war & recovery

[Jim Devine <jdevine03@xxxxxxxxx>]

The New York Times/July 20, 2006

Economic Scene

Count Ethnic Divisions, Not Bombs, to Tell if a Nation Will Recover From War
By AUSTAN GOOLSBEE

WITH repeated Shiite and Sunni killings in Iraq, the Hezbollah rocket
attacks on Israel, Israeli attacks on Lebanon and Gaza, the assaults
by the Taliban and counterassaults by American forces in Afghanistan,
and a train bombing in India, it has been quite a fortnight for at
least two of the horsemen of the apocalypse — war and death.

With little prospect of a quick resolution to most of these conflicts,
perhaps it is worth looking at the long-run prospects for these
nations once the wars actually end (assuming that they do end, of
course).

[assume we have a can-opener!]

The good news is that history suggests that the destruction of war has
no lasting impact on economic prospects. The bad news is that most of
these countries, especially Iraq, are filled with ethnic divisions and
civil discord. The evidence shows that these problems, unlike bombs,
cause lasting damage to the prospects for a nation's economy, even if
they do not boil over into civil war.

The negligible long-term impact of war itself is rather startling but
has been noted in numerous studies. The recent work of two economists
at the University of California, Berkeley — Edward Miguel and Gérard
Roland — for example, "The Long Run Impact of Bombing Vietnam,"
(globetrotter.berkeley.edu/macarthur/inequality/papers/MiguelVietnamBombs.pdf),
starts from the fact that some 10 percent of the 584 districts in
Vietnam received nearly three-quarters of the total bomb tonnage. No
matter how they sliced the data, they did not find that heavier
bombing during the war corresponded with any major differences in
poverty rates, access to electricity, literacy, population density or
consumption in the 1990's and 2000's.

[could this have something to do with the effectiveness of central
planning and the strength of Vietnamese nationalism?]

Similar studies have documented that the long-run population of
Japanese cities was not affected by whether they were destroyed in
World War II (including Hiroshima and Nagasaki, whose destruction was
radioactive, to boot) and likewise for cities in Europe. After
suffering the enormous immediate costs of war, it seems that people
rather quickly return to where they left off. In the long run, things
return to normal. Nation-building is still possible, even if one
starts with rubble.

[usually, at this point, economists cite the high level of education
of the survivors in Japan and W. Europe as helping recovery.]

But for the optimists hoping that war in the Middle East will soon end
so the rebuilding can commence, there is a serious problem. The
political boundaries of these countries, especially Iraq, make the
long-term prospects bleak. The existence of ethnic division in the
countries will probably mar them permanently in a way that bombs never
could.

Boundaries between many countries of the Middle East, like those in
Africa, were haphazardly put together in negotiations by European
colonizers who had little regard for ethnic realities. Indeed, they
sometimes even lumped enemies together on purpose, hoping that ethnic
hatreds might reduce anticolonial feelings. [gee, divide and conquer?
whodathunk?] In a new study, three economists — Alberto F. Alesina and
Janina Matuszeski of Harvard University and William Easterly of New
York University — document how important internal cohesion is for the
health of a society.

Their study, "Artificial States,"
(www.nyu.edu/fas/institute/dri/Easterly/File/artificialstatesNBER.pdf),
creates two measures of how "artificial" a nation's boundaries are.
The first measures whether the country's political borders partition
ethnic groups into separate countries. A country that combines a few
Hutus and neighbors another country with lots of Hutus is in greater
danger of ethnic fragmentation than a country made up of similar
peoples.

The second measures how squiggly the borders of a country are.
Straight lines are usually the sign of an arbitrary colonial mapmaker.
Natural barriers like rivers and mountains seldom look tidy. Taking
the measures of partitioning and neat borders, their study compares
the performance of countries with natural borders to those with
artificial ones and finds, overwhelmingly, that artificial nations
suffer terribly — lower income, horribly ineffective and corrupt
governments, less respect for the law, low literacy, limited access to
clean water, poor health care, you name it.

Professor Alesina explained in an interview why he believed the
fragmentation was so damaging.

"First, the governments in these countries are often run to benefit
one ethnic group at the expense of the others and are prone to
corruption," he said. "Second, if you have a lot of people who would
prefer to be part of the neighboring country, they tend to spend their
time fighting the government rather than improving schools and
building roads,"

The fact that these groups do not trust one another, he said, makes
them less willing to invest in social capital or even to conduct basic
market transactions with one another.

Viewed from this perspective, the long-term economic prospects for
Afghanistan and Iraq do not look good. It is not the destruction of
war. That will end and the countries can be rebuilt. It is the
fragmentation and ethnic hatred. That, typically, never goes away.

Iraq, especially, is a straight-edged, ethnically partitioned nation
wracked with internal strife. And having oil wealth is unlikely to
save the day. Fragmented countries with natural resources often do
worse because civil war rages over who gets to keep the money. Some of
the poorest countries in Africa, for example, are actually quite well
endowed with diamonds and other resources.

When the horsemen of war and death arrive in the form of internal
division, the horsemen of famine and pestilence are seldom far behind.
But come to think of it, the Book of Revelation says the horsemen of
the apocalypse arrive on horses of different colors — white, red,
black and pale. I wonder how they kept from killing one another?

[As I understand it, the US South had a hard time recovering from the
Civil War for two main reasons that don't quite fit the above
analysis. First, the area's infrastructure wasn't rebuilt (while much
of it was aimed at serving shrinking foreign markets for cotton rather
than domestic markets). Second, both the Southern elites and (after
1876) those of the North wanted to maintain the  debt peonage of the
Black "freedmen," which went along with their not being schooled or
allowed to accumulate their own wealth. If "40 acres and a mule" had
been instituted, the South would likely not ended up as an anti-labor
backwater in the 1950s, able to turn the rest of the US into one
during the 1980s, 1990s, and 2000s.]

Austan Goolsbee is a professor of economics at the University of
Chicago Graduate School of Business and a research fellow at the
American Bar Foundation.
E-mail: goolsbee@xxxxxxxxxxxx



--
Jim Devine / "You need a busload of faith to get by." -- Lou Reed.