War Cost World $9.46 Trillion in 2012

By Talia Hagerty, Pacific Standard

Economists are not new to the study of war. Many in the U.S. have argued that war is good for the economy, and those in Washington have seemed eager to believe them. Indeed, war is an ideal economics topic. It’s very expensive, and the numbers involved—money spent, weapons used, casualties—can be easily counted and crunched.

There is, however, a more challenging topic that has recently caught the eye of economists: peace.

In the last decade, researchers and economists from all over the world have made great gains in the nascent field of peace economics. They’re finding that violence and war are terrible for the economy, but also that we can use economics to prevent them.

The most recent study published by the Institute for Economics and Peace (IEP) found that violence cost the world $9.46 trillion in 2012 alone. That’s 11 percent of gross world product. By comparison, the cost of the financial crisis was just 0.5 percent of the 2009 global economy.

Peace seems obvious and easy when we’re living in it, and yet 11 percent of our global resources are being devoted to creating and containing violence.

JURGEN BRAUER AND JOHN Paul Dunne, editors of The Economics of Peace and Security Journal and co-authors of Peace Economics, define “peace economics” as “the economic study and design of political, economic, and cultural institutions, their interrelations, and their policies to prevent, mitigate, or resolve any type of latent or actual violence or other destructive conflict within and between societies.” In other words, how does peace affect the economy, how does the economy affect peace, and how can we use economic methods to better understand them both? These are not new topics for economics, Brauer says. But the research questions have usually used the word “war” instead of “peace.”

What’s the difference? Simply the absence of violence and war is what researchers call “negative peace.” It’s only part of the picture. “Positive peace” is the presence of the structures, institutions, and attitudes that guarantee a sustainable social system and the freedom from all forms of violence. Measuring the absence of violence is easy enough, relative to its presence, but assessing all the nuances of a sustainable social system is considerably more difficult.

Brauer makes a compelling case for peace economics. If, for example, two percent of global GDP is spent on weapons, there are certainly some who stand to gain from violence and war. But the majority of the economy does better in a setting of peace, and that violence is making things a lot harder for the other 98 percent. The trick is understanding how societies develop positive peace.

The Global Peace Index, released annually by IEP since 2007, ranks the world’s countries in order of peacefulness using 22 indicators of the absence of violence. Not surprisingly, IEP finds that Iceland, Denmark, and New Zealand were the most peaceful in 2013, while Iraq, Somalia, Syria, and Afghanistan were the least. The U.S. ranks 99 out of 162.

With comprehensive and nearly global data on the absence of violence, it becomes possible to test for coinciding social structures. This gives us a picture of positive peace. After statistically analyzing the relationship between GPI scores and approximately 4,700 cross-country data sets, IEP has identified groups of indicators, like life expectancy or telephone lines per 100 people, that it considers the key economic, political, and cultural determinants of peacefulness. IEP calls the resulting eight categories the “Pillars of Peace”: a well functioning government, equitable distribution of resources, free flow of information, a sound business environment, a high level of human capital (e.g., education and health), acceptance of the rights of others, low levels of corruption, and good relations with neighbors.

Many of the correlates of peace seem obvious. Quality infrastructure is typically destroyed by war; water is something we’re likely to fight over. The importance of studies like the Pillars of Peace is in unpacking the complexity of a society that, most simply, just works. A society where we all get what we need without picking up a gun. Peace seems obvious and easy when we’re living in it, and yet 11 percent of our global resources are being devoted to creating and containing violence. Peace economics demonstrates that ensuring an economy where everyone gets what they need both creates a more peaceful human experience and, in turn, wealth and jobs.

There are, of course, remaining improvements to be made to IEP’s frameworks. For example, gender equality is a statistically significant correlate of the absence of violence in general. But because the GPI has yet to include specific measurements of gender-based, domestic, or sexual violence—arguing that they don’t have sufficient cross-country data—we don’t yet know exactly how gender equality and peacefulness interact. There are other similar connections to be fine-tuned, too, and researchers are developing the econometric approaches to address them.

Peace economics is an opportunity to move our measurements and analysis of peace beyond war and organized conflict, according to Bauer, and toward the ideas of violence or non-violence. Brauer called upon an old adage to explain his enthusiasm for the field: You can’t manage what you don’t measure. We’re already very good at measuring and managing war, and so now it’s time to measure peace.

Talia Hagerty

Talia Hagerty is a peace economics consultant based in Brooklyn, New York. She blogs about peace economics, among other things, at Theory of Change. Follow her on Twitter: @taliahagerty.

Tags: Economics, Global Peace Index, Peace, War

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