The Political Economy of Conflict Financing: A Comprehensive Approach beyond Natural Resources

By Wennmann, Achim | Global Governance, July-September 2007 | Go to article overview

The Political Economy of Conflict Financing: A Comprehensive Approach beyond Natural Resources


Wennmann, Achim, Global Governance


This article argues that an emphasis on natural resources in conflict financing is unhelpful. Instead of focusing on individual methods of conflict financing, conflict economies should be approached as a combination of financing strategies. This opens new space for analyzing the vulnerability of organized armed groups. The article shows that organized armed groups are rational, have multiple sources of financing, and shift from one to another as a function of their needs. They operate in a structural environment that facilitates conflict financing. This challenges the effectiveness of multilateral policy against conflict financing and the viability of postconflict peacebuilding. If the availability of revenue sources can affect the dynamics of armed conflict, policy against conflict financing holds a promising potential for peacebuilding. KEYWORDS: political economy of conflict, conflict financing, natural resources, organized armed groups, peacebuilding.

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The literature on the political economy of conflict has contributed to our understanding of the processes and dynamics of contemporary armed conflict. (1) The literature is based on an understanding of conflict as a process of social transformation in which violence is functional. It seeks to contradict claims that liken armed conflict to a new form of barbarism in which violence is inherent in every human being and thus is inevitable. (2) Natural resources have a prominent position within the political economy of conflict. (3) Over the past few years, analyses of the relationship between natural resources and armed conflict have generated much debate and critique and have contributed to an increasingly sophisticated understanding of the issues and problems involved. (4) Nevertheless, the focus on natural resources as a financial source has led to a distorted understanding of the financing of contemporary armed conflict. While natural resources undoubtedly play a great role in some conflicts, in others they are of minor importance or only one of the methods of conflict financing.

This article argues that an emphasis on natural resources is unhelpful in developing a better understanding of the larger phenomenon of conflict financing. (5) A focus on natural resources does not adequately reflect that most armed conflicts involve multiple methods of financing. An understanding of conflict financing that goes beyond natural resources is thus required. Although much of the literature on the political economy of conflict is devoted to natural resources and conflict economies, little has been written on conflict economies as a combination of various methods of financing conflict. Such a comprehensive approach opens new space to help analyze the vulnerability of organized armed groups with respect to multilateral initiatives against conflict financing and provides insights into the viability of postconflict peacebuilding. The challenge for policy is to deal with organized armed groups that are rational, have multiple sources of financing, and shift from one to another as a function of their need. They operate in a structural environment that facilitates conflict financing characterized by the persistence of weak states, willing collaborators, shadow economies, and open economies in developed countries. Identifying and tackling sources of conflict financing is a prerequisite for viable postconflict peacebuilding. If not, there is a risk that armed conflict will recur. If the motivation to organize armed conflict depends on the availability of financing, policy against conflict financing holds a promising potential.

The argument and implications in this article will be elaborated in three parts. The first part briefly reviews the literature on the political economy of conflict, natural resources, and conflict economies. The second presents a comprehensive approach to conflict financing. The third charts the implications of a comprehensive approach for policy. …

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