Economic growth and fragility

Question

Identify evidence on the role of economic growth and/or economic development in helping countries break out of fragility (not conflict).

Summary

There is fairly consistent evidence of a correlation between low levels of economic development and state fragility. However, there is less comprehensive literature available looking at the role economic growth has played in helping countries break out of fragility.

The strength and basis of the economy are important factors affecting the stability and resilience of states, yet are often an under-emphasised aspect of statebuilding. While acknowledging the links between the two aspects, some experts caution that economic growth is ‘not a panacea for state fragility’ and that other risks and factors can have more significant stabilising and de-stabilising influences.

Economic factors identified in the literature that can offer opportunities to transition out of fragility include:

  • Employment and job creation: There is some, albeit limited, evidence that links unemployment to instability. Some of the commonly cited elements for sustainable job creation in fragile states include an enabling framework, a consultative process that involves social dialogue, and the adoption of market development and supply chain approaches.
  • Infrastructure development: The relationship between infrastructure and state fragility is unclear, with little evidence to suggest that infrastructure investment plays a significant role in the processes of stabilisation. The strongest evidence about how infrastructure can contribute to effective stabilisation concludes that community involvement is key.
  • Foreign Direct Investment: There is inconsistent evidence on the links between FDI and conflict and fragility. Much of the available literature emphasises the importance of effective state institutions to manage investment and ensure stability.
  • Trade openness: One study finds that in well-defined institutional settings, trade openness can contribute to stability. However, in weak institutional settings this is often not the case.
  • Natural resources: There is a broad body of evidence looking at the links between natural resource endowments and political instability and conflict. Some authors argue that natural resource wealth can make some democracies malfunction because it encourages the politics of patronage and removes the need for the state to make bargains or pacts in support of a social contract.

Key findings emerging from the case study literature include:

  • Economic growth can be less important than other stabilising factors, particularly political stability. Analysis from Rwanda, for instance, notes that demands for political change are likely to outstrip the stabilising effects of economic growth.
  • Economic growth can be a driver of fragility. In Cambodia, there is evidence that political elites – who depend on high-rent industries for their survival – have been complacent when it comes to building state capacity in other areas. This has led the country’s political settlement to become more unstable.

 

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