James K. Boyce is professor emeritus of economics at the University of Massachusetts Amherst and a senior fellow of the Political Economy Research Institute (PERI). He is the author of Investing in Peace: Aid and Conditionality after Civil Wars and editor of Peace and the Public Purse: Economic Policies for Postwar Statebuilding and Economic Policy for Building Peace: The Lessons of El Salvador. He received the 2024 Global Inequality Research Award and the 2017 Leontief Prize for Advancing the Frontiers of Economic Thought. This interview is based on his seven-part video series released by the Institute for New Economic Thinking.
C. J. Polychroniou: Conflicts across the world have surged since 2020, making this one of the most violent periods since the end of the Cold War. The wars in Ukraine and Gaza have been most visible in the news, but there have been dozens of other conflicts, too. What lessons can we draw from history about the economics of war, the topic of your recent video series from the Institute for New Economic Thinking? How about if we start with the wars of conquest during the era of colonialism?
James K. Boyce: Economics is not just about mutually beneficial exchanges entered into by mutually consenting adults, though you could be forgiven for thinking so if your only acquaintance with the subject was a typical textbook. Real-world economics also is about coercive relationships in which one side benefits and the other loses. Such interactions—which can be grouped under the general rubric of plunder—involve not only outright force but also the manipulation of governments and markets, often occurring in the grey area between what is legal and what is not.
Trump often is described as “transactional” with good reason: For him, policy is about making deals.
The colonial wars of conquest were a particularly naked example of plunder. Slavery, the appropriation of lands and minerals, and the monopolization of commerce were common features of the time, thinly cloaked, if at all, by the pretense of a “civilizing” mission. But it would be wrong to imagine that plunder disappeared with the end of formal colonial rule. It remains a ubiquitous feature of the world economy, now sometimes cloaked by the veneer of “modernization” or “development.” Because plunder is inherently antagonistic—it pits the plunderers against the those whose resources and livelihoods are plundered—it can and often does morph into violence and war.
C. J. Polychroniou: What about more recent conflicts, like the wars in Bosnia (1992-1995) and Afghanistan (2001-2021)? How did economics figure into these?
James K. Boyce: Economics is not the whole story in these or most conflicts, but it is an important part of why they begin, how long they persist, and how they finally end.
Bosnia emerged as an independent nation during the breakup of Yugoslavia in the 1990s. Some commentators blamed “ancient ethnic hatreds” for the violence that accompanied Yugoslavia’s dissolution, but tensions arising from economic disparities among its provinces were also at play. Within Bosnia, three main “ethnic” groups lived side by side—Muslim Bosniaks, Catholic Croats, and Orthodox Serbs—and the fighting largely devolved along these lines (I place “ethnic” in quotation marks, because apart from religious origins the three were hard to distinguish). But another underlying axis of conflict was the deep economic gulf between urban Bosnians (often Bosniaks), who benefited in Yugoslavia from good education, health, and pension systems, and rural Bosnians (often Serbs), who were excluded from the benefits of engagement in the formal economy.
Once war broke out, opportunities for plunder became a key driving force in the conflict. Hardliners who engaged in ethnic cleansing—killing minorities and driving them out—not only sought to establish homogeneous enclaves for “their” people but also to gain personally from seizing the businesses, homes, land, and other property the victims left behind.
Economic incentives, in the form of promises of postwar reconstruction aid, played a key role in the end of the war, too, persuading the warring parties to sign the 1995 Dayton Peace Accord. Dayton, in a sense, was an aid-for-peace bargain. So economics was very much implicated in all phases of the Bosnian conflict.
The 2001-2021 war in Afghanistan was in many ways a resumption of the 1979-1989 war, with the difference that now it was the United States instead of the Soviet Union that occupied Kabul while the countryside largely remained under the control of the Taliban and regional warlords. As in Bosnia, pronounced economic disparities between urban and rural areas fueled the Afghan conflict, and the Taliban tapped into rural discontent. Wide disparities between Kabul and the rest of the country predated the Soviet and American invasions, and were further exacerbated by the wartime influx of foreigners and their money. Meanwhile, by controlling the opium traffic and taxing cross-border trade, the Taliban built a viable economic base of their own.
Economics played a central role in the U.S. war strategy, but it was not a pretty picture. In 2002, then-U.S. Defense Secretary Donald Rumsfeld instructed his senior aides to come up with “a plan for how we are going to deal with each of these warlords—who is going to get money from whom, on what basis, in exchange for what, what is the quid pro quo, etc.” The U.S. government poured nearly $1 trillion into Afghanistan—$145 billion in reconstruction aid plus $837 billion in military expenditures—this in a country with a GDP of less than $20 billion. War “became the Afghan economy,” as The New York Times put it. The Afghan leadership, unsurprisingly, was more attentive to the demands of foreign donors than to the needs of their own citizens. Massive corruption fueled by external assistance fatally undermined any possibility of building a legitimate and effective state. “Our money was empowering a lot of bad people,” a senior U.S. official recalled. “There was massive resentment among the Afghan people. And we were the most corrupt.”
Today 85% of Afghanistan’s people subsist on less than one dollar a day. Whether the Taliban government or the so-called international community will act to address their deprivation and build a lasting peace is an open question.
C. J. Polychroniou: What role can economics play in peace building?
James K. Boyce: There is much to be said on this topic—it is the focus of the video series—and space precludes a full answer here. Let me highlight just two points.
First, economic policies can either reduce inequalities and the accompanying tensions or exacerbate them. This means not only “vertical” inequality between rich and poor, but also “horizontal” inequalities between groups defined on another basis, such as region, ethnicity, race, or religion. A single-minded focus on the total size of the economic pie—the conventional goals of growth and efficiency—is misplaced when conflicts over how it is sliced threaten to smash the pie.
Second, economic policies can either strengthen or weaken the bargaining power of pro-peace forces vis-à-vis those who seek to perpetuate the conflict. In Bosnia, for example, a crucial postwar issue was the return of refugees and internally displaced persons to their former homes. In some municipalities, local leaders welcomed them; in others, they actively obstructed returns, in part to protect their ill-gotten loot. In its “Open Cities” program, the United Nations High Commission for Refugees used reconstruction aid to reward municipalities that welcomed returns and to induce leaders on the fence to come down on the pro-peace side. The program’s implementation was not perfect, but the idea was sound. Again, “who” matters as much as “what.”
C. J. Polychroniou: How can we apply economics to the wars in Ukraine and Gaza? Can economic policies help to drive peace in those two war-torn areas?
James K. Boyce: The Trump administration’s “America first” stance seems likely to lead to a U.S. pullback from engagement in the tasks of peace building and state building in war-torn societies. In part, this reflects a disillusionment born of the dismal failures in Afghanistan and Iraq, and as those experiences suggest, disengagement may not be entirely a bad thing. But Ukraine and Gaza continue to loom large on the U.S. foreign policy agenda.
Trump often is described as “transactional” with good reason: For him, policy is about making deals. In both Ukraine and Gaza, economic considerations will be a big part of any deals we see. But it is by no means clear that forging a lasting peace will be the top priority for the dealmakers. If not, the end of the current wars could merely set the stage for future ones.
The Ukraine war is exhibit No. 1 of the dangers of fossil-fueled oligarchy. In addition to enormous environmental costs, fossil fuels carry a high political cost: They enable the autocratic rulers of petrostates to govern with little accountability to either their own citizens or norms of international law. Vladimir Putin’s Russia is a case in point. As Ukraine illustrates, fossil fueled-oligarchy can metastasize into fossil-fueled war.
Putin has oil and gas; Netanyahu has the United States.
Oil and gas revenues have sustained the Putin regime, notwithstanding international sanctions. The sanctions do, however, drive a wedge between the world market price and what Russia receives, so the prospect of lifting them could act as an incentive for Russia to accept a negotiated settlement. But if the Trump administration eases the sanctions without a peace agreement, while at the same time cutting military and financial aid to Ukraine, this will tilt the terms of the settlement in Russia’s favor.
On the Ukrainian side, the prospect of large-scale reconstruction assistance—as well as an end to the carnage—may provide an incentive, too. It now appears that the responsibility for funding Ukraine’s postwar reconstruction will fall mainly on Europe; whether the European nations will be willing and able to shoulder this burden remains to be seen. In an effort to shore up U.S. support, Ukrainian President Volodymyr Zelensky has offered a minerals-for-aid deal that would give the U.S. access to Ukraine’s deposits of lithium, uranium, and other critical minerals. But the minerals will be in the ground regardless of who controls the land above them, and it is not evident that the Trump administration will care much about that.
In Gaza, the latest war tragically illustrates what I call the “partition dilemma.” The 1994 Oslo Accord sought to resolve the Israeli-Palestinian conflict by establishing the Palestinian Authority as a step toward a two-state solution. In the short run, partition can be an appealing way to stop the shooting. But in the longer run, it can set the stage for renewed conflict, as demagogues on both sides invoke fear of the other to enlist public support from their own people. Partition severely undermines the viability of leaders and parties that would appeal to pro-peace constituencies on both sides.
It is not surprising that 30 years after Oslo, we find Hamas on one side and the Netanyahu government on the other. The two feed off each other in a de facto alliance, each holding up the other as justification for its own politics of demonization. This helps to explain why the Netanyahu government not only tolerated but actively facilitated the flow of cash from Qatar to Hamas. In a candid moment back in 2015, Bezalel Smotrich, who is now Prime Minister Benjamin Netanyahu’s finance minister, said that “Hamas is an asset.”
The chances that partition will lead to a lasting peace grow even slimmer if one side receives large-scale financial and military support with no strings attached—without peace conditionality—while the other does not. By emboldening one side and embittering the other, the resulting imbalance is a recipe for renewed conflict. Putin has oil and gas; Netanyahu has the United States. Rather than a negotiated settlement, the Israeli government now appears to be seeking a winner-take-all victory. Under the new U.S. administration, Netanyahu will face even fewer constraints than under the last one.
Trump’s talk of taking over Gaza and turning it into the “Riviera of the Middle East” is reminiscent of plunder during the colonial era, including the dispossession of Native Americans in the United States. Yet in purely economic terms it makes a certain amount of sense: Beach resort development would indeed be a more profitable use of the land than maintaining Gaza as a place of confinement for 2 million refugees. Where other politicians see territory, Trump sees real estate.
The problem, of course, is what to do with Palestinians. There is one place that many of them might go willingly: the land of their grandparents, Israel. The fact that option this is unmentionable, even unthinkable, tells us a lot.
If the war in Gaza and ongoing displacement in the West Bank do not end with the complete expulsion or annihilation of the Palestinians—a prospect that still seems inconceivable—the eventual outcome will be a single state in which the surviving Palestinians have a subordinate and marginalized status. Their struggle will then become one for equal rights. Economic policies could prove helpful at that point, but history suggests it will be a long, hard road.
