firmly grounded in liberal thought which
appeases our desire for more human globalization but does not question the underlying
assumptions of liberalism and neoliberal economic globalization.44 Inclusive liberal
strategies such as human security, represent a temporary pre-emptive, strategic
inoculation, against a more broadly and socially contested double movement, the kind of
political double movement arguably most feared by proponents of a wider liberal
project.45 Liberalism, as articulated earlier, refuses to acknowledge the power dynamics
and interconnectedness of the economy and the political environment in which it exists.
Liberal perspectives are not alone in refusing to question fundamental
assumptions, but a political economy framework can also fall into this trap. Though
42 Doug Porter and David Craig, "The Third Way and the Third World: Poverty Reduction and
Social Inclusion in the Rise of 'Inclusive' Liberalism," Review of International Political Economy 11, no. 2
(2004): 390.43 ibid., 392.44 See Sakiko Fukuda-Parr, "New Threats to Human Security in the Era of Globalization," Journal
of Human Development4, no. 2 (2003): 167.; Lloyd Axworthy, "Human Security and Global Governance:
Putting People First," Global Governance 7, no. 1 (2001): 19.45 Porter and Craig, The Third Way and the Third World: Poverty Reduction and Social Inclusion
in the Rise of 'Inclusive' Liberalism, 418.
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political economy should be commended for its recognition of the interconnectedness of
politics and economics, much of the literature falls short in continuing to assume that the
state is the primary political actor.46 I agree with David Harvey in The New Imperialism
when he states that, there is considerable evidence that the transition to capitalist
development was and continues to be vitally contingent upon the stance of the state.
And that, the development role of the state goes back a long way, keeping the territorial
and capitalist logics of power always intertwined though not necessarily concordant.47
Though I would make a departure from Harveys articulation that the only realistic
answer to the current problems with neoliberalism is the reformulation of state power
along more interventionist and state lines where the power of financial capital,
oligopolies and monopolies is curbed.48 This is indeed an outcome that should be
applauded if realized but it once again places the power of governance in the hands of
nation-state and inter-national actors, discounting the importance of local communities
and the political space located therein to make change.
As articulated in Lydia Herbert-Cheshire and Geoffrey Lawrences essay
Political Economy and the Challenge of Governance, power should not be relegated to
state actors but:
From a Foucauldian governmentality perspective, on the other hand, modernforms of power are seen to occur less through the formal structures of thenation state or for that matter, through supra-national authorities and morethrough a complex network of localized power relations. These relationscannot be reduced to any one way domination of one class by another, but are
46 See Underhill, Conceptualizing the Changing Global Order, 3-21.; C. Roe Goddard, Patrick
Cronin, and Kishore C. Dash eds.,International Political Economy: State-Market Relations in a Changing
Global Order, , 2nd ed. (Boulder, CO: Lynne Rienner Publishers, 2003), 513.47 David Harvey, The New Imperialism, (New York, NY: Oxford University Press, 2003), 145.48 ibid., 209. This is similar to the critique stated by Porter & Craig.
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made up of shifting alliances between individuals and groups, which fractureand re-form according to different issues and interests.49
Power does not only lie within the function of the state but rather, power lies also within
communities who mobilize, take action and embody the ethic that they wish to see in the
world. The modern state should no longer be seen as the primary locus of where
processes of change occur.50 This makes possible a new order where civil society or a
network or organizationspresentrather than represent those interest which represent the
people.51 This is particularly informative when looking at the political economy of war
since many, if not the majority, of the political actors within contemporary conflicts are
non-state actors.
If political economy looks at the dynamics between the political and economic
realms, a political economy of war perspective explores the role of economic factors
which lead to state collapse, give rise to and sustain conflict, and complicate
peacebuilding.52 A political economy of war perspective allows for a critical look at
regional linkages and violent cross-border spillover.53 Michael Pugh and Neil Cooper
acknowledge that traditionally, the effects of globalization and outside economic factors
have not been considered as causes of conflict but rather conflict is caused by purely
indigenous factors.54 Rather, globalization and economic and political liberalism are
49 Lynda Herbert-Cheshire and Geoffrey Lawrence, "Political Economy and the Challenge of
Governance," Journal of Australian Political Economy 0, no. 50 (2002): 141.50 Kenneth Surin, "Marxism(s) and "The Withering Away of the State"," Social Text, no. 27
(1990): 35-54.51 ibid.52 Pugh, Michael and Neil Cooper, War Economies in a Regional Context, Challenges of
Transformation, (Boulder, CO: Lynne Rienner, 2004), 1.53 ibid., 2.54 ibid., 2.
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primary causes of contemporary conflict.55 In discussing the political economy of war in
Sub-Saharan Africa, Cramer notes that now that the classical liberal interpretation of
war with its assumptions of war as exogenous and wholly negative in its socio-
economic effects has been overtaken by more nuanced analyses of the dynamics of
wartime economies and societies, it may well be that this area of research will expand
productively in coming years.56 In contrast to a neo-classical economic framework (i.e.
Collier), Cramer advocates for a political economy perspective which takes seriously
social relations, material conditions, the drive for political power as well as an analysis of
capital and class formation.
57
As already stated, this essay will intend to do just that,
analyze the ways in which neoliberal policies have contributed to fuelling conflict and
civil unrest. Through a global political economy framework, this discussion will explore
three of the mechanisms by which neoliberalism has fueled conflict: the growing power
of transnational corporations, widening income inequalities and the decline of the state.
This will be supported by a review of the contemporary literature as well as through
particular case studies.
55 Timothy M. Shaw, "Peace-building partnerships and human security," in The Companion toDevelopment Studies, ed. Desai, Vendana and Robert B. Potter. (New York, NY: Oxford University Press,
2002), 450.56 Chris Cramer, The Economics and Political Economy of Conflict in Sub-Saharan Africa,
(London, UK: Center for Development Policy & Research, 1999), 20.57 C. Cramer, "Homo Economicus Goes to War: Methodological Individualism, Rational Choice
and the Political Economy of War," World Development30, no. 11 (2002): 1856. The work of persons
such as Collier will be discussed further in the next chapter.
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Chapter 3: TNCs, Inequality and the Transformation of the State
Using this global political economy which looks at the power embedded in
economic relationships, this chapter will analyze how neoliberal policies rather than
building peace, foster global instability by fuelling armed conflict. This has happened in
three significant ways: 1) the increasing role of transnational corporations, 2) the
widening of income inequality and 3) the dismantling of the state.
The Rise of Transnational Corporations
Michael Todaro and Stephen Smith note that few developments have played as
critical a role in the extraordinary growth of international trade and capital flows during
the past few decades as the rise of the transnational corporation (TNC).58 As a result of
neoliberal policies, TNCs are free to move capital as well as goods and services on a
global scale. Increasing foreign direct investment has been rapid during the past couple
of decades rising from an annual rate of US$2.4 billion in 1962 to over US$185 billion in
1999 in constant dollars.59 Recently, the role of TNCs in conflict situations has been
highlighted by non-governmental organizations including Human Rights Watch,
Amnesty International, Global Witness and International Alert.60 This private sector
activity, both licit and illicit, is a significant factor influencing the shape and intensity of
many conflicts.61 Recently, UN Secretary-General Kofi Annan pointed out the ways in
which armed groups use TNCs to their benefit in a report to the Security Council on
armed conflict:
58 Todaro and Smith,Economic Development, 635.59 ibid.60 See www.amnesty.org, www.hrw.org, www.globalwitness.org, and www.internation-alert.org .61 Jessica Banfield, Virginia Haufler, and Damian Lilly, Transnational Corporations in Conflict
Prone Zones: Public Policy Responses and a Framework for Action, (London, UK: International Alert,
2003), 1-89.
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The impact of the pursuit of economic interests in conflict areas hascome under increasingly critical scrutiny. Corporations have beenaccused of complicity with human rights abuses, and corporate tieshave continued to fuel civil wars. It has become commonknowledge that by selling diamonds and other valuable minerals,
belligerents can supply themselves with small arms and lightweapons, thereby prolonging and intensifying the fighting andsuffering of civilians.62
Moreover, nongovernmental organizations indicate that TNCs in countries as diverse as
Colombia, Indonesia and Nigeria, continue to exacerbate conflict.63
Paul Collier, at the University of Oxfords Centre for the Study of African
Economies, has been at the forefront of the discussion regarding the role of resource
exploitation in civil war.64 His analysis is helpful in pointing out the significance of
TNCs and natural resources in civil conflict.65 The main thesis of his ongoing work is that
grievance motives for conflict: inequality, political rights, ethnic polarization, and
religious fractionalization are not significant motivators for conflict; but rather, civil
conflict is motivated primarily by the availability of finance, what he calls the greed
motive.66 Collier argues that countries which have a substantial share of their income
(GDP) coming from the export of primary commodities are radically more at risk of
conflict.67 Thus as a result of these commodities being used for extortion, makes civil
62 Kofi Annan,Report to the Security Council on the protection of civilians in armed conflict,
(New York, NY: UN, 2001).63 Banfield, Haufler, and Lilly, Transnational Corporations in Conflict Prone Zones: Public
Policy Responses and a Framework for Action, 1-89.64 See, Paul Collier,Economic Causes of Civil Conflict and their Implications for Policy,
(Washington, DC: Development Research Group, World Bank, 2000), 1-23.; Paul Collier and NicholasSambanis, "Understanding Civil War: A New Agenda," Journal of Conflict Resolution 46, no. 1 (2002): 3-
13.; Paul Collier, Anne Hoeffler, and Mns Sderbom, "On the Duration of Civil War," Journal of PeaceResearch 41, no. 3 (2004): 253-273.; Paul Collier and Anne Hoeffler, "Greed and Grievance in Civil War,"
Oxford Economic Papers 56, no. 4 (2004): 563-95.; Paul Collier, "Doing Well out of War: An EconomicPerspective," in Greed and Grievance: Economic Agendas in Civil Wars, eds. Mats Berdal and David M.
Malone. (Boulder, CO: Lynne Rienner Publishers, 2000), 91-21.65 Later when discussing inequality we will look at the limits of Colliers analysis and conclusions.66 Collier and Hoeffler, Greed and Grievance in Civil War, 588.67 Collier,Economic Causes of Civil Conflict and their Implications for Policy , 6.
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conflict both feasible and attractive.68 Collier writes: the true cause of much civil
conflict is not the loud discourse of grievance but the silent force of greed.69 From a
political economy perspective, the role of transnational corporations is crucial here as
they play a major role in extracting and transporting these resources. Though Collier
does not speak directly to the role of TNCs, many agencies including the UN and other
NGOs as well as numerous academics point to the significance of TNCs in extracting
these war-financing commodities (including conflict in Afganistan, Burma, Cambodia,
Colombia, DRC, Indonesia (Aceh, Kalimatan and West Papau), Liberia, Nigeria, Papau
New Guinea and Sierre Leone).
70
Cramer as well as Frynas and Wood share my thesis by
questioning the neoliberal notion that increased trade flows will lead to peace; rather,
they indicate that TNCs exacerbate conflict by allowing new opportunities for
accumulation by elite segments.71 Moreover, citing Colliers analysis, Nafziger and
Auvinen, point how rulers and warlords use exclusive contracts with foreign firms
involved in resource extraction in order to consolidate power and secure income.72 They
point particularly to how Charles Taylor used transnational commercial networks to
amass power over Liberia as well as parts of Sierra Leone. Thus, Colliers contribution
in highlighting the greed motive is important for our discussion.
68 Collier and Hoeffler, Greed and Grievance in Civil War, 588.69
Collier,Doing Well out of War: An Economic Perspective , 101.70 See Paula Richardson, Corporate Crime in a Globalized Economy: An Examination of the
Corporate Legal Conundrum and Positive Prospects for Peace,Journal of Public and International Affairs
15 (Spring 2004): 165-189.71 Jedrzej George Frynas and Geoffrey Wood, The Liberal View of the Trade-Peace Relationship
Re-considered: Oil and Conflict in Angola, Paper presented at the VAD Conference 2002; Christopher
Cramer, Capitalism, violence and war,Anti-capitalism: a Marxist introduction. ed. A. Saad-Filho.
(London, UK: Pluto Press, 2002).72 E. Wayne Nafziger and Juha Auvinen, Economic Development, Inequality, War and State
Violence, World Development30 (2002): 157-158.
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International Alert, in a report on the operation of TNCs in conflict zones,
indicates that there are two basic categories for the ways in which corporations contribute
to violence: the impact on the local/micro level and the impact of foreign investment on
the host countrys political/economic structures (macro-level).73 The micro-level impacts
include the relationship between TNCs and local security forces, employment relations
and community relations. Community relations and employment relations are defined as
those activities both internal and within the community that may reinforce tensions and
create further inequality with only certain people benefiting from the companys
operation.
74
When it comes to security, companies contract either public or private
security forces to protect their investments. Sometimes these security personnel can be
repressive, violate human rights and can potentially play a role in the conflict.
One example of this is found in a report by Amnesty International documenting
human rights abuses by security personnel in the Democratic Republic of Congo.75 The
mining company MIBA is a state run diamond corporation with transnational companies
such as De Beers owning portions of the company. Government security personnel kill
dozens of unarmed civilians each year in order to prevent stealing from diamond
concessions.76
Of more importance to this study however, are the macro impacts. In many
conflict-prone regions the political economy is so weak that the disruption of the foreign
73 Banfield, Haufler, and Lilly, Transnational Corporations in Conflict Prone Zones: PublicPolicy Responses and a Framework for Action, 18.
74 ibid., 19-20.75Democratic Republic of Congo: Making a Killing - the diamond trade in government-
controlled DRC, Amnesty International, 2002), 1-37.76 ibid.
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investment has a huge impact.77 Foreign investment often targets specific regions which
benefits some and disadvantages others; this inequality may reinforce existing tensions
either ethnically or religiously. When natural resources are concentrated in one region of
the country, as in the case of oil in Nigeria, residents do not receive a fair share of the
benefits from the resource extraction but are left burdened with the environmental and
resettlement consequences which may fuel violence.78 In some cases, bribery and
corruption are common where either public officials or rebel groups seek self-
aggrandizement, promising security and/or ease of operation.79 The existence of the TNC
itself allows for combatants to have easy access to global markets whether illegally or
legally. Because of increased liberalization through neoliberal globalization, diamonds,
timber, oil and other resources move freely and quickly with the assistance of TNCs
providing the financial income necessary for the purchase of armaments.
Specifically, when one looks at the cases in Africa, war in Angola, Sierre Leone,
Sudan and the DRC have all shown a high integration into the global economy through
the operation of TNCs which have both intensified and prolonged the conflict.80 As
already alluded to, De Beers has had a long history of buying conflict diamonds
originating from areas such as Sierre Leone, DRC and Angola. Particularly in the DRC,
there are a plethora of natural resources which continue to be exploited and thus fuel the
war economy. According to Amnesty International the eastern regions of the DRC are
77 Banfield, Haufler, and Lilly, Transnational Corporations in Conflict Prone Zones: Public
Policy Responses and a Framework for Action, 1-89.78 James K. Boyce,Aid, Conditionality, and War Economies, (Amberst, MA: Political Economy
Research Institute, University of Massachusetts Amhert, 2003), 5.79 Banfield, Haufler, and Lilly, Transnational Corporations in Conflict Prone Zones: Public
Policy Responses and a Framework for Action, 1-89.80 Charles Cater, "The Political Economy of Conflict and UN Intervention: Rethinking the Critical
Case of Africa," in The Political Economy of Armed Conflict: Beyond Greed and Grievance, eds. Karen
Ballentine and Jake Sherman. (Boulder, CO: Lynne Rienner, 2003), 19-26.
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rich in gold, diamonds, coltan, cassiterite, copper, cobalt, wolfram, zinc and oil, as well
as timber, coffee and palm oil. Moreover, considerable diamond deposits exist in
Kisangani, Bafwasende and Watsa, high quality gold in Ituri, and coltan deposits
throughout the eastern DRC.81 Amnesty points out that the UN Panel of Experts has
documented various international connections with the exploitation of coltan in eastern
DRC. In particular, the UN alleges the involvement of several European companies or
individuals and one US Company in the coltan trade. Rebel leaders in the Goma area are
estimated to raise approximately US$200,000 per month on the Coltan trade involving
Northern TNCs.
82
Many of the companies named in the UN Panel reports, particularly in
the final October 2002 report, have denied any involvement in contributing to the
conflict.83
However, the influence of transnational corporations and the overall world wide
trade of primary commodities has not only been a factor in African conflicts but also in
other regions. For example, the timber trade has played a large role in conflict in Asian
countries such as Burma (Myanmar), Cambodia, Indonesia, and the Philippines.84
Similarly, the ongoing conflict in Colombia has been fuelled by the illicit drug cultivation
and trade which has both been made necessary and easier via the forces of economic
globalization.85
81Democratic Republic of the Congo: "Our brothers who help kill us" - economic exploitation
and human rights abuses in the east. (London, UK: Amnesty International, 2003)82 Kent Hughes Butts and Arthur L. Bradshaw, Central African Security: Conflict in the Congo,
(Carlisle Barracks, PA: Center for Strategic Leadership, U.S. Army War College, 2001),28 & 34.83Democratic Republic of the Congo: "Our brothers who help kill us" - economic exploitation
and human rights abuses in the east.84 The Logs of War: The Timber Trade and Armed Conflict - Economies of Conflict: Private
Sector Activity in Armed Conflict, (London, UK: Global Witness, Fafo Institute for Applied Social Science,
2002), 1-65.85 Alexandra Guaqueta, "The Colombian Conflict: Political and Economic Dimensions," in The
Political Economy of Armed Conflict: Beyond Greed and Grievance, eds. Karen Ballentine and Jake
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The case of Angola provides one of the best examples of how corporate
exploitation of natural resources fuels civil war. As Phillipe Le Billon points out, since
the integration of Angola into the Western economy five hundred years ago, the
demands placed on its wealth have been associated with repression and suffering.86 The
country has been placed under continuous stress: Angolas people were shipped to
Brazils plantations, colonists expropriated land for agricultural surpluses for Portugals
provision, and the new industrial economy of the twentieth century, coupled with
neoliberal globalization has facilitated the need for Angolas oil and diamonds. In
Angola, the rival parties of the ruling Peoples Movement for the Liberation of Angola
(MPLA) and the National Union for the Total Independence of Angola (UNITA) both
benefited from the extraction of natural resources facilitated by TNCs: MPLA oil and
UNITA diamonds.87 Oil exports from Angola have financed capital intensive
militarization of the state while also filling the bank accounts of political elites through
the operation of large TNCs such as ChevronTexaco and TotalFinaElf.88 These
companies have been backed by both the French and U.S. governments facilitating state-
backed loans, insurance, and corporate mercenary contracts as well as the French
governments role in facilitating arms-for-oil.89 Oil revenue in 1999 for the government
was estimated at US$ 2, 377 million.90
Sherman. (Boulder, CO: Lynne Rienner, 2003), 92. The example of Colombia will be discussed more fully
in the next section.86 Philippe Le Billon, "Angola's political economy of war: The role of oil and diamonds, 1975
2000," African Affairs 100, no. 398 (2001): 55.87 ibid., 57.88 Cater, The Political Economy of Conflict and UN Intervention: Rethinking the Critical Case of
Africa, 32.89 ibid., 32.90 Le Billon,Angola's political economy of war: The role of oil and diamonds, 19752000, 62.
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On the other hand, the diamond industry helped finance the rebel group, UNITA
who controlled 60-70% of the diamond industry.91 Companies such as De Beers are both
directly and indirectly buying from Angola. Though De Beers is upfront stating that
there is no doubt that we buy many of those diamonds that emanate from the UNITA-
held areas in Angola, second-hand in the markets of Antwerp and Tel Aviv, they deny
the purchase of UNITA diamonds directly.92 Recently, in 2002, the Kimberly process
was initiated in order to stop the flow of conflict diamonds; yet this process has been
hindered by the implementation of the regulations with 83% (25 out of 30) companies
surveyed falling short of implementing the protocols.
93
Though the conflict in Angola has killed 500,000 people with thousands more
suffering from landmines, and other injuries, TNCs refuse to acknowledge their
responsibility in the conflict. One oil company representative perhaps put it best when he
stated: As our boss keeps telling us: we are not Jesus Christ . . .We came to this country
to find oil and to make money. Thats our job.94
Transnational Companies benefit significantly from the liberalization of global
market and are thus able to take advantage of the South whose governments are desperate
for their financial investment. Meanwhile, as we have seen from an extensive review of
the literature and numerous examples (particularly the case of Angola), the operation of
TNCs in conflict areas contributes to further suffering by helping fund insurgency and
expanding military budgets. As Macartan Humphreys has pointed out, TNCs receive the
91Broken Vows: Exposing the 'Loupe' Holes in the Diamond Industry's Effort to Prevent theTrade in Conflict Diamonds, Global Witness, 2004), 7.
92 Le Billon,Angola's political economy of war: The role of oil and diamonds, 19752000, 76.93Broken Vows: Exposing the 'Loupe' Holes in the Diamond Industry's Effort to Prevent the
Trade in Conflict Diamonds, 32.94 Le Billon,Angola's political economy of war: The role of oil and diamonds, 19752000, 77.
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booty from war companies finance warring factions in exchange for the rights to the
spoils of conflict.95
Embedding Inequality
Just as there is a reluctance to acknowledge the role of corporations in civil
conflict, some neoliberal proponents continue to deny the increasing inequality created by
such policies.96 According to recent research, and using numerous testing strategies, there
is substantial evidence supporting the view that income inequality is rising globally.97
The neoliberal growth model, not only produces an overabundance of goods available to
western consumers and Southern elites but it also creates deeper inequality and economic
exclusion.98
Following neoliberal structural adjustment policies, we now have trickle up
or recessive income distribution on a global scale. . .99 and the present structure of the
neoliberal global economic order is transnational, centralized, concentric, and
institutionalized at the top.100 In fact, it is well documented that market-oriented
policies always tend toward disequilibria when one looks through a lens of class, income
distribution and geographic location.101
This growing gap has contributed substantially to armed conflict. According to a
UNESCO report, agreement is growing on the effect of inequality and social exclusion
on the creation and worsening of conditions leading to events that threaten peoples
95 David Hecht, "Why war zones love monopolies," Fortune 149, no. 11 (2004): 66-68.96 See for example, Standing up for the global economy: key facts, figures and arguments in
support of globalization, (Paris, France: International Chamber of Commerce, 2004).97
Robert Hunter Wade, "The Rising Inequality of World Income Distribution," inDevelopmentand Underdevelopment: The Political Economy of Global Inequality, eds. Mitchell A. Seligson and John T.
Passe-Smith. (Boulder, CO: Lynne Rienner, 2003), 36.98 Gilbert Rist, The History of Development: from Western Origins to Global Faith, trans. Patrick
Camiller. (New York, NY: Zed Books, 1997), 239.99 Nef and Robles, Globalization, Neoliberalism, and the State of Underdevelopment in the New
Periphery, 32.100 ibid., 41.101 Victor Segesvary,From Illusion to Delusion: The Contradictions of the Late Modernity,
(Lanham, MD: University Press of America, 2001), 237.
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security, including violence. The recent report studying Human Security, Conflict
Prevention and Peace, indicates that violence created by economic disparities is not just
a question of poverty, but about how people perceive it in a context of increasing
inequality of opportunity and social exclusion in societies which, at the same time,
include them (only) symbolically in their development horizons, thus greatly raising their
expectations.102 Other reports concur with this conclusion regarding the effects of
inequality. According to Francis Stewart, economic differentiation among groups is of
fundamental importance to group mobilization toward conflict.103
This seems to contradict the basic findings of Paul Collier who indicates that
factors such as inequality do not play a role in the engendering of civil armed conflict:
Inequality, whether measured in terms of income or landownership, has no affect on the
risk of conflict according to the data.104 For Collier, it is greed not grievance which
motivates civil conflict. Collier acknowledges that this is surprising but states that the
result cannot lightly be dismissed since his analysis with Anne Hoeffler has experimented
with hundreds of variables in which inequality is never found as a significant cause of
conflict (whereas primary commodity exports are always significant).105 In a discussion
of the Economics and Political Economy of Conflict in Sub-Saharan Africa, by Chris
Cramer, he summarizes Collier as one who ties the insight that there are economic
factors involved in the origins of and motivations for conflict to a rigorous neo-classical
framework, but that arguably what this analysis gains in the elegance of its formal
102 Francisco Rojas Aravena and Moufida Goucha,Human Security, Conflict Prevention and
Peace in Latin America and the Caribbean, (Santiago, Chile: UNESCO, 2001), 1-383.103 Frances Stewart, "The Root Causes of Humanitarian Emergencies," in The Origins of
Humanitarian Emergencies: War and Displacement in Developing Countries, eds. E. Wayne Nafziger,
Francis Stewart and Raimo Vayrynen. (Oxford, UK: Oxford University Press, forthcoming), 13.104 Collier,Doing Well out of War: An Economic Perspective, 97.105 ibid., 97-98.
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model it loses in social understanding.106 As Cramer points out, there is the danger that
economic motivations become too reductionist and simply replace one simplification
(tribal or cultural difference) with another, such as economic opportunism.107 It is here
that Colliers neo-classical framework falls short verses a more holistic political economy
perspective. Though Colliers greed analysis is helpful in highlighting the relationship
between resource access (such as diamonds, oil, timber) and armed conflict, he does not
recognize how those factors contribute to further embedding horizontal and vertical
inequality creating grievance both locally, nationally and regionally. It should also be
noted that others have used the Gini measurement used by Collier and Hoeffler and have
found a relationship between inequality and conflict.108
A regression analysis by Nafziger
and Auvinen using Gini coefficient data indicates that high Gini or income
concentrations contribute to humanitarian emergencies.109 Christopher Cramer notes that
any econometric analysis appears capable of supporting completely contrasting claims
through modest changes in specification data.110 Cramer through a political economy
analysis notes that economic inequality is hugely important in explaining civil conflict
but only if the analysis is considered embedded within the social, political, cultural and
historical, considering factors such as colonialism, ethnic and regional differences, and so
on.111 Moreover, Collier also forgets that resource extraction by Transnational
Corporations, during times of conflict and weak government control, almost guarantees
that the benefits of this foreign investment will be distributed unequally resulting from
106 Cramer, The Economics and Political Economy of Conflict in Sub-Saharan Africa, 15.107 Ibid.,16.108 Nafziger & Auvinen, Economic Development, Inequality, War and State Violence, 156.109 ibid., 156.110 Christopher Cramer, CDPR Discussion Paper 1501: Economic Inequalities and Civil
Conflict, Centre for Development Policy & Research, School of Oriental and African Studies, University
of London, 2002, 11.111 ibid., 18.
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corruption between rebel groups, government and corporations as well as the significant
regional differences in the location of these primary commodities.112
In a book on the causes of humanitarian crises, Nafziger, Stewart and Vayrynen
also point to the role that inequality plays in engendering conflict and the interplay with
race and ethnicity: high rates of inequality are associated with a high propensity to
conflict, especially if it reflects or contributes to high inequality among regional, ethnic
or class groups.113 Chua indicates that whether it is deserved of not, market-dominated
minorities, with access to capital, skills and business networks, drive global capitalism
and foster not only a backlash against the dominant minorities but against the free
markets themselves.114
Rather than reinforcing the market liberalization and its apparent
wealth production, this inequality and the frustration/empowerment of the poor threatens
the peace and prosperity that proponents of the market envision.115 The inequality
fostered by neoliberal globalization actually hurts market liberalization and efficiency by
fuelling and instigating conflict.
Colombia is an excellent example of how inequality fuels armed conflict. In
Colombia, the guerrillas have historically claimed that they are fighting against
systematic political and socioeconomic exclusion of the majority by the small urban
elite.116 Inequality remains one of the primary causes of the conflict in Colombia and has
been exacerbated in the past few decades despite the progress made in the 60s and 70s.
112
Banfield, Haufler, and Lilly, Transnational Corporations in Conflict Prone Zones: PublicPolicy Responses and a Framework for Action, 18-20.
113 E. Wayne Nafziger, Francis Stewart, and Raimo Vayrynen, "Case Studies of Complex
Humanitarian Emergencies," in The Origins of Humanitarian Emergencies: War and Displacement in
Developing Countries, eds. E. Wayne Nafziger, Francis Stewart and Raimo Vayrynen. (Oxford, UK:Oxford University Press, forthcoming), 3.
114 Amy Chua, World On Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred
and Global Instability, (Toronto, ON: Anchor Books, 2004), 261.115 ibid., 261.116 Guaqueta, The Colombian Conflict: Political and Economic Dimensions, 95.
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Rural inequality has increased substantially due to neoliberal reforms and expanding
capitalist agriculture.117 The well-being of small peasant property owners has steadily
declined as a consequence of more open markets and lower protective tariffs.118 This
rising inequality has undoubtedly aided the expansions of the guerilla movement and
also led to an increase in the number of peasants with links to the illegal drug
economy.119 The conflict has embedded these inequalities further as people are forcibly
displaced and as drug traffickers land holdings increase.120
The ongoing conflict and inequality has resulted in a large group of peasants
relying on the drug economy. In addition to liberalization, the drop in coffee prices and
other cash crops have made illicit crops the only viable alternative making up an industry
of approximately 1.5-3 billion per year.121 Nazih Richani specifically points to the strong
correlation between those areas which are dominated by violence and the high levels of
inequality. Uneven economic development has led to high numbers of assassinations in
areas where the agroindustry, raising of livestock, mining and textiles are concentrated.122
The profits that the elite are able to make off of the war through extortion and the control
of the drug trade, make peace a very expensive commodity.123 As a result of the
uncertainty created by insurgents, narco-trafficking, peace negotiations, etc., there was
little time for Colombians to oppose these neoliberal policies which have fed the conflict.
117 Jason Thor Hagen,Agrarian Interests in a Liberalizing Economy: Colombia's Law 101 of
1993, (Guadalajara, Mexico: Prepared for delivery at the Latin American Studies Association, 1997), 1 &7n. Whether inequality remains the sole motivation for the guerillas can definitely be debated considering
the large profits that armed groups are making through trade and criminal activity.118 Nazih Richani, "The political economy of violence: The war-system in Colombia," Journal of
Interamerican Studies & World Affairs 39, no. 2 (1997): 37.119 ibid.120 Guaqueta, The Colombian Conflict: Political and Economic Dimensions, 95.121 Richani, The political economy of violence: The war-system in Colombia, 37.122 ibid.123 ibid.
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In fact, it has been suggested that President Gaviria used these issues as a distraction
meanwhile deepening the liberalization process.124 The inequality created by the
expansion of neoliberal policies through structural adjustment has not only led peasants
into the arms of the guerillas but has also forced farmers into the illegal trade which funds
the insurgency.
It is clear that neoliberal policy imperatives and structural adjustment programs
create increasing inequality entailing intensified impoverishment for the majority.125 The
presence of this income inequality not only leads to poverty but enhances the potential for
insurgency and armed conflict.
126
The Transformation of the State
Not only are the operations of transnational corporations and rising inequality
causes of instability but the retreat or hollowing out of state structures can also be a
catalyst for violent conflict. Though the implementation of neoliberal macroeconomic
policies through structural adjustment programs are said to facilitate adjustments to more
positive economic realities, they often create increased political instability as public
expenditure decreases and as the state loses control over economic decision making. The
new structures of global governance (including international financial institutions such as
the World Bank and the IMF) as well as the increased strength of local-global
interconnections undermine state authority and democratic accountability.127 Neil Cooper
points out in his discussion of the political economy of post-modern conflict that weak
124 Hagen,Agrarian Interests in a Liberalizing Economy: Colombia's Law 101 of 1993, 1 & 7n.125 Shaw,Peace-building parnerships and human security, 450.126 Edward N. Muller and Mitchell A. Seligson, "Inequality and Insurgency," inDevelopment and
Underdevelopment: The Political Economy of Global Inequality, eds. Mitchell A. Seligson and John T.
Passe-Smith. (Boulder, CO: Lynne Rienner Publishers, 2003), 93-95.127 Angus Cameron and Ronen Palan, The Imagined Economies of Globalization, (London,
Thousand Oaks, New Delhi: Sage Publication, 2004), 139.
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states in the developing world have become virtual states where their autonomy has been
destabilized by the influence of globalization, aid dependence and structural adjustment
programs. These neoliberal influences have both reduced the authority and the
legitimacy of the state.128 Looking particularly at conflicts in Sierra Leone, Congo and
Liberia, Nafziger and Auvinen indicate that humanitarian crises, particularly conflict, are
more likely to occur when the state is weak.129 Another study points out that the
occurrence of civil conflict in Africa is intimately related to the failure of governments to
deliver the type of public expenditures that the people want, i.e., with a strong
redistributive component such as health and education.
130
Giving examples as diverse as
Colombia, Kosovo, Afghanistan and the DRC, Neil Cooper point to how increased global
free trade has contributed to the weakening of the state.131 I quote at length:
When the structural violence created by these legitimate tradingnetworks is combined with the impacts of neo-liberal globalization,structural adjustment and aid dependence the effect is to produce aparticularly acute version of the crisis of the state which creates theconditions for, if not the inevitability of, collapse.132
However, Nicolas van de Walle has difficulty with those who quickly point to the
international financial institutions and SAPs as reasons for state failure.133 According to
Van de Walle, there has not been a neoliberal assault in low-income Africa, but yet he
128 Neil Cooper, "Warlords and Logo Warriors: The Political Economy of Post-Modern Conflict,"
inArming the South: The Economics of Military Expenditure, Arms Production and Arms Trade in
Developing Countries, eds. Jurgen Brauer and J. Paul Dunne. (New York, NY: Palgrave, 2002), 39.129
Nafziger & Auvinen, Economic Development, Inequality, War and State Violence, 154.130 Jean-Paul Azam, The Redistributive State and Conflicts in Africa,Journal of Peace
Research 38 (July 2001): 442.131 See Neil Cooper, State Collapse as Business: The Role of Conflict Trade and the Emerging
Control Agenda,Development and Change 33 (2002): 935-955.132 ibid., 952.133 See Nicolas Van de Walle, "The economic Correlates of State Failure: Taxes, Foreign Aid and
Policies," in , ed. Robert I. Rotberg. (Princeton, NJ: Princeton University Press, 2004), 94-115; Nicolas
Van de Walle,African Economies and the Politics of Permanent Crisis, 1979-1999, (Cambridge, UK:
Cambridge University Press, 2001), 291.
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acknowledges that structural adjustment processes have created instability.134 Speaking
specifically about Africa, he states that initially the flow of resources to the area through
multilateral lending helped to stabilize governments by providing an economic boost.
While at the same time he points out that donor efforts have not helped to bring about the
renewal of economic growth and that the persistence of economic crises for over two
decades has had a negative effect on political stability.135 Moreover, though Van de
Walle expresses reservation about those who make blanket statements in regards to SAPs
and the IFIs, he concedes that:
Local technocrats often take a back seat to semestrial missions fromthe Washington institutions. Economic decision-making power ismoved away from the ministries and their procedures to ad hocdonor-financed structures . . .which typically lack transparency andaccountability. National budgetary and planning structuresatrophy.136
Joseph Stiglitz, former advisor to President Bill Clinton and chief economist at the World
Bank, asserts that the Bretton Woods institutions have failed to bring about global
stability but for many countries have made matters worse, crippling the developing
world.137
When we adopt a political economy framework, we see that this crippling of the
state also fosters increasing inequality and creates an environment where transnational
companies can operate with little accountability. This dislocation of conventional
political structures thus permits further social exclusion.138 Inequality is further
embedded as access to public services of education and health decrease and while weak
134 Van de Walle, The economic Correlates of State Failure: Taxes, Foreign Aid and Policies,111.
135 ibid.136 ibid.137 Joseph E. Stiglitz, Globalization and its discontents, (New York and London: Norton, 2002).138 Cameron and Palan, The Imagined Economies of Globalization, 139.
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state elites (whether government or rebel leaders) use privatization and the presence of
TNCs to exploit local resources and linkages with the global market place.139
As the poor become increasingly frustrated during this phase of adjustment,
there are often violent outbursts against the state. In fact, this negative perception of the
state by the local population has a negative effect on the structural adjustment programs
themselves because of social and political unrest.140 For example, privatization and
liberalization was highly unpopular in Haiti as many argued that the problem was the
political will to make public companies run efficiently.141 Moreover, IMF policies hurt
Haitis rural population (70%) with the shift to export-orientation creating massive
migration into urban slums which caused further discontent with the government.142
Since there is no effective governance in Haiti, policies which further disenfranchise the
population breed civil unrest continuing to whittle away at the state.
A similar comparison can be made to the restructuring that occurred in Somalia
prior to the crisis in 1991. Michel Chossudovsky argues that the Bretton Woods
recommended fiscal reforms contributed to the collapsing of the state.143 Chossudovsky
draws a direct correlation between SAPs and the formation of the famine because of its
systematic undermining of the categories of economic activity which do not directly
serve the interests of the global market system, specifically Somalias pastoral economy
and the exchange between nomadic herdsmen and small agriculturalists:
139
Cooper, Warlords and Logo Warriors: The Political Economy of Post-Modern Conflict, 39.140 Eirin Mobekk and I . Spyrou, "Re-evaluation IMF Involvement in Low-Income Countries: The
Case of Haiti," International Journal of Social Economics 29, no. 7-8 (2002): 527.141 ibid., 533. For further discussion on IMF involvement in Haiti see "Haiti's latest coup:
Structural adjustment and the.." Multinational Monitor18, no. 5 (1997): 20.142 Mobekk and Spyrou,Re-evaluation IMF Involvement in Low-Income Countries: The Case of
Haiti, 533.143 Michel Chossudovsky, "The Real Causes of Somalia's Faimine," in Justice Denied!: Human
Rights and the International Financial Institutions (Geneva, Switzerland: Women's International League,
1994), 27-33.
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Import substituting industries for the internal market are dismantledas a result of the lifting of tariff barriers and the collapse of internalpurchasing power, small artisans are impoverished, and food farmingis undermined in favor of export crops. In turn, the State apparatusis undone through the imposition of fiscal austerity, civil society
collapses, and the nation-State becomes politically fragmented.
144
Though, Somalia and Haiti are good examples of how already weak states became
crippled by neoliberal policies, it is the case of Rwanda which is perhaps the most
horrific and noteworthy.
In an essay entitled How multilateral development assistance triggered the
conflict in Rwanda, Regine Andersen notes that both multilateral and bilateral agencies
promoted strategies of economic structural adjustment, democratization and peace in
Rwanda.145 Though a multitude of factors contributed to the crisis (i.e. ethnic tensions,
economic malaise, etc), the policies played a role in instigating the genocide. During and
economic downswing, the Habyarimana regime was forced into negotiations with both
the IMF and the World Bank on structural adjustment loans which in turn made a
conditional link between aid and democratization, as well as the implementation of the
Arusha Accords.146 Even Nicolas van de Walle agrees that aid contributed to the
mobilization of ethnic minorities despite his reservations about such arguments.147 SAPs
undermined the legitimacy of the government as perceived by the majority of the
population as Rwandas currency was devalued numerous coupled with significant price
increases which led to rapid inflation.148 Though exports increased, farm earnings
144 ibid. 27 & 32.145 Regine Andersen, "How multilateral development assistance triggered the conflict in
Rwanda," Third World Quarterly 21, no. 3 (2000): 442. In some ways this coupling of marketization anddemocratization echoes previous arguments in Chua, World On Fire: How Exporting Free Market
Democracy Breeds Ethnic Hatred and Global Instability, 346.146 Andersen,How multilateral development assistance triggered the conflict in Rwanda, 450.147 Van de Walle,African Economies and the Politics of Permanent Crisis, 1979-1999, 291., 210.148 Andersen,How multilateral development assistance triggered the conflict in Rwanda, 448.
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decreased sharply by 20%.149 Meanwhile the simultaneous multiparty democratization
process led to the fragmentation of political groupings into new radical racist groups
which further weakened the position of the government and led to the deterioration of the
peace process.150 It was therefore the tensions between these economic and political
processes which led to the weakening of the regime contributing to the formulation of the
genocide.151
The particular examples of Rwanda, Colombia and Angola along with the
extensive review of the contemporary literature has revealed the numerous ways in which
neoliberalism has contributed to civil conflict. By looking simultaneously at political and
economic factors, one can see that dominance of TNCs, growing inequality and the
retreat of the state has perpetuated and fuelled these violent conflicts.
149 ibid.150 ibid., 452.151 ibid., 452.
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Chapter 4: The Construction of the Neoliberal Hegemony
In a recent report on globalization, the International Chamber of Commerce (ICC)
argues that globalization, more particularly neoliberal globalization, is a much-
misunderstood phenomena.152 The report insists that a more open economy and more
accountable governance will lead to a higher standard of living for persons around the
globe. The report defines globalization as the spread of market reforms and open trade
policies. The benefits of globalization include: faster economic growth, a rise in living
standards, easier access to capital and technology, high productivity and lower prices;
while the challenges of globalization are listed as transition problems as well as social
and cultural impacts.153
As we have seen, Structural Adjustment Programs (SAPs) and neoliberalism have
led to increasing global inequality which disputes the findings of this report which
indicates that the inequality gap is closing.154 But perhaps the biggest inadequacy of the
ICC Report on Globalization is its recommendation that it is conflict and bad
governance which are holding countries back from reaping the benefits of economic
globalization.155 What the report fails to recognize is how in many instances neoliberal
globalization in fact undermines Southern governments as well as fuels global instability
through increasing inequality. Moreover, the expansion of transnational corporations
(TNCs) around the world has actually been associated with an increase in distributional
152 Standing up for the global economy: key facts, figures and arguments in support of
globalization, (Paris, France: International Chamber of Commerce, 2004).153 ibid.154 See for example: Frances Stewart and Albert Berry,Inequality, Globalization, and World
Politics, (New York, NY: Oxford University Press, 1999) & Oscar Altimit, "Income Distribution and
Poverty Through Crisis and Adjustment," inPoverty, Economic Reform, and Income Distribution in Latin
America, ed. Albert Berry. (Boulder, CO: Lynne Rienner Publishers, 1998), 43-80.155 Standing up for the global economy: key facts, figures and arguments in support of
globalization,18.
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conflicts around the globe with conflicts arising over oil, gas, minerals, etc.156 Similarly,
neoliberal policies and the influence of the Washington Consensus by the International
Financial Institutions have undermined local government authorities by imposing strict
guidelines on public expenditure and fiscal policy. Though armed conflict is a concern
for development, the ICC report seems to be confusing cause and effect.
What this paper has argued from a political economy perspective is that in many
cases it is precisely that neoliberal economic hegemony which has fueled conflict.
Neoliberal policies allow for warring factions to fund their operations with the help of
transnational corporations such as the case of Angola; radical liberalization causes further
social polarization and inequality like in Colombia; and programs such as structural
adjustment or the Washington Consensus have led to a hollowing out of the state in
instances such as Somalia and Rwanda. What is needed and what is not explored in this
work is an understanding of the types of macro-economic policies which foster peace-
building and sustainable development. Some continue to advocate that liberalization,
commercial freedom and the general promotion of capitalism will bring peace;157 but as
we have seen from the literature and numerous examples, the idea that such pure market-
based approaches bring peace is an illusion. We must seek alternatives to the
Washington Consensus if development policy is going to promote peace. However, the
development discourse remains fragmented with very little alternatives to the dominant
neoliberal model.
156 Joan Martinez-Alier, "Environmental Justice as a Force for Sustainability," in Global Futures:
Shaping Globalization, ed. Jan Nederveen Pieterse. (New York, NY: Zed Books, 2000), 159.157 See Erich Weede, "The Diffusion of Prosperity and Peace by Globalization," Independent
Review 9, no. 2 (2004): 165-186. & John A. Tures, "Economic Liberalization and International Order,"
Cato Journal23, no. 3 (2004): 423-31.
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It has become difficult to engage alternatives to the neoliberal model when the
forces of economic globalization are so pervasive. Neoliberalisms linear growth model
has not only led to a widening gap between the rich and the poor, given rise to large
transnational capital flows and weakened the position of the state, but the shear
dominance of this ideology has led to the fragmentation of development discourse.
Growth is assumed and many of the so called alternatives only cloak themselves in a
new language in an attempt to hide the same linear thinking.
Because Marxs model is no longer considered viable due to the fall of Soviet
communism, the neoliberal growth paradigm has become the governing model in the
present ideological vacuum.
If the South were to just follow the recipe for growth there would be
development. Yet, the current neoliberal model has caused great hardship for the poor
as a result of increasing global inequality. Neoliberal policies have created a world
where the richest one percent receives as much income as the poorest 57 percent.158
Gilbert Rist even argues that it is in the nature of development not only to make the
overabundance of goods available to consumers but also to produce inequality and
exclusion.159 The proponents of the growth ideology insist that the poor will eventually
benefit as a result of the trickle-down effect; yet the benefits of this hyper-growth most
often trickle up.160 The model assumed that once the pie gets big enough, then it can be
158 Henry Veltmeyer, James Petras, and Steve Vieux,Neoliberalism and class conflict in LatinAmerica : a comparative perspective on the political economy of structural adjustment, (New York, NY:
St. Martin's Press, 1997), 5.159 Rist, The History of Development: from Western Origins to Global Faith , 239.160 "A Critique of Corporate Globalization," inAlternatives to Economic Globalization: A Better
World is Possible (San Francisco, CA: Berret-Koehler Publishers Inc., 2002), 21.
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divided. The neoliberal growth paradigm maintains an inequitable social order, which is
exclusionary, class-biased and thus fuels conflict.161
While on the one hand, advocates indicate that this growth will eventually trickle
down to the poor, there is an acknowledgement that before one reaches development
there will be some growing pains. Inequality, the destruction caused by TNCs and cuts to
government spending are then perhaps just necessary growing pains of this neoliberal
agenda. Rist links the neoliberal model to Western Christian thought saying that
neoliberalism, like any religion requires sacrifice.162 It appears then that armed conflict is
not unexpected but that such hardship for the poor and marginalized is part of the
turbulence required for the take off.
Neoliberalism has become the dominant discourse because it has on its side all
the forces of a world of relations of forces, a world that is contributes to making what it
is.163 This discourse legitimates the elitist interests of national and international regimes
such as transnational corporations and the international financial institutions and of
course the economic policies of those very elites who benefit from such a regime.164 The
globalization of this ideology has eroded political power by forcing nations to follow the
logic of the market and the god of growth.165 Neoliberalism is a construction; yet this
logic has become hegemonic because of the institutions which continue to preserve the
same violent evolutionist creed. The need for economic growth continues to be the
161 Nef and Robles, Globalization, Neoliberalism, and the State of Underdevelopment in the NewPeriphery, 35.
162 Rist, The History of Development: from Western Origins to Global Faith, 240.163 See Pierre Bourdieu, The essence of neoliberalism: Utopia of endless exploitation,Le Monde
Diplomatique (Dec 1998).164 See Ken Kempner and Loureiro Jurema, "The Global Politics of Education: Brazil and the
World " Higher Education 43 (2002): 331-354.165 Rist, The History of Development: from Western Origins to Global Faith, 224.
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imperative for every new development model proposed. Development discourses have
become fragmented as a result of the neoliberal ideological empire.
If there is going to be hope for the people of Colombia, Sudan, the DRC and
Jamaica, then we are going to need to imagine alternatives to the existing paradigm. Our
political economy approach teaches us that we cannot assume that a narrow neoliberal
approach will bring peace and development. Perhaps more importantly as development
practitioners and theorists, we must be conscious about how the construction of
knowledge can initiate violence and promote the continued suffering of the global south.
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