A diagnostic of the impact of security risks on public institutions requires reviewing issues of public finance (revenue collection and allocation of resources to the security sector); political institutions (and accountability to the public at large); and corruption (which requires also looking at the quality of public administration). Elements of such a diagnostic are presented in Sections 3 to 5.

Finally, it must be recognized that in addition to the causal link from insecurity to weak and problematic public institutions as described above, the reverse causation also occurs: worsening and weakening public institutions can promote, or at least leave greater scope for, greater insecurity. Moreover, stronger but repressive and predatory states generate insecurity for their populations and can be the main source of human insecurity in some countries. While such states may be able to prevent outright conflict in the short run through repression, experience in some countries suggests that this may build up tensions over time, sometimes resulting in much greater conflict and insecurity when the repressive regime in the end fails. While it is beyond the scope of this paper to explore these issues in detail, the complex and two-way causation between security and public institutions must be kept in mind.

# **2.4. Summing Up**

There are two lessons from this review of the linkages between security and development. The first lesson is that security very much matters. Lack of security directly weakens the investment climate, erodes human and social capital, and weakens public institutions. Governments must therefore devise strategies to improve security. However, there is also a second lesson: security cannot be seen in isolation, for two reasons.

First, abolishing security-related risks is impossible (or too expensive for available resources). Hence a security strategy must be cognizant of the private responses to security risks. Lack of security leads individuals, communities, and firms to take actions to reduce the likelihood or potential impact of risks (before they actually occur) and to cope with risks once they materialize. There is a role for government when these actions can themselves have a negative development impact (typically because they use suboptimal informal devices).

Second, there are mutually reinforcing effects between security on the one hand and the investment climate, human and social capital, and public institutions on the other. Hence there can be virtuous or vicious circles between security and these three development objectives (Figure 2). In essence, security risks can be reduced and mitigated through a better investment climate—economic activity generates revenues for the government, which creates fiscal space to provide security services, and reduces the profitability of illegal activities relative to legal activities; stronger human and social capital—trust in the polity facilitates conflict resolution; and effective institutions—they provide the required accountability framework for proper decision-making and policy implementation in the security sector, and they also provide more effective conflict resolution mechanisms. As noted in World Bank (2003a), the probability of civil war tends to decrease with faster economic growth and stronger institutions, which in turn require a base of good governance.

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