(C) Kapok Tree Diplomacy. 2010. All rights reserved. Jeff Dwiggins. FREE CONTENT
There’s a number of economic tools that may be effective in preventing conflict. Most seem to fall under good governance. The first one that comes to my mind is export diversity. If you depend on one item for 44% of your exports and that one item is a commodity as it is with Sierra Leone’s diamonds, your economy is extremely vulnerable to global price fluctuations in that commodity. A downward dip in prices can have a devastating effect when all your eggs are in one basket. If people have to be laid off or you have to cut their wages, then social dissent can escalate as a result.
The second item that comes to mind is avoiding growth without development. If a nation choose to ignore its infrastructure and social services at the expense of corruption and out-of-control government spending, or spending on things that do not have a long-term impact like million dollar conferences, then that nation will suffer the consequences in decreased foreign direct investment and increased social dissent.
The third economic tool I can think of is well-developed economic and market institutions that are capable of opening up the economy to increased trade. Peter Sutherland adds that increased trade may “challenge domestic corruption, encourage competition, release entrepreneurialism, ensure affordable services, “provide cover for reformers”, increase foreign investment (examples: Saudi Arabia, Cambodia, China), and increase personal civil rights and freedoms by virtue of access to greater levels of information via the internet, cell phones, etc.” (2008).
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