War, disorder costs global economy $7.2 trillion a year


War and disorder is costing the global economy at least US$7.2 trillion in lost opportunity a year, a new study a new study by the Institute for Economics and Peace in conjunction with the Economists for Peace and Security shows.

The study, part of the Global Peace Index, notes “peace creates the optimum environment in which the other activities that contribute to human growth can take place.

“In this sense, peace is a facilitator making it easier for workers to produce, businesses to sell, entrepreneurs and scientists to innovate and governments to regulate,” the report says.

The benefits brought about by peace can also be measured in economic terms. “Peace does in fact have a monetary value independent of the human values associated with it. It can be expressed in terms of the additional value to global GDP that would ensue from creating a peaceful world,” the study explains.

The study says the US$7.2 trillion (US$7,200,000,000,000) price-tag of war includes the US$2.4 trillion annually that would move from industries that create or manage violence to other economic activities and US$4.8 trillion from additional economic activity that had been suppressed through violence.

“If the cost of investing in proactive peace-creation was minimal compared to the lost potential caused by violence, then would it not be fitting for business to engage with government to create peace in the markets in which they operate?” the study asks.

“Although the ‘Defence Industry` is a well-defined concept, there is no clear identification or definition of the ‘Peace Industry`. The Peace Industry comprises those companies and industries whose markets improve with improving peacefulness or whose costs decrease with improving peacefulness.

“Examples include retail, finance, tourism and insurance.”

The study says research indicates that there is a relevant relationship between a nation`s ranking in peacefulness and the size of its retail sector, stock market and tourism industry, and that changes in peacefulness could be used to calculate changes in market size.

“War and violence are not inevitable. All human societies have developed mechanisms for settling unproductive conflicts and providing a conducive environment for human development. This is an essential part of our human nature,” the study adds.

“As globalization embraces humanity we now need to extend these natural impulses to be globally inclusive and create a peaceful world so that we can move forward with the things that really matter.

“Contrary to popular belief, the world in the last twenty years has become more peaceful. The frequency and lethality of wars has been declining since the end of the Cold War in 19895. Since 1990 more wars have ceased than have started and the number of negotiated settlements has steadily increased.

The study finds that a decline in the number of conflicts from forty to thirty in the last seven years corresponds with an increase in global GDP from US$32 trillion to US$55 trillion.

“Many of the processes of peace are self-reinforcing. Business cannot really develop until conflict stops but once started productive employment can have a self-reinforcing effect.

“People become motivated by the improved standard of their lives, rather than seeking retribution for past wrongs. This creates the optimum environment for business to thrive. This is known as a virtuous cycle. Similarly, when economic development contracts, violence will almost certainly increase, leading to a further deterioration of the business environment,” the study laments.  

Pic: The ruins of a Darfur village.