Can Entrepreneurship Make Peace Work?

Tony Addison and Tilman Brück

There is a special role for entrepreneurship to play in making peace work. The recently published UNU-WIDER study, Making Peace Work: The Challenges of Social and Economic Reconstruction, details how the related goals of peace, prosperity and participation need to be brought together to achieve successful and sustainable reconstruction. Entrepreneurship has, for many reasons, an increasingly important role to play in this process. In this article we explain the key elements of successful reconstruction and outline how productive entrepreneurship can help achieve such an endeavour.

Peace, participation and prosperity are mutually reinforcing

'Peace' implies preventing a resumption of mass violence, looting and killing - but it also means finding constructive conflict resolution mechanisms and preventing spoilers from de-railing reconstruction through the use of violence. 'Prosperity' calls for broad-based and sustainable development that results in poverty reduction and growth benefiting even the most marginalized. But it also requires re-orientating entrepreneurs towards peaceful ways of making a living that eliminate the smuggling, drug production and arms dealing which make war economies so profitable and which sustain conflict. 'Participation' involves the design and implementation of a post-war social and political decision making processes, to enhance the involvement of all stakeholders in the peace process and to enable prosperous peace building. This may not be electoral democracy in all instances, but it should certainly involve a strengthening of transparent and participatory institutions, without which a return to violence is more likely. Participation should also entail the inclusion of gender issues into the reconstruction agenda—often a neglected area still in the reconstruction debate. Participation is also a key task for the international community—to alleviate the likely tensions between democracy and peace.

The interaction between peace and prosperity is well documented analytically and empirically, and the evidence shows that the probability of renewed conflict declines as per capita income rises. The relationship between peace and participation is less clear; the absence of conflict should help to build participation but participation certainly does not lead to peace in a linear fashion (and elections themselves may be a flashpoint for conflict as Angola and Kenya demonstrated in 1992 and 2007, respectively). Evidence of the link between prosperity and participation shows a wide variety of outcomes; both dictatorship and democracy can be associated with economic success, as well as with failure.

A number of positive experiences of peace and participation can help guide policy makers in how to avoid a conflict—ridden path to participation. While it is hard for low-income countries to build democracy, Mozambique, Botswana and India all serve as evidence that stable democracy can be attained and sustained, even in initially poor societies.

A cautious hypothesis may be that ultimately peace, prosperity and participation are mutually reinforcing, even if we do not yet know very well how these processes work together. In other words, we need multi-dimensional reconstruction efforts that take into account the many important aspects of development such as horizontal inequalities, gender issues, ethics, and health—to name but a few. Disregarding these important issues of development in the context of conflict would most likely lead to a failure in tackling poverty and hence to unsustainable development.

Our central theme is that political participation is a key factor for successful post-conflict transition. Political participation has many dimensions such as constitutional design, electoral politics, human rights protection, the legal and justice system, decentralization, and political culture. Political participation can occur at the individual or the institutional level, may vary across groups within a country, and include issues such as ethnicity or gender. It is therefore a much broader concept than democracy as represented by national parliamentary, presidential or regional elections—the elements of participation most focused on by the media and many donors.

Democratization may lead to conflict for a variety of reasons. With three or four large political groups vying for dominance, politics may become very divisive, for example by emphasizing ethnic or religious divisions. Furthermore, the political changes implemented to promote democracy could trigger violence that then stalls the democratic process. Rising prosperity provides scope for accumulation outside the realm of politics. Therefore, fragile democracies may not be the most appropriate form of governance for preventing conflict. This is also the experience of Afghanistan today, where there is an overemphasis on electoral democracy at the expense of other forms of social, political and economic participation.

Entrepreneurship is a key element of reconstruction

Chapter 11 of Making Peace Work by Wim Naudé is specifically devoted to exploring some important aspects of entrepreneurship as a key element of reconstruction. This chapter emphasizes that entrepreneurship may not automatically improve peace, prosperity and participation. While entrepreneurship is a ubiquitous quality in post-conflict states, it can be unproductive and destructive, so that the establishment of peace may not automatically result in development. Entrepreneurship may even cause a relapse into conflict. Entrepreneurship is not necessarily intrinsically good or bad, but depends for its effects on the structure of incentives that a particular time and society offers. To prevent unproductive and destructive entrepreneurship from derailing peace and prosperity, efforts to increase the amount of entrepreneurship itself may be less important than efforts to channel entrepreneurial effort into productive entrepreneurship.

Several factors can contribute to the support of peaceful, participative and prosperous entrepreneurship. The relationship between war, institutions and entrepreneurship and the evolution of institutional reform needs to be better understood in the post-conflict context. Post-conflict governments and donors should remove barriers to business development, provide support on the input side of the entrepreneurial process and decentralize the provision of support measures and economic decision making as much as possible. We believe that a precondition for productive entrepreneurship in post-conflict societies is therefore that governance and transactional trust be restored. In that sense, good pro-entrepreneurial policy in the post-conflict period is simply good development policy.

Furthermore, particular characteristics of entrepreneurship in poor and conflict countries need to be taken into consideration, especially the role played by ethnic, immigrant and minority entrepreneurs and their networks (for example 'entrepreneurial migration' induced by war). Human and financial capital requirements are also critical inputs into the entrepreneurial process, though the kind and type of requirements cannot easily be transplanted from other contexts or countries.

However, our understanding of entrepreneurship in such circumstances remains limited. Entrepreneurship in developing countries and post-conflict states in general and the impact of entrepreneurship on poverty in particular is an under—researched topic. The related lack of data places a significant constraint on policy design, including the urgent need to generate more livelihoods through an expansion of the private sector. The workshop 'Entrepreneurship and Conflict', co-organized by UNU-WIDER, the Households in Conflict Network (HiCN) and INCORE (The International Conflict Research Institute) at the University of Ulster takes place in Londonderry, Northern Ireland, from 20–21 March 2009, and will address these critical issues. The papers at the conference will deal with the conceptual role of entrepreneurship in conflict, as causal agents, beneficiaries and victims, and will explore empirical evidence of these relationships from a number of countries suffering from armed conflict. More information on the workshop can be obtained here.

WIDER Angle newsletter, March 2009

ISSN 1238-9544