The global economic impact of violence was $14.4 trillion in purchasing power parity terms in 2019, research from the Institute for Economics & Peace (IEP) shows.
Equivalent to 10.5% of global gross domestic product or $1,895 per person, the trillion-dollar figure demonstrates the substantial economic toll that violence imposes on society, in addition to the human suffering it causes.
For the second year in a row, the global economic impact of violence improved in 2019, decreasing by 0.4 per cent or $64 billion from the previous year.
The positive improvement can be attributed to reductions in the Armed Conflict domain of the economic model. The fall in armed conflict in the Middle East and North Africa region resulted in positive flow-on effects not only for conflict deaths, but also for the costs associated with refugees and internally displaced persons and terrorism, all of which fell in 2019.
Global military expenditure is the single largest component of the economic modelling and accounts for US$5.9 trillion, 40.8% of the total. Globally, military expenditure increased by 1% in 2019, the equivalent of $49.6 billion. However, this increase was primarily driven by increases from the United States, China, and India.
Since 2007, 85 countries have recorded decreases in their economic cost of violence compared to 78 that increased, highlighting that more countries have become less burdened by the economic impacts of violence over the longer term.
The global economic impact of violence is defined by IEP as the expenditure and economic effect related to “containing, preventing and dealing with the consequences of violence.”
The economic model used to calculate the global figure includes the direct and indirect costs of violence, as well as an economic multiplier. The multiplier effect calculates the additional economic activity that would have accrued if the direct costs of violence had been avoided.
The two types of costs include direct and indirect costs. Examples of direct costs include medical costs for victims of violent crime, capital destruction from violence and costs associated with security and judicial systems. Indirect costs include lost wages or productivity due to physical and emotional trauma.
A measure of the impact of fear on the economy is also included in the model, to account for people who fear that they may become a victim of violent crime and alter their behaviour.
The 2021 Economic Value of Peace report estimates the global the economic impact of violence. In addition to causing suffering, interpersonal violence, social unrest and collective violence hinders productivity and economic activity, destabilises institutions and reduces business confidence. Violence disrupts the economy, resulting in adverse and ongoing negative effects even after conflict subsides.