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Putting the peace and economy framework into practice

February 24, 2015

Taken as a whole, the framework for integrating peacebuilding into economic development set out in my blog post of 10th February may seem disempowering. It explains the importance of integrating peace into economic development. It identifies areas where actions can help shape a more peace-conducive economy, and broad outcome indicators thereof. But it also makes clear that many of these factors are largely structural and interlinked, thus resilient to change. What this reminds us of, given the five lessons learned summarised in my post of 28th January about how peace gets stronger in society, is the importance of taking a very practical perspective in working out how a specific agency, or coalition of agencies, can contribute to peace through economic development. The framework can be used to help identify specific approaches and strategies for this, for agencies with the right combination of entry point, opportunity, leadership and agency.

In this post, I explore generically how the framework can be used in analysis. As a reminder, the utility of the framework it to work out how to integrate peace into economic development – i.e. in practical terms, to adapt economic approaches so they promote peace. The starting point for most planners is therefore likely to be their own initial economic development niche or opportunity. Obviously public policy, business project or programme design processes are rarely purely linear. But for the sake of clarity, we set out this adaptation process generically in linear form here, going step by step from clarifying the mandate, defining relevant peace outcomes, analysing the political economy and the seven ‘levers of change’, developing a concrete plan, and then implementation, and finally monitoring and evaluation of the impact on economy and peace.

1. Mandate

As a starting point it is important to be clear about the mandate of the agency or agencies concerned. Some economic development promoters and businesses maintain (or at least silently assume) that their mandate is ‘purely economic’ – and that even corporate social responsibility is a distraction from maximising economic returns[i]. More typically, businesses go further and accept the need to ensure ‘their stakeholders’ will ‘buy-into’ their project or at least stand in its way – i.e. provide a ‘social licence to operate’. This is a purely transactional approach which can still comply with Milton Friedman’s 1971 famous call that “the social responsibility of businesses is to increase its profits”[ii]. But as explained in chapter one of this paper, there is a genuine overlap between economic and peacebuilding actions and interventions, so even ‘purely economic’ actors can take the needs of peace into consideration if they choose to do so. Indeed, it is becoming increasingly accepted that providing social value as well as financial or economic value is a legitimate expectation of businesses and economic promotion. This is often called shared value, defined by Michael Porter and mark Kramer[iii] as follows:

‘The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

The concept rests on the premise that both economic and social progress must be addressed using value principles. Value is defined as benefits relative to costs, not just benefits alone. Value creation is an idea that has long been recognized in business, where profit is revenues earned from customers minus the costs incurred. However, businesses have rarely approached societal issues from a value perspective but have treated them as peripheral matters. This has obscured the connections between economic and social concerns.

In the social sector, thinking in value terms is even less common. Social organizations and government entities often see success solely in terms of the benefits achieved or the money expended. As governments and NGOs begin to think more in value terms, their interest in collaborating with business will inevitably grow.’

Many businesses, large and small, are adopting this way of understanding their value creation role: from Unilever at the top, to small companies in divided societies reaching out across conflict lines in their employment practices as a way to heal divisions[iv]. Moving beyond business to other economic promoters, the World Bank’s recent creation of a Center for Conflict, Security and Development to guide its programming in fragile contexts is indicative of a broadening understanding that ‘pure’ economic and poverty mandates are less and less legitimate. Given the risk of conflict and violence which prevails in fragile contexts, it is vitally important for economic development agencies to clarify with their stakeholders – boards, politicians, staff etc. – that their mandate does explicitly include making a contribution to sustainable peace. This creates the room for manoeuvre to do so, as well as the internal carrots and sticks to encourage it.

2. Relationship to the four peace and prosperity outcomes

Having agreed on the mandate, it is important to determine a more specific ambition in terms of my four overarching indicators of peace-promoting economic development: sustainability, decent livelihoods, revenue and services, and safe capital accumulation. Most if not all economic projects will expect to have some impact on these, almost by default. For example a mining project will create new jobs and royalties and pay attention to sustainability, a new water use or land tenure policy may expect to improve agricultural business opportunities, and a new road will be expected to lead to new economic opportunities and tax revenues.

But it is important to go beyond the ‘default’. This means examining the four characteristics to determine whether and how the project can make a difference to all four of them, and also to ensure that their nuances are not lost. If a mining project will create new jobs and royalties ‘by default’, can it also do so in ways which minimises damage to the environment, and are there ways the project can also help to improve people’s resilience and economic power through safe savings schemes? And to what extent can the mining company ensure that people have access to ‘decent’ livelihoods and employment, both within its direct sphere of control and perhaps beyond? Can it go beyond simply paying taxes and royalties to the state, and consider its role, as a major taxpayer and ‘corporate citizen’, in ensuring that these are well used for public benefit and to strengthen the peace factors?

This is where some of the tensions between peace and economic development  begin to come into play. To continue with the mining project example: taking on an explicit commitment to creating public value and peace may lengthen the capital development stage of the project, and thus go against shareholders’ apparent interests; and becoming engaged with questions of what royalties are used for may seem too political for some companies, and create friction with the government – even if it does fit in with the idea of shared value. Hence the importance of working these issues out at an early stage in the planning process, and determining which of the peace-and-prosperity characteristics the project can reasonably and ambitiously aim to strengthen.

3. Analysis of the political economy and the seven levers of change 

Having made a commitment to explore ways to contribute to the four core characteristics of a peaceful economy, the next step is to identify the extent to which this will be possible within the constraints of the political economy, the likely opportunities for change, the leadership and agency needed, and the mechanisms for adaptation in terms of the seven ‘levers of change’ identified on 10th February. This is a very broad analytical canvas, but can be narrowed and thus made more user-friendly by association with the main economic development project under review. To illustrate more fully, let us take the hypothetical example of a government policy change.

In this illustration, the government of a large, fragile country recovering from civil war is developing a policy to attract inward investment, focused on the export of high value fresh exports from irrigated farms around a large lake. This meets the government’s needs to raise revenue – royalties from water use, and taxes on inputs and wages; and will provide direct and indirect employment.

Despite lobbying by investors, the government also determines that employment conditions will be regulated to ensure that workers get a decent deal; and that stringent environmental standards will be applied to minimise water and energy waste, and to maintain the quality of water in the lake. Lobbying by civil society means an additional benefit is included into the policy, under which a percentage of the water royalties are dedicated by law to local service provision in the communities surrounding the lake, on priorities to be agreed with community members.

So the new policy is designed to meet at least three of the core outcomes of peace-conducive economic development: decent livelihoods, revenue and services, and sustainability.

Examining the policy proposal through the lens of our framework we can see that it is primarily designed to change the make-up of the economy, by taking advantage of suitable and land water resources. Further analysis indicates the need for human capital development – i.e. training for employees, and for government employees who will be involved in monitoring water use and in the export chain (customs, etc.). Infrastructure development will also be needed to ensure that fresh produce can be reliably exported on a regular basis.

The high value horticulture projects expected to be developed as a result of the policy will not surprisingly interact significantly with aspects of the political economy. The civil war was between two main ethnic groups now in a power-sharing agreement negotiated by the UN: one drawn largely from traditionally pastoralist/fishing communities, the other dominated by farmers, and the latter group is also dominant in government. The lake is in a traditionally pastoral region, but the main investors are members of the ‘farming’ tribe who are closely allied with senior government figures. There are opposing interests at stake (access to the lake shore for pastoralists versus export-oriented farmers). Government figures allied with the investors have an incentive to assist ‘their own’ people. While the less powerful pastoralist tribe’s representatives in government may have personal incentives to make a deal with their fellow ministers, this is in tension with a competing incentive to support the interests of their fellow pastoralists, who badly need continued access to the lake shores. This latter is in keeping with their values, while the government – and the dominant ethnic group – ostensibly espouses the combined values of economic growth and peace.

Critically, to complete this admittedly over-simplified political economy analysis, the institutions available to mediate the tensions between these groups are inadequate: the power-sharing government is based on an externally negotiated peace agreement, and is not underpinned by historically tested governance traditions or systems; and the strongest institutions currently are those operating within each of the two ethnic groups, rather than between them. So the opportunity to resolve the tensions between the competing interests within the pastoral tribe is greater than the opportunity to resolve the competing interests between the investors and the pastoralists.

This is a hypothetical case, so there is no “outcome” to relate. But it is easy to see how, given the opportunity of the peace agreement, and in the absence of the right leadership and analysis, this policy might end up contributing significantly to economic development but not to peace. Indeed, it has all the potential to be conflict-insensitive and to undermine peace, locally or even more widely.

With good leadership and analysis, on the other hand, the potential of the lake, combined with export markets and the right technical and managerial expertise could make a significant contribution to peaceful economic improvement. If the opportunity were carefully and slowly taken to contrive a system whereby the governance of lake water access was amended to integrate export investors and government alongside the pastoralists, while avoiding giving any group too much power, then improved institutions mediating between different interest groups, and between them and the state would have been created. Meanwhile if the investors were incentivised to ensure that jobs and other opportunities were made available to local community men and women, and sufficient training were provided; and to ensure that the market and export infrastructure took account of fish and livestock exports as well as fresh produce, then economic benefits and relationships could all be improved, further strengthening local peace.

This goes beyond mere conflict-sensitivity and if defined and implemented with a view to contributing to peace through appropriately designed economic development, could be a good example of promoting peace-conducive economic development.

4. Plan

Once the project analysis has been done, pathways through which to achieve the peaceful prosperity outcomes are defined. This is obviously something which has to be done in ways which involve all stakeholders, to ensure buy-in but also that the plans take sufficient account of their interests.  

5. Implementation, adaptation and evaluation

The project is then implemented, with continuous participatory monitoring to ensure that assumptions about the political economy were sound, and that the intended outcomes for peace and economic development are being achieved as planned. Where necessary, as the results unfold, plans need to be adapted, so mechanisms for this needs to be built into the planning. Lessons learned also need to be shared so they can be taken into account in other projects and policies. By engaging a wide variety of stakeholders in such exercises – politicians, communities, media, etc. – the idea of peace-with-prosperity gains popular and political currency, as well as a very practical understanding.

[i] Robert Simons. The Business of Business Schools: Restoring a Focus on Competing to Win. Capitalism and Society, Volume 8, Issue 1, Article 2, 2013

[ii] Milton Friedman. 1970. The social responsibility of business is to increase its profits. The New York Times Magazine, September 13, 1970.

[iii] Creating Shared Value, by Michael E. Porter & Mark R. Kramer. From the January 2011 Issue of Harvard Business Review.

[iv] International Alert, 2006. Local Business, Local Peace: the peacebuilding potential of the domestic private sector.

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