The Role of Economic Policy in the Prevention of Conflict

November 26, 2014 OPINION/NEWS

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By

Anant Mishra

“If poverty and economic instability are so often the root causes of war, then getting the economics right is key to sustainable peace and preventing countries from falling back into conflict.  Effective governing institutions are also critical to building a lasting peace. ” – Marek Belka, former UNECE Executive Secretary.

Introduction

Carrying the scars of two world wars, Europe was faced with the daunting task of rebuilding not only physically, but also economically.  With much of their industrial base damaged or demolished, European Member States were eager to move forward.  As the United Nations (UN) was in its infancy, the charter specifically noted the need for ensuring mechanisms for economic stability in an effort at maintaining peace.  Article 55 of the UN Charter calls for the United Nations to promote “solutions of international economic, social, health, and related problems; and international cultural and education cooperation…” Stemming from this effort was the creation of the five regional economic commissions falling under the auspice of the Economic and Social Council (ECOSOC). The Economic Commission for Europe (ECE) was initially established in 1947 by ECOSOC as a measure to help foster and increase economic integration as peace building measure throughout Europe and today functions as a regional body helping to further peace through economic endeavours and agreements.

Underpinning the work of the UN, the ECE focal point has shifted from one of rebuilding to one of deepening and strengthening economic efforts at maintaining peace.  Increasingly economics is playing a greater role in the prevention of conflict through strengthening trade relationships as well as through market based measures of mutually beneficial relationships.  The ECE does not function as a political body, but rather as an economic minded committee helping to establish peace through economic policy, multilateral agreements, and other economic measures amongst Member States.  Their independence from a strictly political realm allows the ECE to bring together a myriad of other actors, including economists, scientists, and civilians to the table for discussions regarding using economic means of furthering peace.  Through the ECE, rebuilding and post-conflict development efforts can shift from one of peacekeeping to one of peace building and conflict prevention.  Bolstered by the efforts of not only the UN but also the European Union (EU), the ECE is able to take a prominent role in helping the UN build peace through economic measures on a regional basis.

Building upon their unique history, the ECE is positioned within the UN system to utilize their role as an economic advisory base to impact the peace process.  Increasingly, the ECE is being called upon to participate in the efforts at non-traditional measure of building peace, chiefly through the economic ties which can help bridge seemingly insurmountable gaps at the regional level.  Branching out into areas such as Economic Cooperation and Integration, Population, Sustainable Energy, Trade, and Transport, the ECE is helping sustain regional cooperation through not only economic measures, but also through opening lines of communication and strengthening trade relationships.  Focusing on a regional level, the ECE is able to adapt more quickly to changes in the market as well as those Member States within the ECE reach.  More and more the UN is calling upon the regional commissions in order for their goals and plans to be more fully implemented across all Member States as the UN and the global community move closer and closer to the 2015 deadline for the Millennium Development Goals (MDGs).

 

The History of Peace and Economics

According to the Institute for Economics and Peace, in 2012 the cost of conflicts represented eleven percent of the Gross World Product and totalled USD 9.46 trillion dollars. Following World War I world leaders joined together in 1919 through the Treaty of Versailles in an effort at achieving the goal of securing international cooperation for peace and security.  Establishing the League of Nations and the International Labour Organization, the treaty became one of the first efforts in the 20th century to make tentative connections between economics and peace. Though the League of Nations did not prevent World War II, it helped lay the foundational ground work needed for the UN, which would place a greater emphasis on helping to put peace outside of a purely political context and into one which acknowledged the interplay between peace, politics, economics, and social factors.

During the initial phases of the UN and crafting the charter, Member States recognized  more peaceful solutions  to resolving conflicts was needed to offset the costly impacts throughout multiple sectors, including the economic, social, political, and environmental.  While economics and economic policy was not expressly written into the charter, it is aimed at giving each Member State equal opportunities at participating and recognizes the individual rights of the Member States and their residents at being protected from further conflict situations.  Building upon those concepts, the Economic and Social Council and the subsequent subsidiary bodies focus on mitigating factors which could potentially lead to conflict situations.  As the global community moves into new and uncharted territory, the concept of peace building has changed and shifted in acknowledging economics as a key factor in helping build a global community connected to peace through economics.  With advanced weaponry, including nuclear and biological weaponry, changing the face of conflict, Member States acknowledged there needed to be more emphasis placed on peace and peace building.  Though the term is relatively new, the concept of peace building is not.  Stretching back through generations, treaties and alliances sought to bring peace and order to conflict.

Peace building for the UN takes on a variety of different actions, including those on the economic sphere.  The United Nations Conference on Trade and Development (UNCTAD) is helping carry out a large amount of the UN work in peace building through economics.  During the early 1960s, questions regarding the role and protection of development Member States, UNCTAD were the result of the collective efforts aimed at answering the role of developing Member States in international trade. From the first meeting in 1964 until the early 1980s, UNCTAD focused on acting as a measure of opening dialogue surrounding questions in relation to the “new international economic order” and the discussion of policy suggestions for development. By 1968, UNCTAD helped developing economies gain stronger footholds in markets through the Generalized System of Preferences and assisting the Group of Least Developed Countries (LDCs) with their economic development.  Pushing forward into the 1980s UNCTAD shifted focus and was charged with helping to change perceptions of economics and stepped into the realm of “trade liberalization and privatization of state enterprises.”Fiscal and macroeconomic management emerged as measures to open dialogues in an effort at stabilizing Member States in post conflict situations.

UNCTAD is not the only arm within the UN system focused on using economics as a measure of securing peace.  Since 2005, the Peace building Commission has served as a vital role in the UN effort at building peace.  Established through two resolutions, A/Res/60/8025 and S/RES/1645 (2005) the Peace building Commission (PBC) is tasked with bringing together the collective efforts of the UN bodies, including the General Assembly, Economic and Social Council (ECOSOC), and the Security Council.  The PBC efforts comprise both political and non-political efforts, including those surrounding helping to establish stronger economic efforts aimed at rebuilding stronger institutions to assist with the rebuilding efforts in post-conflict situations. Individual Member States belonging to the ECE have worked together with the PBC to help bolster their efforts through contributions to the Peace building Fund.  According to the 2012 Annual Report, contributions to the fund exceeded USD 250 million, with large contributions coming from the United Kingdom, Sweden, Netherlands, Norway, Canada, Japan, Germany, Spain, Finland, and Ireland. A vital part of the PBC effort is carried out through economic measures, including stimulation of the economy, regeneration of employment, and helping to establish sustainable livelihoods for individuals. Continued efforts at strengthening peace building efforts through economic measures are increased through relationships with the World Bank, and the African Development Bank.

 

Development, Capacity, and the ECE

Strengthening trade relationships is a strong building block towards peace and strengthened relationships for all parties and helps to lead to further development among Member States.  Development and capacity building are key factors in helping to break down barriers in lopsided trade relationships.  Understanding the interconnectivity of peace and development, the UN placed emphasis on creating and enhancing current partnerships for development efforts.  Millennium Development Goal Eight strives to ‘Develop a Global Partnership for Development’ and places financial and structural development front and centre on the global and even regional stage. Target 1 specifically calls for breaking down traditional barriers in trade though establishing a more open and rule based trading system.  Helping propel the UN goal forward at the global level is the United Nations Development Programme (UNDP) and the Capacity Development Group. Over the course of the last thirty years, rapid changes in the technology field has impacted and reshaped previous business models.  Older, more traditional methods of business are no longer sufficient at meeting current needs and demands.  Member States lacking both know how and capital for making needed changes are quickly finding themselves left behind in market access, creating an ever widening gap between the ‘haves’ and the ‘have not’s.  The focus of the UNDPs Capacity Development Group is helping build collaborative relationships between Member States in order for fostering further development plans. Building stronger networks for information sharing in real time, online based networks, and highlighting successful programs are three tools being utilized currently by the UNDP in helping build up Member States ability to adapt and change with a rapidly evolving market.

As a regional economic body, the ECE does not only deal in trade amongst ECE Member States, but also on a global scale.  To help focus on this portion of the ECE mandate, the Committee on Trade (CT) was established.  Part of the Committee on Trade’s focus is working towards assisting on meeting the Target 1 in helping to shape and form the global trade policy discussion. Being an active participant in UNCTAD and UNDP activities, the ECE has taken a role in furthering capacity development through economic means.  During the sixth session of the Committee on Trade in February 2014, the CT put forth a comprehensive report of their efforts in cooperation and support of other organizations.  Detailed in the report are the undertakings of the ECE in helping to meet Target 1.  As a part of the United Nations Inter-Agency cluster on Trade and Productive Capacity the ECE provides support in advancing the initiatives such as the Delivering as One and the United Nations Development Group.  As a member, the ECE is helping provide capacity building assistance in areas such as supply, exports, trade related rules and regulations, dispute resolution, and negotiation. Further support is provided for research and analysis of economic based efforts for capacity development and building.  The ECE is also a central force in the United Nations Development Account project on Global Supply Chains. Centred on removing trade barriers and increasing trade partnerships, the project is devoted to ameliorating the high cost of trade through encouraging cost reductions and simplification of trade rules and regulations.

Capacity building and further trade development is only one part of the puzzle.  A key factor in helping increase economic development and extend peace through economics is a stable economic environment.  Transitional economies are ones which present both challenges and possibilities for Member States and peace economics development. Following the break-up of the former Soviet Union, economies throughout Eastern Europe and Western Asia experiences changed, as they shifted from a central economy to a market economy. Transition from the central to the market was not then and is not today an easy process, but one in which considerable growth and development occurs.  According to a 2000 report from the International Monetary Fund (IMF) there are four main factors within a transitional economy, including liberalization, macroeconomic stabilization, restructuring and privatization, and legal and institutional reforms. Of these four factors, liberation and macroeconomic stabilization can be obtained on a relatively short time span, but restructuring and reforming is a longer, more calculated process within the existing legal and political environment.  Transitional economies though offer the opportunity for more discussion and open the door for further cooperation amongst various sectors and a deeper integration of not only sustainable economic practices, but also allowing for further integration of economics into the political framework.

 

Economic Cooperation and Integration 

Within the ECE system the agenda of economic expansion and integration is carried out by the Economic Cooperation and Integration Division (ECI).  The ECI serves as an arm of the ECE driven by the economic needs of Member States through their established program of work.  The program of work includes overarching goals of promoting and facilitation the sharing of knowledge, supporting entrepreneurial endeavours, bolstering regulatory policies and governance, and increasing public-private partnerships.  A vast majority of the work is carried out by the Committee on Economic Cooperation and Integration.  Established after the Reform Process in December 2005, the Committee on Economic Cooperation and Integration (CECI) is responsible for the “policy, financial and regulatory environment” throughout the ECE; focused intently on transitional economies, the CECI fosters an economic environment promoting growth and innovation. First meeting in September 2006, the CECI established its program of work focusing on: Innovation and Competitiveness Policies, Entrepreneurship and Enterprise Develop-private partnerships, Financing for Innovative Development, Intellectual Property Rights, and Public- Private Partnerships.

Recently, the major focus for the CECI has been in establishing and developing public-private partnerships.  Through the work of the CECI regular meetings conferences are held for discussing opportunities and best practices with building further partnerships between the public and private sectors. Under the guidance of the ECE secretariat, a roster of experts is maintained of those individuals with experience in public-private partnerships referred to as the Team of Specialists. Divided into three categories, the Team of Specialist (TOS) meet once a year at the Palais des Nations in Geneva, Switzerland.  During the fifth session in February 2013, the TOS joined together with 38 Member States, 15 intergovernmental organizations, and over 100 private companies discussing previous work during the fourth session and plans for the future year.  Topics ranged from a feasibility study for needed renovations for the Palais des Nations, partnership plans for health centres in the Philippines, and building specialists centres throughout Azerbaijan, France, German, Republic of Korea, the Netherlands, the Russian Federation, and Qatar. TOS meetings are not limited to ECE Member States, but instead are open to all UN Member States in order to further share the best practices in building partnerships between the public and private sectors. Tethered together by economic bonds, the deepening of cooperation between the public and private gives Member States more incentives to maintain open lines of communication.

 

Trade Development and Standardization

Developing out of greater cooperation and communication are new outlets for trade and development within the UN and ECE systems.  Over the course of the last thirty years, trade has developed into a major facet of the ECE system, with the ECE participating as one of the five regional bodies acting as a regional effort to developing new mechanisms for supporting peace.  The Committee on Trade (CT) is responsible for furthering the ECE commitment to expanding economic relationships between ECE Member States and bringing great cooperation amongst other Member States.  While the majority of the work within the CT is making policy recommendations and developing standards for all ECE Member States, they are also involved in establishing harmonization of technical regulations and are involved in the agricultural and e-business areas as well. Great emphasis within the CT is placed on sustainable practices and providing support for Member States through economic transitions.

Within the CT there are multiple areas of focus in relation to trade, including facilitating trade and e-businesses, agriculture, regulations, and standardization.  As technology increase and business are conducting more business through electronic means, the ECE answered with change with the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) charged with reporting on improving worldwide coordination and cooperation in e-commerce to the Committee on Trade and the ECE Executive Committee. The UN/CEFACT aims to break down barriers and constraints to trade and development and promotes best practices in trade and development amongst Member States. It is also through the UN/CEFACT the ECE interfaces with international trade organizations including, the World Trade Organization (WTO), the World Customs Organization (WCO), the Organisation for Economic Co-operation and Development (OECD), the United Nations Commission on International Trade Law (UNCITRAL), and the United Nations Conference on Trade and Development (UNCTAD).  UN/CEFACT work is built on three pillars: process, information, and technology and how those three pillars are utilized in world trade and development. Also falling within their purview is the developing strategies and standards for internet based business, developing a “Core Component Library, containing syntax- neutral and technology-independent building blocks,” and “XML schemas provide a series of coherent, consistent, and normalized syntax” for standard web development and e-commerce activities.

The two remaining working parties within the CT are Working Party on Regulatory Cooperation and Standardization Policies and Working Party on Agricultural Quality.  Both working parties are forum style in order to encourage open dialogue between policy makers and regulators. Working Party on Agricultural Quality or WP 7 develops clear and concise guidance regarding production, importing, and exporting agricultural based products throughout Member States within the ECE.  Work is broken into four categories: fresh fruits and vegetables, dry and dry produce, seed potatoes, and meat.  Remaining true to the ECE history, individuals from the agricultural community are invited to participate in the consistent discussions regarding standards development.

 

CASE STUDY: The European Union

A hallmark of cooperation across Europe is the European Union.  From humble beginnings in 1951 as the European Coal and Steel Community, the ECSC brought together Belgium, France, Germany, Italy, Luxembourg, and the Netherlands as the first tentative steps towards economic based peace building. Joining together their coal and steel industries under one management umbrella, the six original Member States removed the capability of utilizing their coal and steel industries as machines of war. Based on a plan from French foreign minister Robert Schuman, the Schuman Declaration, signed by the original six members in 1951, were the first steps towards utilizing economics as a measure of peace building.  Schuman encouraged those in attendance to sign agree not on multiple economic fronts, but instead using one common business as a stepping stone to building further agreements and multilateral agreements among Member States.  Under the plan France and Germany would agree their coal and steel industry would be governed by a common High Authority and would make provision for further Member States across Europe to join if they so wished and would serve as their first concrete efforts towards building peace throughout Europe.

For six years the ECSC stood as the only successful effort in helping to bring together the original six in regular communication.  Failure of other forays into joint participation in a defence community, the ECSC refocused priority back to economies by centring their interests on the physical rebuilding of European cities and industries.  Meeting in 1956, the committee moved forward with establishing a common market and an atomic energy community.  Following the signing of the Treaty of Rome in 1957, the European Economic Community (EEC) created the common market among those Member States.  The main objective of the new EEC was two-fold, first as a transformative measure on trade and trade relations and second as a clear move towards expanding current efforts towards building a stronger and more unified Europe. The Treaty of Rome echoed the sentiments of the Charter of the United Nations, building within it the desire for strengthening peace building among all Member States.

Taking the steps towards economic integration, but did not come in one sudden phase.  Full impact of the common market was established through three stages transpiring over the course of twelve years. Each phase was assigned specific actions which occur concurrently with one another leading towards the full implementation of the common market.  The cornerstones of the common market are the four freedoms: free movement of persons, services, goods, and capital. Establishing the four freedoms and not only the expansion but the deepening of the common market throughout first the European Community and then the European Union has brought about an increasing change directed at how economics can increase peace building opportunities.

Bringing economic based peace throughout the EU has not been an easy process and is one consistently undergoing change.  As the EU has expanded over the last twenty years and more Member States join the Euro zone, economic based peace efforts are at times tested by shifts and changes in individual Member States economies.  Prior to the global financial crisis, Greece began borrowing and spending against their current ability leading to a stimulus package on 110bn in 2010.  Once the crisis expanded their precarious economic state came to light and resulted in their need for another influx of capital provided by the Euro zone.  One of the conditions of the continued support was the introduction of austerity measures, which included privatization of business, rising of taxes, and the dismissal of some civil servants. Despite the assertion of previous governments, the austerity measures were not carried out, leaving Greece in the position of still needing further support and still responsible for putting in place the requested measures.  Greece eventually passed the measures, but to widespread disapproval across Greece and throughout the upper echelons of the EU.  During the entire process multiple riots occurred throughout Greece, causing widespread panic throughout the country and strained their relationships with not only those in the Euro zone, but further straining their relationships with neighbouring Member States, including Turkey. Three years later, Greece is slowly experiencing a rebound in their economy and in their relationships within the Euro zone, but not without carrying the impact of the crisis with them.

Breaking down traditionally expensive customs and establishing common economic policies, the European Union is one such example of not only strengthening peace building in post conflict situations, but in how economies in transition can implement policies and measures aimed at furthering peace through regular and routine communication and examination of existing policies.  Today the EU continues to utilize sanctions, most recently against Russia following the breakdown in the Ukraine.  The full impact of the economic measures are still largely unknown, but the depth and breadth of the economic sanctions can bring about changes without resulting in further violence.

 

Conclusion

While strides have been made in the last twenty years, the work of the ECE as a regional commission continues to remain relevant. Peace economics is a relatively new terminology, but the utilization of economics as a measure of peace is not new.  Building relationships based on peace has a long held tradition with Member States building strategic alliances based on beneficial trade relationships.  Routine assessments of existing policies are creating an atmosphere responsive to consistent changes in economic service delivery.  Utilization of organizations such as the European Union and expanding the efforts of multiple UN programs, the ECE is consistently evolving and changing to meet the needs of Member States and support regional economic development and transition.  Economic sanctions have long been seen as a measure of brining Member States into line, but they have not always been successful over long terms.  With an ever expanding global economy, the regional commissions, including the ECE, are faced with finding newer and more responsive economic measures in order to continue to shape peace throughout the region.

 

 

 

 

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Anant Mishra

Anant Mishra is a former youth representative for United Nations. Almost 4 years of experience, he has served in number of committees including United Nations Conference for Trade and Development and United Nations General Assembly primarily focusing on international trade, education, finance, economics. food crisis And disputes. He is available on anantmishra92@gmail.com

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