Economic Power-sharing as a Means of Conflict Resolution in Peace Agreements.

Satish Chand is Professor of Finance in the School of Business at the University of New South Wales and based at the Australian Defence Force Academy in Canberra. Satish is also an Adjunct Professor at the Crawford School of Economics and Government at the Australian National University.

His research interests include labour migration, fragile states, and the challenges of development. He has recently authored the research report, Financing for Fiscal Autonomy: Fiscal Self-Reliance in Bougainville, published by the National Research Institute, Papua New Guinea, which provides cutting-edge analysis on how fiscal autonomy arrangements relate to peacebuilding efforts in a context where natural resources (in this case, copper and gold) played a key role in the conflict.

I read with interest Christine Bell’s 2018 PSRP report titled: Economic Power-sharing, Conflict Resolution and Development in Peace Negotiations and Agreements that covers considerable new ground on how the sharing of economic power can be used as a means to conflict resolution and thus constitute an integral part of a peace agreement. Bell argues, at least in my mind, that:

  1. the relationship between the distribution of economic resources and conflict need to be included in conflict analysis;
  2. the design of peace agreements must include sharing of economic power between groups in conflict; and,
  3. the risks of implementing agreements on the sharing of economic power must be built into the design of peace-agreements upfront.

My interest in the role of economic power-sharing as a means to conflict resolution emanates from some recent research undertaken on fiscal federalism within the context of the Bougainville Peace Agreement that was signed on 30 August 2001. I stumbled upon Bell’s work and was pointed to this paper while researching the literature on the use of fiscal transfers as a tool to bind autonomies within a federal structure. The questions being investigated were how the specific circumstances under which revenue sharing across autonomies forms a bridge binding them together, as against one that serves as a drawbridge that can be lifted after sufficient fiscal health has been restored within the conflict-afflicted community.

Bell notes that:

“[e]conomic power-sharing is arrived at in peace processes as part of the broader political negotiations as to how to end the conflict, rather than an exercise in economic reform … [and] designed to accommodate the competing interests of conflict parties to financial resources” (page 1).

Sustained peace, moreover, requires access to public goods including security to person and property for long-term investments which are critical to growth of the local economy. The virtuous effect of a growing economy providing the employment to the people and the resources to the government to invest in public goods consolidates peace. But achieving such a state is never easy and rollbacks into vicious cycles of violence feeding economic malaise are common.

Thus, economic power-sharing and economic reform in general need to be factored into peace agreements right from the start. Consequently, design of peace agreements must include economic expertise such that the conditions for growth of the economy are included right from the start. On this, Bell notes that economic expertise are often ignored (page 7). She is right!

In the case of the Bougainville Peace Agreement, for example, the revenue-sharing provisions were left vague and may have created perverse incentives. The vague provisions relating to the value of the recurrent and developmental grants to be provided to the Autonomous Government of Bougainville have subsequently led to heated exchanges between leaders, risking the fracturing of the PNG nation state. Furthermore, differences in the capacity to raise revenues locally, and the need for funds to provide public services, has led to the mandating of ‘gap-filling’ grants, but these then lend little incentive for the ABG to grow its own tax base.

While I think that this is an excellent start, I would encourage Bell and her colleagues at PSRP to consider expanding on the following three issues:

  1. Economic power-sharing as a positive sum game. Any analysis of economic power-sharing across a federation must be able to demonstrate that the sharing of such powers leads to a ‘win-win’ arrangement for all of the parties in conflict. Doing so is necessary, but not sufficient to bind together opposing parties. It is not sufficient because the causes of conflict extend beyond simple cost-benefit calculus, and even in these cost-benefit analyses, the costs of lives lost may outweigh any perceived economic gains from the sharing of power between the former combatants. People who may have lost family in the conflict, for example, may see no amount of economic gain as being enough to remain within the federation. But there is more to this story.
  2. Natural resources, particularly in an archipelago, create deep divisions. Islands and atolls create a physical divide between the citizens, mineral resources therein provide incentives for the locals to ‘grab’ them, and traditional systems may provide the legitimacy for the ‘grab’. But the island being part of a larger nation founded on a national constitution may suggest otherwise. Again, how can these divides be bridged?
  3. Finally I agree that ‘payments for peace’ short-change lasting peace. Rewarding the combatants to lay down their arms may be desirable during the conflict, but it may incentivise recidivism later. This is an issue that I would like to see investigated further.