Why Economists Must Engage with War and Peace: Costs, Peacebuilding, and Policy Failures

This podcast episode from NewEconomicThinking critically challenges the traditional stance of economists who often view war and peace as outside their professional domain, labeling such attitudes as "shrug" or "smug" responses. The speaker argues that this detachment is irresponsible, given the immense and multifaceted costs of conflict. These costs extend beyond the commonly acknowledged financial expenditures, encompassing horrific human tolls—millions of civilian deaths, widespread casualties, and psychological trauma—as well as significant and often deliberate environmental destruction, from greenhouse gas emissions by militaries to toxic contamination and the enduring legacy of landmines. The core argument is that economists must integrate the dynamics of war and peace into their analytical frameworks and policy recommendations to prevent conflict and facilitate genuine post-conflict recovery.

The episode delves into the nuances of these costs, highlighting that while financial costs are substantial (e.g., $8 trillion by the US since the turn of the century), the human and environmental impacts are often more profound and long-lasting, yet frequently overlooked in economic analyses. A key distinction is made through the El Salvador Civil War case study, where the speaker, involved in post-accord economic assessment, observed a critical disconnect. He uses the metaphor of "two doctors" operating on a patient (El Salvador) behind a curtain—the United Nations focusing on peace accord implementation, while Bretton Woods institutions (World Bank, IMF) pursued "business as usual" structural adjustment policies. This illustrates the failure to harmonize peacebuilding efforts with economic policy, risking the failure of both.

Practically, the podcast advocates for a "new economic thinking" that explicitly considers the fiscal requirements of peace accords, such as funding for national civilian police forces and land transfer programs for ex-combatants. It suggests that international aid, often part of an "aid for peace bargain," should be conditioned not just on macroeconomic stability but also on the fulfillment of peace commitments. The El Salvador experience revealed that governments, even after agreeing to peace terms, might be reluctant to fund certain provisions, using fiscal constraints (like IMF agreements) as an excuse. This underscores the need for external institutions to use their leverage to ensure compliance with peace-critical expenditures.

The broader implication is that the failure to integrate economic policy with peacebuilding can undermine fragile peace processes, potentially leading to a resumption of conflict and hindering sustainable economic recovery. The "shrug and smug problem" observed in El Salvador is presented not as an isolated incident but as a systemic issue prevalent in other post-conflict regions like the Balkans, Cambodia, and Guatemala. Therefore, the episode calls for a fundamental reorientation of economic thought and practice to actively contribute to peace, stability, and human welfare, recognizing that a healthy economy cannot truly thrive amidst unresolved conflict or without addressing its root causes and consequences.

"very often economics has taken the view that War and Peace is somebody else's problem that cop out is an irresponsible position"

"our job is simply to grow the biggest economic pie"

"two-thirds of the deaths were of non-combatants these are horrible costs horrible human costs"

"militaries are among the world's biggest emitters of greenhouse gases contributing to climate change"

"the legacy of that toxic contamination is still with us today and will be around its estimated for at least a century"

"the aid was a carrot which helped to induce the Waring parties both the government and the fmln to come to an agreement"

"El Salvador as a patient lying on an operating table with curtain drawn the length of the patient's body on either side of which two doctors were performing surgery at the same time neither of them aware of or able to see what the other doctor was doing"

"without doing so there was a serious risk that both operations would fail that is to say that both the peace process would break down and that the economy would not recover"

"these were programs that the government itself had agreed to fund as part of the peace process but had agreed to fund reluctantly very reluctantly"

"what was missing were any conditions that pertained to implementation of the Peace Accords"