# Civil conflicts

Although declining in frequency, conflict is a significant contributor to growth collapses or decelerations among African countries (Arbache et al. 2008). In 2000, for example, one in five people living in SubSaharan Africa lived in a country affected by conflict (World Bank, 2000). Nearly 20 countries experienced at least one civil war since 1960. In fragile and conflict-affected states, violence has huge direct social and economic costs, making it the main constraint to meeting the Millennium Development Goals (World Bank 2011b). In neighboring countries, the costs of conflict through refugees, increased military spending, and the disruption of communications routes, trade and investment could also be substantial.

Conflict involves at least three categories of economic cost – the destruction of goods, capital and people; the disruption of present and future economic activities and trade; and the diversion of resources to defense (Anderton and Carter, 2009). In an important study, Collier (1999) distinguishes five channels through which civil war damages the economy. The most pronounced impact is through the destruction of resources. Part of the labor force is killed or emigrates, while physical infrastructure is being destroyed. For major conflicts, like world wars, or civil conflicts of long duration, the death numbers at the macro levels are visibly high. For limited civil conflicts of shorter duration, the macro numbers are less immediately discernible as a percent of the population, e.g. much less than 1% in several cases, but the costs of human lives at the local and micro levels are nonetheless horrendous (see various numbers and implied ratios in Anderton and Carter, 2009). The second impact is the loss of social order and institutional capacity. Economic activity becomes more costly as passing through the country requires extra security and goods are easily stolen. Moreover, provision of public goods becomes much less efficient. The third impact of a civil war is the diversion of public expenditures from output enhancing activities to guns and bullets. Fourthly, temporary income losses often lead to dissaving and further reduction of capital stock. Finally, civil war inevitably leads to financial and human capital flight. Most of these factors will tend to reduce development prospects for many years after the conflict is over.

Although damages can vary by each conflict and its circumstances, Collier (1999) provides some estimates. During civil war, annual economic growth could be reduced by 2.2 percent. It is interesting to note that the length of war has an impact on post-war recovery. After a one-year war, economic growth is likely to continue to decline by 2.1% relative to a no-war scenario. However, after a 15-year civil war, the post-war growth rate is generally 5.9 percent higher. After a short war the capital flight often continues in view of the perceived risk of renewed civil war. After a long war the peace seems to be more stable and repatriation of capital boosts economic growth. Also, the longer the duration of the conflict, the higher of course will be the losses during conflict itself, so the base from which a country grows is lower.

A case in point is the Ugandan civil war that lasted from 1972 to 1986. Collier and Pradhan (1994) report that up to half a million Ugandans lost their lives in the civil war. Some 7% of the population was displaced as refugees. The economic consequences went much beyond military expenditures and material destruction and triggered the removal of legitimate authority with far-reaching repercussions. Between 1971 and 1986 GDP declined by 13%. The authors estimate that had the Ugandan economy grown at the average of a slow-growing African country, it would have been double its actual size by 1986. As part of the post-war rebound, GDP grew by 37% over 1986-1992. The war resulted in two major shifts in the composition of expenditures. First, investment as a share of GDP fell from 12% in 1971 to 3% in 1978. Secondly, the share of government expenditure in GDP fell from 20% in 1971 to 16