Q&A: The multiplier effect of violence containment spending

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After I spoke on Wisconsin Public Radio a few weeks ago, a listener wrote me with an important question. In the interview, I said that the Institute for Economics and Peace has calculated that the multiplier effect of reallocating our current violence containment spending would be about 2 to 1. That means that money spent manufacturing and purchasing guns, tanks, police uniforms, and even security cameras could generate twice as much economic activity if it were instead spent on books, computers, school uniforms and movie cameras. I later said that we’re missing out on the multiplier effect when we spend money on violence and violence containment.

Brian wrote me with this question:

Would the purchase not be an economic multiplier for the company that received the order, it’s employees and families and everything they spent money on?

The multiplier effect is the economic concept that every $1 spent generates more than $1 in economic activity. And the answer to Brian’s question is, yes.

It’s correct that manufacturing violence containment has some economic multiplier. I should have specified — it is significantly limited compared to other industries. Let’s take a computer and a simple explosive device as an example:

The firms that manufacture computers and explosives both generate economic multipliers for each $1 in sales. The firms pay employees, suppliers, and other vendors, who in turn pay other firms and individuals. Employees of both businesses buy groceries, go to the movies, pay the mortgage, pay their taxes, etc. The difference in the flow-on effect is chiefly in the economic activity generated (or not) after the product is manufactured and sold.

The computer serves as an input to a number of other activities: a student’s education (which generates economic benefits for a lifetime), the operations of other firms, or maybe even the creation of a new business. The explosive device does not create any new economic activity. In fact, if used, it is likely to destroy wealth (homes, factories, etc.) and the infrastructure that makes future economic growth possible (roads, ports, power grids, etc.). And so the flow-of effect of spending money on violence or violence containment is limited, or even negative!, compared to spending money on computers.

This is one example, and it obviously gets more complicated. For example, hiring a security guard may generate a net positive return for, say, a bank. But from a macroeconomic perspective, those human resources could be productively used manufacturing computers, used by business schools to train new entrepreneurs, who develop new products, and employ more factory workers, and so on.

The goal is to start categorizing our economic activity in a way that allows us to understand the impact of violence. “Manufacturing” as a category of economic activity includes the production of computers, toys, shoes, guns, fighter jets, and drones. “Violence containment” as a category let’s us measure the economic impact of the subset guns, fighter jets, and drones.

It does get tricky when we use drones, for example, for more than defense purposes. But, using the example I mentioned on air, we know that $40 million for drones on the border will not be producing economic flow-on benefits. We could, alternatively, create those benefits by caring for and schooling the children that have arrived here, thus adding a host of young people to our future work force. And if you are worried that we won’t have jobs for them, well, I’ll note that $40 million at the mean US income would employ about 1,000 social workers, educators, and grocery store and restaurant proprietors, to name a few, and their families and our economy would certainly enjoy the multiplier effect of that spending. The beneficiaries of that spending can be expected to create new jobs — history predicts that well enough.

Fewer wars and less peace? What to do about it.

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Last month, the Institute for Economics and Peace released the 2014 Global Peace Index. The results are frustrating: the world has been getting less peaceful for the last several years. And at the same time, the number of wars between countries is also declining. How is that possible? Read my analysis of the 2014 Index report on Pacific Standard:

In short, the nature of peace is changing. Breakdowns in peacefulness are becoming more decentralized, and peacefulness relies more heavily on social structures and non-state actors as opposed to exclusively governments and formal militaries. Peace is becoming more democratic, if you will. Given the severity of organized, inter-state conflict in the 20th century, the trend of declining militarization and international war implies that we have made progress in solving 20th-century problems.

The rise of internal conflict, in all its forms, demonstrates that people are unsatisfied with their governments, economies, and social structures. We don’t need complicated econometrics to tell us that—the Arab Spring movements, the anti-austerity protestors, and even ISIS have made their dissatisfaction abundantly clear. Meanwhile, violent markets—like the drug trade—are growing as opportunities in formal, non-violent markets disappear.

Click through for the full article.

The Pacific Standard site doesn’t do comments, but I’d love to hear your thoughts and questions here or on social media. Do you think this analysis makes sense? Are we doing the right things to address our 21st century problems? Do you have an innovative idea for building peace?

The Butcher, the Baker, the Brewer, and the Peacebuilder

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“The Butcher, the Baker, the Brewer, and the Peacebuilder: Opportunities, Strategies, and Metrics for the Role of Business in Building Peace,” in the journal of Business, Peace, and Sustainable Development

My first journal publication is out!

This past spring I attended and presented at the conference Peace Economics, Peace Metrics, and the Role of Business, co-hosted by the Institute for Economics and Peace and the American University Kogod School of Business. A short report-back that I wrote was featured on the U.S. Institute of Peace’s International Network for Economics and Conflict blog, and now a full analysis of the conference proceedings and the trends and opportunities for peace economics is appearing in the first issue of the new journal Business, Peace and Sustainable Development.

You can purchase the first issue, including my article and the work of my colleague, Daniel Hyslop from IEP, on violence containment – another project I collaborated with IEP on a few years ago – at the link above.

An Ecosystem for Peace

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A few weeks ago, the Institute for Economics and Peace (IEP) released a new report on the Pillars of Peace – the first quantitative framework for understanding positive peace. Positive peace – the presence of attitudes, institutions, and structures to support peacefulness – is the counterpart to negative peace – the absence of violence or the fear of violence. IEP has pioneered the frameworks for quantitatively measuring both negative and positive peace. By testing 4,700 variables for correlation with the Global Peace Index (GPI), the measurement of negative peace, IEP identified the key social conditions that coincide with the absence of violence. The statistically significant variables fall into eight categories, or Pillars:

  • Well functioning government
  • Sound business environment
  • Equitable distribution of resources
  • Acceptance of the rights of others
  • Good relations with neighbours
  • Free flow of information
  • High levels of education
  • Low levels of corruption

The new report was released just in time for the opening of 68th session of the UN General Assembly, and the accompanying High Level meetings of world leaders in New York City. This year’s hot topic: the Millennium Development Goals, which will remain un-met at their 2015 deadline, and what to do next. A global process is underway to design an improved post-2015 framework, and the peacebuilding community has been calling for the inclusion of a peace and security goal.

IEP participated in a number of discussions around operationalizing the Pillars of Peace post 2015, and I was invited to join one of these conversations at the Quaker House here in New York. Representatives of the UN and civil society communities gathered to hear a presentation from IEP founder Steve Killelea and to discuss how the Pillars of Peace framework could be put into practice. The main takeaway?

Success lies in building a sustainable ecosystem for peace.

A few criticisms of the framework were raised, but in my mind, each of them underscores the need for a holistic approach more than they reveal unsolvable problems:

  • Gender: IEP consistently finds that the available data on global gender inequity and gender-based violence (GBV) is either inadequate (too few countries, unreliable, etc.) or not statistically significant, resulting in the absence of gender indicators in the GPI and the Pillars of Peace. The data issue is a real constraint – see the next point. But that doesn’t mean gender inequity is unimportant to peace. On one hand, as a discussant in the session noted, we have to be creative about exploring every indicator. The global data on domestic violence is problematic, but what about indicators for the number of women in parliament? The number of female cabinet members? The implementation of 1325? On the other hand, well, see the point on correlation.
  • Data: Gender isn’t the only category in which it’s difficult to gather accurate data. It was noted in conversation that sometimes a country is so poor it lacks the infrastructure to measure how poor it is. And violence only complicates this – on top of destroying infrastructure, violent activity is often illegal (and therefore clandestine), always chaotic, and usually both. So while quantitative measurements of something as illusive as peace are appealing, we have to remain aware of their limitations. Statistics are only as good as the underlying data.
  • Correlation: The Pillars of Peace represent the social indicators that correlate with the GPI. That means that anything left out of the GPI will similarly be left of the Pillars. It’s logical that something like Well Functioning Government, which includes rule of law, will correlate significantly with an index that includes indicators like perceived criminality and levels of violent crime. However, it also makes sense that measures of gender equity wouldn’t correlate with an index that doesn’t include an indicator for GBV. This isn’t a problem of IEP trying to leave it out, of course – there are a lot of reasons why the data on GBV is problematic. But we can’t forget that what isn’t present in our statistics isn’t unimportant – especially to the victims of the violence we aren’t counting.
  • Linearity: This was one of the most prominent points of the conversation. Practitioners working with very real resource constraints raised the dual issue of the need to prioritize areas of work and the problematic nature of working in a linear fashion – the eight Pillars, as interdependent factors, can’t be checked off a list in priority order. In the room, this felt like the greatest challenge for operationalizing the framework. But upon reflection, perhaps it’s the greatest opportunity.

The more we discussed linearity, the more the word “ecosystem” came out as the preferred alternative. Indeed, IEP promotes the Pillars of Peace framework as a systems approach, noting on page 3 of the report that the pillars are interdependent, comparable to the various species in a forest, and that “the wider interactions in a system also determine the ways components themselves operate.” But the challenge arises in translating systems thinking into systems working.

Some discussion participants felt that the best way to correct for issues in the quantitative frameworks, and to account for local context and needs, was to connect the quantitative tools to existing qualitative tools, particularly conflict analysis. However, it seems to me that the Pillars of Peace framework is ripe for a peacebuilding analysis. The eight Pillars are likely to correspond closely with both the post-2015 goals and the civil society and social enterprise work happening in settings all over the world. It could be said that ending extreme poverty is the major difference, but Killelea pointed out that, in an extreme poverty setting, “everyone is trying to make a buck” and that’s as relevant a business environment as any. After all, IEP finds that a Sound Business Environment includes quality infrastructure, access to the Internet, and clean water for the majority of a population – three fairly standard development goals.

Would it be possible to map our peacebuilding and development work in a given context according to the eight Pillars? It would be beyond the scope of any one organization to work on every aspect of all eight, but in order to know if, and how, we’re building an ecosystem for peace in Sierra Leone, or Syria, or Detroit, for example, it might be possible for one team to map the existing work, across organizations, against the Pillars of Peace framework. Where are we succeeding? Where are we falling short? And who should be working together?

When we find that development and the absence of violence are correlated, it means that these things move together. And so we can likely amplify our success in all arenas by working on them together. A peacebuilding analysis based on the Pillars of Peace would be informed by the quantitative work, but could build in the necessary qualitative work for context factors, actor mapping, and identifying what discussion participants called “pathways” and “momentum factors.” Such a systems working tool could be the first step in building sustainable ecosystems for peace. Perhaps that should be IEP’s – or one of their partners’ – next project.

Business & Peace: The End of the Zero-Sum Game

Steve Killelea, founder of the Institute for Economics and Peace, and Talia Hagerty at the recent Peace Metrics conference in D.C.
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I’ve been trying to debunk the “zero-sum game” since I first heard of it. Last month I had the opportunity to write a blog post for the United States Institute of Peace’s International Network for Economics and Conflict, and one of the points I came to was that the zero-sum game rests on conflict. If we’re fighting, the pie is limited; but if not, we can grow it for everyone. Find the full post below, originally published here.

The international movement to end apartheid in South Africa is a valuable example of the success of nonviolent social change. Activists regularly cite the success of the divestment campaign, boycotts, and other domestic acts of protest within South Africa as proof of the efficacy of these tactics. But, it turns out, there is actually more to this story. Not only did the private sector in South Africa react to activist pressure, but, as Yale doctoral candidate Tumi Makgetla demonstrates, business leaders took a proactive role in the peace process and contributed to both the critical mass and the practical resources needed for change. While we are accustomed to the narrative of social activism pitted against the joint-enemy of big business and unjust government, the case of South Africa shows that business can be a collaborative actor in social justice – and can be better off because of it.

Earlier this month graduate students from around the world gathered at the Kogod School of Business at American University (AU) to present groundbreaking work on business, economics, and peacebuilding in a conference, co-hosted with the Institute for Economics and Peace (IEP), entitled Peace Metrics, Peace Economics, and the Role of Business. IEP founder Steve Killelea opened the weekend by recognizing the student presenters for our participation in the first-ever conference of graduate student work on peace economics. The role of business in building peace has often seemed unclear, if existent at all. Kogod professor Jennifer Oetzel reiterated the challenge of private sector engagement in peacebuilding by noting that business schools are not currently training professionals for this role in the countries in which they operate. But examples given over the course of the weekend demonstrated that some businesses are increasingly and effectively engaged in peacebuilding.

Steve Killelea, founder of the Institute for Economics and Peace, and Talia Hagerty at the recent Peace Metrics conference in D.C.

Steve Killelea, founder of the Institute for Economics and Peace, and Talia Hagerty at the recent Peace Metrics conference in D.C.

Unfortunately, we are more familiar with the ways business negatively impacts peacefulness. Misty Seemans, an AU student, raised the example of Shell’s alleged abetting of human rights abuses in Nigeria; Elizabeth Armstrong from the University of St. Andrews discussed ways in which businesses in Colombia may prove counterproductive to the peace process there; and, to include illicit businesses, I spoke about the ways drug trafficking organizations in México use violence in their business models. Additonally, Jonathan Kolieb, a doctoral student from the University of Melbourne, noted in his presentation on international regulation that any institution that shapes behavior is a regulator, and so in this sense economic elites and/or violent actors may be acting as market regulators by maintaining the unpeaceful status quo. However, we also learned that business actors in South Africa, the Philippines, the Caucasus, Lebanon, and Kenya specifically, and in the technology sector globally, have aided peace, and that possibilities exist for businesses in Colombia and Mexico to do so as well.

The key questions, of course, are why is business important in peacebuilding and how can businesses engage in this process? In an environment of political instability, international sanctions, and domestic acts of protest, the private sector in South Africa had a strong incentive to work for peace. As activists know from this case, this shift in incentives was crucial to ending apartheid. Businesses faced considerable risks in getting involved, but other social actors demonstrated that the risks of the status quo were greater. Today, civil society organizations like IEP are working to show that our present violence is costing us – in lives and wellbeing, but also in economic growth. IEP estimates that between 15 and 20 percent of the U.S. GDP is spent on violence or its containment.

Robert Schlehuber, of Operation Respect and the AU School of International Service, challenged us to find the private sector’s place using the framework of collective impact theory. Successful collective impact relies, among other things, on infrastructural support – coordination, logistics, and resources from a central source. Given that the private sector excels at leadership, publicity, resource management, logistics, and communication, infrastructural support can be one ideal role for businesses in building peace. This support is the success Makgetla identified in South Africa and what Armstrong sees as possible in Colombia. South African firms engaged in and convened a number of peacebuilding initiatives, including engagement with black unions for labor reform, negotiations support, technical support, behind-the-scenes shuttle diplomacy, and the involvement of international actors. Businesses were able to share power with political and labor leaders in a positive-sum – rather than zero-sum – way. In situations of oppression, injustice, and violence, we find ourselves fighting over every slice of the socio-economic pie. But when we work together for peace, the whole pie grows.