Vision of Humanity"

Introduction  (the full report can be downloaded above)

Violence interferes with education, health, and personal safety and thus with personal productivity, the pursuit of business opportunities, commerce and trade, economic development and growth, and human material well-being and subjective happiness. Business leaders might make different decisions if they knew, even approximately, not only the current cost of violence (or its credible threat to the global business environment) but also the extent of business opportunities forgone by continuous violence (or the threat thereof) that in some cases renders entire states largely unfit for business.

We distinguish between economic activity that is criminal as opposed to that which is violent or, at any rate, related to violence. For this Report, we are not interested in estimating a non-criminal (“ethical”) gross world product (GWP) but in estimating a peace-based GWP as distinct from a violence-based GWP. The Report does not argue that it is feasible to eliminate violence, nor that military forces and violence-related law and order functions are or will become unnecessary; it does argue that societies have choices between spending money on conflict-transformation, for example, as opposed to locking up people for individual or collective violent behavior. Businesses, in particular, have both the resources and the incentives to affect how societies respond to violence. Our purpose is therefore to show how overall society, including businesses, might benefit by a reduction in violence. Quantifying the benefits for each state and economic sector makes clear that with few exceptions businesses — their shareholders, executives, employees, suppliers, customers, and the communities in which they operate — have a considerable stake in peace.

The Stockholm International Peace Research Institute (SIPRI) estimates that world military expenditure as a share of actual gross world product (aGWP, or the sum of individual countries’ aGDPs) was 2.5 percent in 2007.2 Thus, only a minority of businesses has a direct stake in war. If one adjusts this number for the typical underreporting of military expenditure and for the economic activity involved in violent activities such as the prosecution of war, civil war, political repression, piracy, and activities in conjunction with criminal violence, it can be argued that the combined effect directly or indirectly implicates a conservatively estimated 4.4 percent or more of aGWP in violence.3 The mere reallocation of economic activity from violence to peace would shift this 4.4 percent from violence industries to peace industries but would not, by itself, add to the overall economic pie. We therefore refer to this as the static peace dividend (spd) effect, meaning that aGWP itself remains at first unchanged (static). Although some industries would decline precipitously (e.g., military aircraft manufacture), others would decline only slightly (e.g., sport and hunting firearms manufacture, by far the largest part of the manufacture of firearms), and still others would probably see no decline in economic activity at all (e.g., a law firm doing business in criminal and civil law might merely see less business in its violent crime case load but more business in its corporate law cases as economic activity shifts).

Beyond the static economic effect lies the realization that by suppressing economic activity, violence suppresses GWP below what otherwise it could have been. For example, some studies of the economic effects of terror suggest that GWP might have been up to 11 percent higher in the absence of terrorist events. If violence ceases and peace is obtained, otherwise idle, underused, or misdirected labor and capital resources can be liberated and enter into the economy in productive ways. We refer to this as the dynamic peace dividend (dpd) effect. Combined, the static and the dynamic effects account for the total economic effect of the cessation of violence and the utopia of peace. For 2007, this total effect could have been, in foreign-exchange based nominal terms, as much as US$7.2 trillion. One-third of that would have come from the static reallocation of resources but a net gain of about US$4.8 trillion, or 8.7 percent, over the actual 2007 gross world product of about US$54.7 trillion could have been realized from the dynamic effects of peace.

The remainder of this Report is arranged as follows. Section 2 summarizes the prior literature, focusing on economy-wide rather than business-specific effects of violence. Section 3 focuses on business-specific effects by selective business activities and selected business sectors, or industries. The objective is to gain from the very disparate and highly case-specific literature a sense of the likely global percentages across all states and all economic sectors that would then guide our assumptions to be used in the computations to follow. Section 4 discusses our concept of a peace gross world product (PGWP). Section 5 takes the 2007 economic pie per state and for the world as a whole as given and discusses how we compute shares of actual GDP and actual GWP that accrue to peaceful and to violent activity, respectively. Because we assume that GWP is given, the estimates of the current share of economic activity accruing to violent activity therefore constitute a first cut at estimating a static peace dividend when economic activity is reallocated from violence to nonviolence. Dynamic effects would enlarge the economic pie, and this is discussed in Section 6. The combined static and dynamic effects give an estimate of the overall peace dividend that might be realized if violence ceased.

Section 7 presents results of a country by country analysis and, for reasons explained there, is based on purchasing power parity or so-called international dollars (ppp-$) rather than on nominal US dollars (US$). Section 8 is a peace dividend analysis by sector (agriculture, industry, services) and subsectors within sectors. An analysis of the interaction of country and sector effects is carried out in Section 9. Section 10 discusses limitations of the calculations underlying this Report. Section 11 lists recommendations for business outreach, public outreach, and academic outreach (research). Appendix A contains some data tables. A selective bibliography, selectively annotated, on the economics of violence and peace is provided in Appendix B. A Microsoft Excel spreadsheet (“Peace GDP and Industries”) is an integral part of this Report.