PEACE

SECTION 1:
CONCEPTUAL BACKGROUND
In addition to its social and political impact, violence imposes
enormous economic costs for individuals, communities and nations.
Interpersonal violence results in medical, policing and
judicial costs in the short term, and longer term impacts
on productivity and economic growth. Social unrest and
collective violence destabilise governments and social
institutions and reduce business confidence. Warfare
destroys both private and public infrastructure. Not only
are private houses and businesses destroyed in war, but
electricity, water supply, telecommunications, schools
and health facilities are affected as well. For instance, the
capital stock damage in Syria from the start of the civil
war through to the end of 2014 is estimated at US$72
billion, or nearly twice the size of the country’s 2010 GDP. 1
Moreover, the mere anticipation or expectation of future
violence has a deleterious economic impact. Fear of
falling victim of violence changes consumption and work
related decisions. It leads to increased transportation
costs, reduced productivity, and reduced consumption.
Fear of victimisation could also lead to adverse mental
health effects such as anxiety, anger and reduced mental
wellbeing, all of which have productivity implications. In
addition, the social cost of the fear of violence manifests
itself in reduced trust in society and the erosion of social
cohesion. The economic impact of the fear of crime is
high in regions with high level of violence due to crime or
conflict.
As public finances are necessarily limited, increased
public spending on violence needs to be funded by either
increases in revenue through debt and higher taxes, or the
reallocation of resources from other sectors. Given that
it is generally less politically feasible to increase taxes,
debt and the reallocation of resources are the more likely
options. The financing of violence containment through
debt increases the economic impact of violence in the long
run, due to the interest on this debt. For instance, Stiglitz
and Blimes calculated the cost of interest for a period of
13 years on borrowing to fund the war in Iraq at US$400
billion to the United States. 2 Such high levels of spending
on violence containment may also lead to reductions in
spending on high return activities such as education,
health and public infrastructure.
Violence produces spill-over effects both within
countries and across national borders. For example,
population displacement has adverse impacts on income,
consumption, health and well-being of displaced people.
Mass displacement also cost the governments of origin,
transition and destination countries. Forced migrations
have the largest effects on neighbouring countries but
can also result in mass movements of migrants across
continents. The migration crisis resulting from conflicts
in Syria, Iraq and Afghanistan challenged the global
humanitarian systems in 2015. Over one million people
arrived in Europe and the level of global refugees and
displaced people reached an all-time high at 65.3 million
people. 3
Correspondingly, the UNHCR’s budget also reached an alltime
high at over US$7 billion in 2015.
Terrorism is another spill-over effect from conflict and
imposes substantial costs due to loss of life, destruction
of property and dampening of the economic outlook. The
number of deaths from terrorism worldwide has increased
over 800 per cent since 2000. The majority of these
deaths occurred in conflict-affected countries, however,
terrorism incidents and casualties also impacting Europe,
North America and Asia-pacific regions. Terrorism
also exacts costs on the larger economy by decreasing
production, tourism, trade and investment. It also leads
to an increase in security spending both domestically and
internationally. For instance, the average daily cost of the
war on ISIL for US forces alone is US$11.7 million per
day. 4
THE ECONOMIC VALUE OF PEACE 2016 | Conceptual Background 6