New directions in conflict research from an economics perspective - Conflicts Over Natural Resources in the Global South - page 41

small pockets of the nation state, and may even escape serious international scrutiny,
as the country as a whole is deemed to be making progress. Countries that are growth
or human development successes on aggregate may still contain regions where extreme
disadvantages and deprivation persist.
Some of the world's economic success stories, in terms of growth, are highly glob-
alised in terms of their participation in international trade and financial flows. These
countries, mainly in East Asia (and also India), have done well, but the cost has been
greater inequality, particularly the widening gap between skilled and unskilled workers
(Mamoon and Murshed 2008), and the increased marginalisation of informal sector
workers and landless labourers. The Heckscher-Ohlin-Samuelson (HOS) theory of
trade informs us that after an expansion of trade, the factors of production engaged
more intensively in the exportable sector will witness a rise in their remuneration. This
is because the exportable sectors of the economy expand after increased international
trade, while the import-competing sectors contract. If there are factors of production,
say certain types of workers, specific to the contracting sectors, many of these indi-
viduals will become part of the unemployed unless they can re-equip themselves into
newer occupations. It is immediately apparent that globalisation produces winners and
losers, and in many instances the losers of increased trade or globalisation demand pro-
tection. The absence of these counteracting policies can encourage revolt, including
violent protest that undermines development, even if it is not a serious challenge to
the state of the type that produces what is commonly understood to be state 'failure'.
For example, the commercial extraction of forestry and mineral resources in India,
along with the historical marginalisation of certain ethnicities, have fuelled Maoist
insurgencies in that country.
Rodrik (1998) pointed out that more open economies generally tend to have bigger
governments. The larger size of government relative to national income is predicated
on the need for the state to provide a form of insurance or social safety net against
the temporary adverse economic shocks that tend to strike these more open economies
with greater frequency, some of which are purely external to the country. For example,
the rise in global food and essential fuel prices sparked off revolts in many parts of the
world, especially in food and fuel importing developing countries. Shifts in food and
fuel prices may also have even been partially responsible for the Arab Spring protests
in 2011. By contrast, the Chinese government's fiscal boost following the growth slow-
down in the wake of the 2008 recession may have staved off social unrest. Similarly, the
achievement of macroeconomic stability may produce conflict. For example, interna-
tional financial markets require the smooth servicing of a country's external debt, but
debt servicing may require belt tightening in terms of competitive devaluation (which
raises the cost of imported food and fuel), as well as government spending cuts. This
can lead to mass protest and riots. There is thus a trade-off between macroeconomic
and political stability (Boyce 2007).
3.2.4 Prosperity and violence
More generally, historical accounts suggest that violence and increasing prosperity
initially go hand in hand in the early stages of development, but decline thereafter (Bates
2001). Traditional societies may have rules and norms that manage violent behaviour,
even making peaceful dispute settlement self-enforcing. An increase in prosperity may