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Would the world be richer if it stopped preparing for war and invested in peace? Read what a researcher from the Institute of Economics and Peace has to say about this. The answer, expressed in dollars, is surprising.
How much does war and armed violence cost a year?
Talia Hagerty: We have quantified the economic impact of violence in the global economy. What we discovered is that in 2016 the direct and indirect costs of violence totaled 14.3 trillion dollars (12.2 trillion euros) in purchasing power parity, including the multiplier effects.
This number includes not only the costs of war, but also other forms of violence, such as terrorism, homicides and violent crimes.
How do you calculate the costs of the war ?
When a soldier is wounded in the war, there are direct costs, such as medical assistance, and indirect costs, such as the loss of a lifetime salary if he or she has a disability. But there are other things. Suppose it costs $ 100,000 to treat a wounded soldier, who loses five years of wages for not being able to work, adding another $ 250,000. That is not the total cost, because the money could have been spent on something productive, something with added value.
When a pump is manufactured, it will never be used in the best case. In the worst case, if it is used, it will destroy human lives or physical capital, or probably both.
Let’s compare the manufacture of computers and firearms, and ask ourselves which one makes the most sense in economic terms.
But is not war, or the threat of war, good for the economies of countries like the United States, Russia, the United Kingdom, France or other countries that have large armies and export many weapons?
Is it good for these countries? No. Maybe it could be lucrative for some companies? Definitely. But that is only part of the question. These national economies that you mentioned thrive in a context of globalized trade. The economic impact of violence in the global economy far exceeds that of the global financial crisis of 2008, for example.
Therefore, if we want to have prosperous countries in a globalized world, this implies that we have to measure the economy of each of these states and look at the complete image, not only measure the prosperity of countries separately or of specific sectors, such as the one of the arms manufacturing companies.
However, does not military spending generate an enormously valuable technological innovation? For example, transistors and the internet are both the result of funding from DARPA, the US advanced defense research agency. And the Germans made extraordinary progress in artifacts such as jet engines or rockets during the six years of offensive between 1939 and 1945. The urgency of war, or military competition, seems to stimulate high creativity and results in technological terms, which also has an economic dimension.
Of course. It can not be denied that a large number of technological advances have come from military pressures. But I think what you see here is that organizing people around a common goal results in amazing things being achieved. Consequently, should we invest money in research? Of course we should. But does it have to be a military investigation ?
Moreover, in fact, this progress was also achieved thanks to high levels of positive peace, not in spite of them.
Positive peace? What is that?
Positive peace is the attitudes, institutions and structures that sustain internally peaceful societies and that create optimal environments for human potential to flourish.
We have identified eight main factors that are statistically associated with the absence of violence and a high level of internal peace in a country: a well-functioning government, an equitable distribution of resources, a free flow of information, good relations with neighbors , high levels of human capital (which increases life expectancy and increases literacy), acceptance of the rights of others, low levels of corruption and a good business environment.
It is a combination of factors that contribute to basic human security, productive diversity and justice. And because of productive diversity, I do not mean that we “tolerate” diversity, but that we embrace it and commit ourselves to uniting diverse perspectives and generating positive results.
How does all this relate to the Cold War and the innovative technologies that were born in this period?
Technological progress, which resulted in the creation of the internet, did not take place without high levels of human capital, for example.
But there was the pressure of the Cold War and the threat of mutual annihilation between the United States and the Soviet Union.
Yes. But the mistakes of the past do not have to define the future. In a generous interpretation, during the Cold War, people did the best they could with the information and narratives they had at that time. But the study of the economy of peace has only just begun.
If we approach this issue from another perspective, we see how these extraordinary advances were achieved in a context of mobilization for peace and prosperity, rather than mobilization for war.
Talia Hagerty is a researcher at the Institute of Economics and Peace, based in Sydney, Australia, a think tank dedicated to developing metrics to analyze peace and quantify its economic benefits.