With more than 92 countries involved in conflict beyond their borders in 2024, achieving lasting peace has become increasingly challenging. Over the past decade, global peace levels have been significantly affected by rising social unrest and political tensions. This decline in peace not only threatens national security but also disrupts business environments, making it more difficult for nations to maintain economic stability. Understanding the connection between peace and favourable business conditions is essential, as it directly influences the ability of nations to sustain both economic prosperity and long-term security.
It is much easier to start and register businesses in high peace societies compared to low peace countries, the rate of new business registrations being 10 times higher. There is a more rapid international movement of goods in high peace countries, twice the amount of time being taken for imports and exports in low peace countries. Through these statistics, it is clear that peacefulness fosters an environment that brings prosperity and development towards a country. With peace, due to better governance and effective institutions, this subsequently provides optimal conditions for business operations, encouraging more entrepreneurship and innovation.
Peace also allows countries to allocate more resources towards health, infrastructure development and education rather than defence and resolution; these funds are used for initiatives that increases the livelihood and wellbeing on individuals in the country. Due to the absence of widespread violence and social disruptions, the markets can prosper and function more effectively.
Through IEP’s framework of Positive Peace, this outlines that peace and businesses are interdependent on each other to thrive within society. For example, factors such as low corruption levels, governance and high levels of human capital provide optimal conditions to create and sustain peaceful societies. Figure 1.1 demonstrates this correlation between peace and business. In the past six decades, very high peace countries have generated the highest growth in per capita GDP, high peace countries also showing relatively strong GDP per capita growth. Very high and high peace countries have recorded annual rates of 1.1 and 1.6% respectively, even with the COVID-19 pandemic causing a major contraction within the global economy. Low peace countries have conversely undergone a decline in GDP growth, the average annual GDP per capita being –0.93%.
A correlation has also been observed between a country’s peacefulness and their net foreign direct investment inflows (FDI), FDI inflows in highly peace countries doubling the proportions in less peaceful nations. Through this disparity, it is evident that highly peaceful countries attract international investors due to the strong likelihood of economic stability, security and growth in these regions. Stronger economics environments have a greater appeal in the global market. Figure 1.3 shows this disparity, between 1980-2021, FDI levels in very high peace countries rising approximately 20 times more than low peace countries. Whilst FDI rose from 1.5% to 5.5% amongst high peace countries, low peace countries grew from 1.2% to 2.2% from 1980 to 2021.
The Global Peace Index scores reflect a country’s level of peacefulness, which influences its socio-economic conditions and institutional strength—key factors that form the foundation of its economy. The instability of low peace countries causes them to be more susceptible to economic shocks, experiencing a higher degree of volatility in exchange rates. There is much more stability in currency values within nations with high GPI scores due to their more secure economic environment, being favourable towards their foreign investment.
This stability is also reflected through the levels of inflation in low and high peace countries, as seem in Figure 1.4. When observing the standard deviation of inflation rates since 2005 for low and high peace countries, this signifies the vulnerability of low peace countries due to economic disruptions. This leads to extreme inflation, unlike stable levels of inflation in high peace countries. In the past few decades, especially due to the COVID-19 pandemic, this disparity has widened. Whilst the standard deviation between high and low peace countries was respectively 1.4% and 9.9% during 2005, the standard deviation was 2.2% and 74.9% by 2021.
The analysis between the correlation of peace and favourable business conditions further demonstrates how imperative maintaining peace levels within countries is. In addition to offering global security and stability between nations, this also allows the economies and global market to flourish, improving the livelihoods and wellbeing of individuals globally.
As the world continues to escalate in political conflict and economic turmoil, it is essential that nations focus on developing strong institutions and government systems. Higher peace levels will allow countries to generate higher imports and exports, GDP growth, stability in currency values and more FDIs. This will subsequently allow them to maintain a robust system of economics as well as peace and security.
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