Calculating the cost of global violence supports the case for more peaceful policies

Violence generates substantial economic costs for individuals, communities and nations, in addition to social and political impact.

Recent research by the Institute for Economics & Peace (IEP) is showing peacefulness is declining, while the reported economic impacts of war and violence have never been higher, a finding that is gaining recognition at the highest levels of US government.

Today’s release of the Economic Value of Peace report by the Institute for Economics & Peace shows that the global economic cost of violence is at its highest level on record, equivalent to $14.8 trillion in 2017, or 12.4 per cent of global Gross Domestic Product (GDP).

The report brings the economics of existing conflicts and violence into sharp focus following the 2018 Global Peace Index showing the level of peace around the world has reduced by 0.27 per cent in the last year, the fourth successive year of decline. It estimates the economic impact of violence for 163 countries and independent territories, covering over 99.5 per cent of the global population.

 

Violence generates substantial economic costs for individuals, communities and nations, in addition to social and political impact.

Interpersonal violence leads to short-term medical, policing and judicial costs and has long-term implications for work productivity and the economy. Social unrest and warfare costs and destabilises governments and reduces business confidence.

Earlier this year, the US House of Representatives Foreign Affairs Committee recognised the original peace economics of IEP while introducing a new bill to curb conflict around the world. The bipartisan Global Fragility and Violence Reduction Bill proposes a way for the United States to work towards reducing conflict overseas and calls for more multilateral commitments to improve governance, inclusive development, and the protection of human rights. Members of US congress cited IEP’s figure on global economic costs of violence and unprecedented levels of human displacement as motivation for the proposed law.

The staggering $14.8 trillion figure is a conservative measure of the economic cost of violence and war. IEP’s modelling assesses 17 expenditure categories including both direct and indirect costs of violence such as spending on military and internal security or lost wages and productivity due to trauma; yet the model excludes many areas of violence that cannot be assessed due to a lack of reliable data. Areas such as domestic violence, household out-of-pocket spending on safety and security, the cost of crime to business and self-directed violence are not included. Data for some violent crimes are inherently conservative because they are underreported, such as sexual assault and homicide.

In the pursuit of a more peaceful world, IEP’s research aims to inspire a shift in the way the world thinks about peace, and encourage organisations and governments to foster more peaceful policies and practices.

Mohib Iqbal and Tim Balllesteros

Research Fellow and Research Assistant

Mohib is a Research Fellow at the Institute for Economics and Peace. He is leading the research on Economic Value of Peace, with special focus on cost of violence and the link between armed conflict and economic development. Mohib has worked for the past ten years for USAID, UN agencies, Australian government and Deloitte.

Tim is a fifth-year student at Northeastern University, where he is pursuing degrees in mathematics and political science. His focuses are in peace and conflict studies, with a focus on sub-Saharan Africa and the Balkans. Currently, he is a Research Assistant at the Institute for Economics & Peace, where he has researched conflict relapse.

 

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