THE PRIVATE SECTOR AND CIVIL CONFLICT: LEVERAGING ECONOMIC SECTORS FOR PEACE
Shabb, Rana Olivia
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My dissertation, The Private Sector and Civil Conflict: Leveraging Economic Sectors for Peace, aims to better understand the relationship between the private sector and peace, filling an academic gap and addressing a policy need. To this end, I undertake three interrelated research projects. The inquiries put forth and their findings seek to leverage existing policy tools to help strengthen peacebuilding and conflict prevention interventions in countries affected by conflict. To frame the questions undertaken in this dissertation, I provide a quick overview in Chapter 1 covering the main bodies of literature that seek to understand peace and prosperity in developing countries. While metatheories of modernization, liberalism, and intuitionalism have sought grand-scale explanations, they tend to assume that capitalism is part and parcel of peaceful and prosperous societies. The private sector is treated as a black box. At a more granular level, this dissertation seeks to understand how capitalism and the private sector affect the civil conflict-peace dynamic. Further, more targeted civil conflict academic work – which is more positivist and exhaustive in nature – tends to highlight economic factors (economic growth, poverty, price shocks) as drivers for conflict. Nevertheless, there is significantly less examination or theorization of how the private sector and firms can contribute to these factors. Previous approaches treat the private sector as a consumer of its environment (in terms of property rights, labor, prices, privileges). As such, this dissertation fills an analytical and theoretical gap and shifts the level of analysis to the private sector and firm-level. From this perspective, the private sector engages with labor (would-be-rebels and those with possible grievances) and governments to advance their material interest. Better understanding the private sector- civil conflict nexus sheds light on previously unexamined areas and can help inform peacebuilding interventions in developing countries. Notwithstanding academic work, conventional wisdom in the practitioner community states that a vibrant private sector is necessary to help secure peace in conflict-affected countries. International development agencies, for instance, have adopted private sector development as a strategy to promote peace. Despite this conviction, there is little to no evidence in the academic literature to support this claim. In chapter 2, I draw on the business and peace, and civil conflict literatures, to argue that a strong private sector through job creation and growth decreases prospective rebels’ incentives to join a rebellion and eventually reduces the likelihood of civil conflict. The argument is tested by examining the effects of private sector strength, as measured by domestic credit granted to the private sector and investment climate, on the probability of civil conflict occurrence from 1995 through 2018. Statistical analysis shows that a strong private sector has a pacifying effect on civil conflict. Specifically, findings demonstrate that access to credit, rather than investment climate, is more effective at sustaining peace. I illustrate the quantitative findings with the comparative cases of Egypt and Tunisia to show the mechanism by which access to credit has higher peace dividends. These findings fill an academic gap and equip policymakers to make more effective peacebuilding interventions. Further, the civil conflict literature tends to compare conflict nationally and does not differentiate between economic sectors, with the exception of the extractive industries. In chapter 3, I address the question of whether some economic sectors are better than others at sustaining peace. To examine firms’ subnational contributions to peace or civil conflict, I build a theoretical framework to predict economic sectors’ propensity for peace. Based on the supply of factors of production in civil conflict, I deduce that economic sectors that rely on skilled labor, mobile, and high-tech equipment are more vulnerable than those that rely on unskilled, fixed, and low-tech equipment. Subsequently, I argue that firms operating in sectors vested in peace (for their bottom line) engage in peace-promoting activities. To test for differentiated effects, I conduct a focused and structured within case analysis in Lebanon examining two sectors: one vested in peace and the other peace-neutral (financial vs. quarrying sector). Analysis of fieldwork data, collected through semi-structured interviews and local news reports reveals that firms vested in peace support national policies to that effect, whereas peace-neutral business can engage in inflammatory tactics, which have occasionally led to violent conflict. Given that knowledge and high-tech intensive economic sectors are more vested in peace than others, can existing foreign policy tools be leveraged to promote innovation in recipient economies? Chapter 4 examines the conditions under which military aid to developing countries triggers innovation. This question emanates from a puzzle in the innovation literature. Studies focused on military expenditure in the developed world show a positive relationship between military expenditure and innovation. Conversely, studies centered on military expenditure in developing countries often note the unintended, negative consequences of such expenditure (autocracy, increased coups, and the undermining of human rights). Borrowing from current literature on innovation that examines diffusion channels from the military to the national economy, this research seeks to identify a similar process in developing countries. Using a congruence test on a least-likely case, this study finds that military aid – effectively a military expenditure subsidy – can indeed trigger the emergence of new high-tech knowledge intensive sector in a recipient economy. In Jordan, this is reflected as the emergence of an innovative domestic arms industry after its peace agreement with Israel and a major influx of U.S. military aid. Further, by dividing military aid into different sub-types and tracing and comparing their different effects, this study finds that with conducive industrial and S&T domestic policy, military aid can have secondhand virtuous effects and lead to innovation in the recipient economy. Finally, Chapter 5 concludes by highlighting the main findings from the project, policy recommendations, and avenues for future research. Overall, this dissertation sheds light on how the private sector can help sustain peace, and how military aid – already dispatched in the billions – can be leveraged to magnify virtuous second-hand effects that work to support peace and prosperity in the long run.