Conflict and development: The reality of civil war economies
Policy and research are generally in line with the notion that conflict is an obstacle to economic development. It is common knowledge that fragile countries affected by violence receive less investment, tend to be poorer, and consequently more vulnerable to conflict. This is often referred to as “development in reverse” (Collier, 2008), or a situation where the negative effects of war paralyze economic development. Although there is evidence that supports this theory, researchers have noticed that there are cases where high levels of conflict have not deterred investment flows. Moreover, they have increased it. In a case study of Colombia’s oil industry in Arauca, David Maher (2015) found that in the peak of the violence during the period of 2001 to 2010, there was a substantial increase of Foreign Direct Investment (FDI) in the area. By analyzing the dynamics of investment flows, number of victims of human right violations and political violence, and internally displaced people, he noticed that violence levels were higher in the municipalities where oil companies had strategic interests. In fact, in those areas episodes of violence were followed by oil exploration, higher production, and investment in infrastructure.Mahler suggests that civil war violence in Colombia has facilitated access to land for oil exploitation, low labor costs, and the suppression of dissent, which created the conditions for increased investment and economic growth. This study shows that economic interest is also pursued in violent ways, which is a phenomenon that the “development in reverse” theory misses to fully capture. Furthermore, another study looking at investment flows to conflict affected areas from 1997 to 2009 found that companies with less concerns around corporate social responsibility are more likely to invest (Driffield, Jones & Crotty, 2013), which also affects the quality of economic development they drive. It is clear that further research on the mechanisms in which investment can exacerbate conflict, or promote peaceful, sustainable development is needed.
Collier, P. (2008). The bottom billion: Why the poorest countries are failing and what can be done about it. Oxford University Press.
Driffield, N., Jones, C., & Crotty, J. (2013). International business research and risky investments, an analysis of FDI in conflict zones. International business review, 22(1), 140-155.
Maher, D. (2015). The Fatal Attraction of Civil War Economies: Foreign Direct Investment and Political Violence. A Case Study of Colombia. International Studies Review, 17(2), 217–248.