World wars, as we have known them, have come to an end. The ideological divide that polarized humanity and gave the order to the world’s wars is behind us. And yet, the number of entrepreneurs and companies selling weapons or military expertise has increased. But is war a more lucrative business than peace?

Barbera (1973) argued that war and peace do not differ in the objectives pursued but in the means used to achieve them. Although war represents human violence in its most intense form, it is more than just violence. Von Clausewitz (1911) defined war as “an act of violence intended to compel our adversaries to do our will.”

The nature of war has changed over time. While the level of violence has decreased, the types of wars in the world seem to have taken on a new hue, such as economic or trade wars.

A trade war is an economic conflict that leads the conflicting countries to impose protectionist trade policies through trade barriers. These barriers can be imposed in different ways, including tariffs, import quotas, domestic subsidies, currency devaluation, and embargoes.

Another type of trade war is based on weakening an adversary’s combat power by attacking its supply chain. For example, between 1944 and 1945, Germany had no natural oil reserves, which made Germany utterly dependent on domestic sources. The repeated bombing of oil plants in the summer of 1944 permanently reduced supply resulting in an inability to meet the demand.

Undoubtedly, any kind of war destroys physical and human capital. However, the impact of war on GDP per capita is unclear. On one hand, war can increase GDP per capita by reducing unemployment and shifting people from non-market activities to wartime production. On the other hand, war can reduce GDP per capita by affecting total factors and labor productivity by destroying existing physical and human capital and minimizing investment in new physical and human capital.

This ambiguity is due to the way national income accounting considers the death and destruction incurred during wars. 

The economic impact of violence on the global economy in 2019 was $14.5 trillion. This is equivalent to 10.6% of global economic activity, or $1,909 per person. Violence continues to have a significant impact on economic performance around the world.

Likewise, the global economic impact of violence can be understood as the expenditure and economic effects related to “the containment, prevention, and treatment of the consequences of violence”. Among the indicators that allow the calculation of this impact, the multiplier effect represents the effects of the direct costs of violence, such as the additional economic benefits that would be derived from investment in business development or infrastructure improvement, rather than the less effective costs of containing or dealing with violence.

A dollar of spending can create more than a dollar of economic activity. The multiplier effect is a frequently used economic concept that describes how additional spending improves the overall economy. Thus, resources used to confront and contain violence eventually fade away. While the resources that are invested in peace-building and development get multiplied.

Given this fact, Hobbes‘ point of view raises an interesting question: can peace be defined simply as the absence of war? (Grieves, 1977). Well, this is not the case. We have observed how, despite the declining number of active wars, violence rates have increased globally.

Violence and instability persist in much of the world, and the trillions of dollars of annual military expenditure is unsustainable, making it necessary to implement alternative methods of fostering peace. A valuable but untapped asset is the business community. Business and peace are often understood as opposites, but growing evidence of their association suggests that business should not be excluded from the broad range of actors working for peace.

Attention has been directed at understanding business as an integral part of the problem in conflict-affected areas, underestimating its value as a possible solution. As the engines of economic activity, businesses can foster peace in multiple ways and facilitate the transition from dependence on social programs to self-sustaining progress.

Businesses play a critical role in creating wealth, promoting socio-economic development, and contributing (directly or indirectly) to the prevention and resolution of conflicts. As market economies become more widespread and businesses become more important actors than states, their role is becoming increasingly important.

The business sector is becoming increasingly aware of how its actions can positively or negatively impact society. Peter Sutherland, Chairman of BP and Goldman Sachs stated that ”…It is part of building good sustainable businesses to help establish safe, stable and peaceful societies. Business thrives where society thrives”. A truly prosperous and sustainable business sector needs peace to exist, just as peace needs private initiatives to build itself.

Peace and conflict prevention have a direct positive impact on business. Peace represents a set of good opportunities, providing the private sector with customers, qualified employees, local suppliers, and investors. Businesses can find a reduction in operating costs as peaceful and stable conditions are most likely to reduce some of the main operating costs of businesses, such as risk management, security, and personnel expenses.

The business sector’s contribution to peacebuilding is not only an ethical responsibility but also a lucrative opportunity. Through their management and concrete initiatives, companies positively impact peacebuilding by contributing to the generation of inclusive social, political, environmental, and cultural conditions. They also contribute to peace by building trusting relationships and promoting peaceful resolution of differences between social, public, and private actors.

Recent research by the United Nations and the World Bank concluded that there is an urgent need for the international community to refocus on building peaceful societies and preventing violent conflicts; they estimate this could save between $5 billion and $70 billion per year.

A peaceful society allows citizens to carry out their life projects. It facilitates free exchange between individuals, which brings with it growth and development in employment, wealth, prosperity, opportunities, and assets that become extremely difficult to access in violent contexts.

So it can be agreed that war is a business, but peace is an even better business.

 

Bibliography

BARBERA, H. (1973). Rich nations and poor in peace and war. Lexington Books, Lexington, Mass.

GRIEVES F. (1977) Conflict and order: an introduction to international relations. Houghton Mifflin, Boston.

Institute for Economics & Peace. (2020). Global Peace Index: Measuring Peace in a Complex World, Sydney. 

The Prince of Wales Business Leaders Forum, International Alert, Council on Economic Priorities. (2020). The Business of Peace. 

United Nations and World Bank. (2018). Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict. Executive Summary booklet. World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO.

US Strategic Bombing Survey (USSBS) (1946). Summary report (European war), Washington DC: US Government Printing Office.

VON CLAUSEWITZ, K. (1832). Vom Kriege. Ferdinand Dümmler, Berlin. (English ed. : “On War”, London, 1911).

This article is translated from its original publication: 

https://www.alianzaibero.com/por-que-la-paz-es-un-negocio-rentable-para-la-empresa-privada/

 

Michelle Bernier is an attorney specializing in international law and commercial law. She is studying Master of Laws and International Business with a double degree from the Universidad Internacional Iberoamericana in Mexico and the Universidad Europea del Atlántico. She is also a part of Students for Liberty’s inaugural cohort of Fellowship for Freedom in India.