World Bank admits its policies caused war

Review of Collier, Paul et al (2003), Breaking the Conflict Trap - Civil War and Development Policy

29 May 2003

Review of Collier, Paul et al (2003), Breaking the Conflict Trap – Civil War and Development Policy, World Bank and Oxford University Press, published 14 May 2003

By Joseph Hanlon

Like much research carried out inside the World Bank regression analysis bubble, this is totally ahistoric and ignores some of the most important research in the field. But one curious outcome of this lack of context is that, seemingly without noticing, the report challenges some of the World Bank’s basic neo-liberal tenets and effectively says that what the international financial institutions have done in post-war countries has been wrong and encouraged a return to violence. Thus the report is both challenging and intensely annoying.

The contradiction is illustrated particularly clearly in a discussion of commodity prices. Chief economist Nicholas Stern in his introduction points out that “price crashes have been associated with severe recessions that directly increase the risk of civil war.” No mention is made of the World Bank’s role in encouraging over-production of primary commodities, nor of the US role in sabotaging the international coffee agreement which triggered the civil wars in Rwanda and Colombia. But ignoring this lack of context, Paul Collier and his colleagues at the World Bank Development Research Group then call for the international community to pay as much attention to these shocks as to the less important but more “photogenic shocks such as earthquakes”. They urge grants when prices collapse. And they criticise the IMF for only offering non-concessional finance when there are commodity price shocks, and the United States for increasing the subsidy for its own cotton farmers which further “depresses the price to cotton farmers in low income countries.”

The report agues that it would be “particularly helpful” in preventing war if the poorest countries could “diversify out of dependence on primary commodity exports”, but ignores the role of the World Bank in deindustrialisation and pushing countries back in dependence on a few commodities. It cites the success of China and India of becoming major exporters of labour-intensive goods, without mentioning, as Joseph Stiglitz repeatedly does, that these countries succeeded by ignoring the World Bank prescription. Similarly, Collier and his colleagues highlight the problem of “marginalised countries” without asking, as Ankie Hoogvelt does in Globalization and the Postcolonial World (Palgrave 2001), how they came to be marginalised. Naturally, Hoogvelt in not in Collier’s long list of references. But at least they admit there is a problem.

The report lays most of the problems of war at the door of the countries themselves. A discussion of Zaire’s failure to reform makes no mention of decades of US (and World Bank and IMF) support for Mobutu despite his know corruption and unwillingness to reform. Boxes on Angola and Afghanistan on facing pages make no mention of the central role of the US in promoting insurgents in both civil wars.

Perhaps the biggest challenge to World Bank orthodoxy is the suggestion that perhaps the free market is not the cure all for civil wars. The study finds that “poor” economic policy, as defined by the Bank, does not increase the risk of war, but that trying to “improve” economic policy immediately after a peace settlement does increase the risk of a return to war. “The results suggest that social policy is relatively more important and macroeconomic policy is relatively less important in postconflict situations than in normal situations”. Indeed, “if opportunities exist for modest trade-offs that improve social policies at the expense of a small deterioration in macroeconomic balances, growth is, on average, significantly augmented.” In particular, the report recognises the importance of inequalities as roots of civil war and calls for “an explicit long-term strategy for intergroup redistribution” and for directing resources to formerly rebel-controlled areas because “market forces will … probably agglomerate activity in a way that is disadvantageous to the rebels.” And they call for more stress on rehabilitation of key infrastructure destroyed by war, because of the high rate of return. These are points that some of us some of us have been making for the past decade (see, for example, Hanlon (1996) Peace without Profit.) Collier and his team fail to note that present World Bank market-driven policies still make it impossible for a government to intervene to improve intergroup redistribution, while restrictive IMF fiscal policies still block postwar reconstruction. They do, however, remind readers that the World Bank was created for post-war reconstruction in Europe, and remark that aid policy “has evidently lost this original insight.”

The report challenges the current donor fetish with rapid elections. Economic and political stability “is a necessary precondition for democracy rather than the other way around.” Indeed, “even moderate change in political institutions is a risk factor in itself; political institutions must be stable”. Thus they conclude that “at low income levels democracy may well be highly desirable for many reason, but it cannot honestly be promoted as the road to peace,” and pressure for institutional change actually increases the chances of a return to war.

Collier and his colleagues do see the central challenge: “Low and declining incomes, badly distributed, create a pool of impoverished and disaffected young men who can be cheaply recruited by ‘entrepreneurs of violence’.” But can the IMF and World Bank make the radical change to their policies that continue to widen the gaps?