Financial crisis fuels unrest and crime, but war risk eases

By Peter Apps, Political Risk Correspondent

LONDON (BestGrowthStock) – The global financial crisis has made the world less peaceful by fuelling crime and civil unrest, a worldwide study showed on Tuesday, but the risk of outright armed conflict appears to be falling.

The 2010 Global Peace Index — which examines several dozen indicators from the crime rate to defense spending, conflicts with neighboring states and respect for human rights — showed an overall reduction in the level of peacefulness.

The key drivers were a five percent rise in homicide, more violent demonstrations and a perceived greater fear of crime.

“We have seen what looks like a direct impact from the crisis,” Steve Killelea, the Australian entrepreneur behind the index, told Reuters. “At least some unrest is probably unavoidable but the important thing is to target measures to keep it to a minimum.”

That could mean ensuring any economic pain was equitably shared across society, he said, to maintain social cohesion.

Perhaps as a result of the more cash-strapped times, defense spending as a percentage of gross domestic product was down to its lowest in four years with countries also showing generally better relations with their neighbors.

“In most areas of the world, war risk seems to be declining,” he said. “That is very important.”

The index is compiled by the Institute for Economics and Peace based on data From the Economist Intelligence Unit. They estimate violence costs the global economy $7 trillion a year.

A 25 percent reduction in violence would save about $1.7 trillion a year, enough to pay off Greece’s debt, fund the United Nations millennium development goals and pay for the European Union to reach its 2020 climate and carbon targets.

“There are such clear economic benefits to peace and it is something investors are now looking at much more closely,” he said, adding that some were using the index alongside the World Bank governance indicators and other key rating systems to inform investment decisions.


The struggling euro zone economies of Portugal, Ireland, Italy, Greece and Spain showed a particular rise in unrest risks, while Africa and the Middle East were the only two regions to have become safer since the survey began in 2007.

Africa had seen a drastic fall in the number of armed conflicts and an improvement in relations between neighbors, he said, overshadowing the impact of greater crime. Better ratings for the Middle East and North Africa came primarily from improving relations between nations.

The picture was still mixed for both regions. Ethiopia topped the list of “most improved” countries in 2010 while the world’s least peaceful countries were listed as Iraq, Somalia, Afghanistan and Sudan.

New Zealand was listed as the world’s most peaceful country, followed by Iceland and Japan.

The worst performing region since 2007 has been South Asia, with conflict in Sri Lanka, Pakistan and India hitting ratings.

Russia’s rating was reduced by ongoing tensions with Georgia after their short war in 2008, while China was undermined by a rising risk of social unrest and increased defense spending, up some 15 percent in the last year.

The United States accounted for 54 percent of global military spending, he said, with its conflicts in Iraq, Afghanistan and elsewhere a potentially damaging distraction.

“You can easily make a case that if the United States had not been so be occupied with war in recent years they could have put much more energy and thought into the economy,” Killelea said.” Then we might not be where we are today.”

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(Editing by Noah Barkin)

Financial crisis fuels unrest and crime, but war risk eases