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This short article was done in 2006. Longer essays on a similar theme can be found under Middle East Peace or Nuclear Peace or World Peace, in the right-hand menu

Conflict Reduction Bonds: give greed a chance

Or to put it more politely: 'give financial self-interest a chance'. Why? Because the idealists and ideologues, the politicians, the generals, and the men of religion have failed tragically to end violent political conflict. War continues to destroy hundreds of thousands of lives every year. It is surely time now to contract out the achieving of peace to the private sector.

It's largely a matter of focus: we don't have to be as ruthless as the warmongers and arms merchants, but we do have to be as focussed on our ultimate goal: sustained world peace. We need to be very clear that this is what we want to achieve, and we need to reward the successful achievement of this goal, rather than activities that are supposedly aimed at achieving it. There are too many people with a vested interest in keeping conflict going. Almost all civilians, and many governments and enlightened non-governmental organisations, would like nothing more than to see a permanent end to war. But there are many in positions of power or influence who are half-hearted about peace; others who feel threatened by it, and others who, for whatever reason, actively promote violence.

Ideally, then, we need a way of promoting peace that can modify or circumvent these people's uncooperative or obstructive behaviour. We need to mobilise the interests of the far greater number of people who want peace. We need to find a way that can co-opt or subsidise those people in positions of authority and power who want to help, and at the same time bypass, distract, or otherwise undermine, those opposed to our goal.

Ideally too, we would use market forces. In economic theory, and on all the evidence, markets are the most efficient means yet discovered of allocating society's scarce resources. But many believe that market forces inevitably conflict with social goals: accentuating extremes of wealth and poverty, for example, or accelerating the degradation of the environment. It is certainly true market incentives stimulate the manufacture and distribution of the weapons that cause so much human suffering. So it is important to remind ourselves that market forces can serve public, as well as private, goals. Conflict Reduction Bonds are a new way of channelling the market's incentives and efficiencies into what to many is the most urgent of these goals: the permanent end of violent political conflict.

Conflict Reduction Bonds

I have no solution to the problem of violent conflict. But I can offer a way of encouraging solutions. Solutions that will be diverse, responsive and efficient. My suggestion is that governments and other interested organisations and individuals collectively back Conflict Reduction Bonds. These would be sold by auction, and redeemed for a fixed sum only when the number of people killed or injured by violent political conflict reached a very low level. Importantly, the bonds would make no assumptions as to how to bring about greater peace -- that would be left to bondholders. Unlike normal bonds, Conflict Reduction Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that peace is achieved quickly.

Once issued, the bonds would be freely tradeable on the open market. As the level of violence fell, so the bond price would rise. Bondholders would have incentives to cooperate with each other to do what they could to achieve peace, then to sell their bonds at a higher price. Governments would decide only on the definition of peace to be targeted -- not on how to achieve it. That would be left up to investors in the bonds, who would have every incentive to maximise their, and the taxpayer's, reduction in violence per unit outlay. So, in contrast to the current fossilised, counterproductive approach, a Conflict Reduction Bond regime would stimulate research into finding ever more cost-effective ways of achieving peace.

Bondholders would be in a better position than governments to undertake a range of peace-building initiatives. They could lobby or work with governments to, say, change and enforce laws that make wars at home or overseas a less likely prospect. They could finance sports matches between potential protagonists, promote anti-war programmes on TV, or set up exchange schemes for students and schoolchildren. They could try to cajole the financial supporters of conflict into redirecting their funds along more edifying lines. They could offer poor countries different forms of aid, including education and scientific aid, and measures aimed at enlightening populations. They might even subsidise intermarriage between members of different ethnic or religious groups. The crucial point is that bondholders have more freedom and incentive to explore and carry out such diverse initiatives than governments or other international bodies.

Some powerful people in governments, religious institutions or militant organisations would resent the targeting of such objectives by external agencies in this way. But, while under the current system they can generate opposition to peace-building activities, under a Conflict Reduction Bond regime they would have to openly declare their opposition to peace itself. It is precisely this focus on the outcome of peace -- rather than activities or institutions -- that would help mobilise and strengthen the coalition working to achieve it.

By appealing to people's self-interest, Conflict Reduction Bonds are likely to be more effective than conventional efforts aimed at reducing violence. In channelling market forces into the achievement of this objective the bonds could bypass or even co-opt the corrupt or malicious people in government or elsewhere who stand in the way of peace.

In today's emotional climate decision-making is too often reactive. It is too easily swayed by those with a propensity for violence or those who benefit from it, whether financially or emotionally. There are enlightened people and organisations working for peace, but their ability to deploy resources effectively is constrained. The funding of the United Nations and other publicly-financed conflict-reduction bodies is conditional on their carrying out a range of activities limited by the imagination and insecurities of their sponsoring governments. Private peace-building bodies work in admirable and diverse ways, but their efforts are relatively small-scale and uncoordinated. For both sets of organisations the financial rewards from building peace are not correlated with their effectiveness in actually doing so. Conflict Reduction Bonds, in contrast, would explicitly reward movement toward a targeted peace outcome, however it is done, and whoever does it. They would focus on an identifiable outcome and channel market efficiencies into exploring ways of achieving it. They could be the most effective means of achieving the peace that people all over the world yearn for and deserve.

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