Violence Denies Economy Trillions, Study Finds

Violence is widely recognized as causing trauma, hardship, and death. It also is denying the global economy significant economic benefits, according to a recent assessment of world peace.

The third annual Global Peace Index concluded that if the world had been peaceful in 2007 - with no war in Iraq, school shootings in the United States, or political unrest in Myanmar, for instance - the global economy would have benefited by as much as $7.2 trillion.

"There is an argument that war is good for the economy," said Clyde McConaghy, president and co-developer of the Global Peace Index, at the report's launch on Tuesday. "I don't think that argument stands up anymore."

An estimated $2.4 trillion would be generated from diverting finances from "violent" to "peaceful" activities, according to the report. This conclusion assumes that some industries, such as military aircraft manufacturing, would decline, but that the estimated 4.4 percent of Gross World Product spent on violent activities would largely shift elsewhere. For example, a criminal law firm's losses would be offset by a corporate law firm's gains, the report said.

The remaining $4.8 trillion is an estimate of the economic activity worldwide that has been repressed by violence. An improvement in a country's peace-index ranking results in greater consumer spending and reduces risk for investors, predicts the Australia-based Institute for Economics and Peace, which authored the report.

"Having a more peaceful environment will allow businesses to grow, entrepreneurs to thrive, and scientists to do research," said McConaghy, who added that his organization's attempt to quantify the economic value of peace was the first of its kind.

The researchers did not evaluate the effects of additional energy and land constraints caused by "peaceful" economic growth.

The peace index was launched in 2007 in an attempt to define peace, rank the world's most peaceful countries, and evaluate what factors have led to these countries' success.

With a global economic collapse, food riots, and continued Middle East violence, the main conclusion of the latest assessment was not much of a surprise. "Overall, the world was somewhat less peaceful last year than it was in 2007," said Leo Abruzzese, North American editorial director and financial services director for the Economist Intelligence Unit, which helped evaluate various data sources used in the report.

Of the 144 countries evaluated, New Zealand, Denmark, and Norway were ranked as the most peaceful. The least peaceful countries are Iraq, Afghanistan, and Somalia, the report said. To determine the country rankings, the evaluation relies on several quantitative indicators, such as arms exports, violent crime, and prison population, in addition to qualitative indicators such as political stability.

The 2009 report also attempted to identify potential determinants of peace. Countries with high levels of distrust in other citizens, perceived government corruption, and poor respect for human rights correlated with a lack of peace.

Andrew Williamson, global director of custom research and deputy director of forecasting services with the Economist Intelligence Unit, said the indicators are useful measures to gauge improvements in a nation's peace index. Yet he acknowledged the research method's limitations.

"Correlation doesn't mean causality. We're economists; we know that," Williamson said.  "Is it an improvement in development or education that drives peace? Or is it peace that drives the variables? We hope that over time we'll have an answer to that."

Despite ongoing instances of terrorism, failed states, and civil unrest, the report notes that the world has slowly become more peaceful over the past two decades. More wars ceased than began, and the number of negotiated agreements has increased. Armed conflicts have steadily decreased from more than 40 in 2000 to 30 in 2007, according to the report.

Meanwhile, peacekeeping budgets are on the rise. United Nations peacekeeping operations cost about $6.8 billion in 2007-08, an increase from the record $5.6 billion spent in 2006-07. National military spending is still prioritized in most countries. World military budgets were about $1.2 trillion in 2006, according to the Worldwatch Institute's Vital Signs.

Ben Block is a staff writer with the Worldwatch Institute. He can be reached at bblock@worldwatch.org.

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