Falling Commodity Prices Lead To Civil War

Downturns in the price of international commodities increase the probability of civil wars in African countries that are big exporters, according to research published in the May 2010 issue of the Economic Journal.

Analysing data on the prices of almost 20 international commodities, Markus Brückner and Antonio Ciccone find that a 10% fall in income due to falling commodity prices raises the likelihood of civil war in sub-Saharan Africa by around 12%.

For example, between 1997 and 2000, international coffee prices dropped by over 50%. The three sub-Saharan countries that depend most on coffee exports are Burundi, Rwanda and Uganda. Civil war started in Burundi in 2000, in Rwanda in 2001 and in Uganda in 2002. Ugandan civil wars that started in 1981 and 1991 were also preceded by drops in international coffee prices.

The research finds that the international prices of oil and cotton also have an effect on the likelihood of civil war. The civil war in Angola that started in 1998 was preceded by a 20% fall in the price of oil, the country''''s most important export. The civil war in Chad that started in 2001 came after a 25% fall in the price of cotton, which is the source of almost all of Chad''''s export income.

Between 1945 and 1999, there were approximately 127 civil wars. These conflicts are estimated to have directly resulted in at least 16.2 million total casualties, with many more killed or disabled by war-induced diseases. Since the end of the Second World War, civil wars have killed more people than wars between countries.

What are the causes of civil wars? It seems plausible that desperate poverty must have been a factor, at least in some cases. That poverty and civil war tend to go together both across countries and over time was shown in the World Bank''''s 2003 report Breaking the Conflict Trap: Civil War and Development Policy.

But does this mean that poverty is a cause of civil wars? In their evaluation of the World Bank''''s 1998-2005 research, MIT''''s Daron Acemoglu and Princeton''''s Angus Deaton emphasised that the World Bank''''s methodology is not conclusive. Poverty and civil war could be symptoms of some deeper cause, such as discrimination based on religion and ethnicity.

It is difficult for cross-country analysis to dispel such doubts. There are simply too few countries and too many differences among them that could be relevant.

What about evidence that civil wars tend to be preceded by periods of low income growth? Does this establish that lower incomes cause an increase in the chance of civil war? Not necessarily; civil wars could be preceded by economic recessions simply because a greater chance of a future war scares away investments, and this lowers economic growth.

To examine whether lower incomes can cause civil wars, it is necessary to identify economic downturns driven by factors that are exogenous to an individual country''''s likelihood of future conflict, such as world commodity markets.

It is known that downturns in international commodity prices cause economic recessions in sub-Saharan African countries, as their export revenues are often dominated by a few commodities. But do downturns in the price of international commodities also increase the probability of civil war in countries that are big exporters? This study finds evidence suggesting this to be true.

''International Commodity Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa''' by Markus Brückner and Antonio Ciccone is published in the May 2010 issue of the Economic Journal.