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The fuse in the powder keg: how the corona crisis can lead to civil wars

3 June 2020
Martijn Vlaskamp

Article originally published in Dutch on "Joop" on May 29, 2020

According to the International Monetary Fund, this year's corona crisis will cause the world to experience the biggest economic recession since the 1930s. In many countries in the southern hemisphere, whose economies depend to a large extent on the export of raw materials, political unrest and even violent conflicts are lurking.

For several weeks now, global commodity markets have been heavily influenced by lockdowns and limited consumption. Investors are seeking refuge in 'safe havens', causing the price of gold, for example, to skyrocket. However, this is not the case for many other commodities, whose prices have plummeted dramatically in recent months. Demand will of course drop when less is consumed. The fall in the (American) oil price below 0 dollars was widely reported in the press, but minerals such as copper and aluminum have also lost between 10 and 20 percent of their market price since the beginning of the year.

In several countries in Africa, Asia and South America, trade in raw materials accounts for more than two-thirds of total exports. A significant drop in the price of these raw materials therefore results in significantly less government revenue. For countries that are already unstable due to political, social and/or ethnic tensions, this may well be the proverbial fuse in the powder keg.

The lower raw material prices and other economic consequences of the corona crisis, are punching big holes in the budgets of these countries. As many as ninety countries have already approached the International Monetary Fund for emergency credits. The largest application comes from Nigeria, which has already been ravaged by violent conflicts and where lower oil prices mean that government revenue is expected to decrease with at least forty percent. Reduced government income and external loans can lead to cuts in social spending and subsidies on indispensable necessities of life. Together with rising unemployment as a result of the economic crisis, this could lead to civil unrest and protests against the government.

British researcher Alex de Waal uses the term 'political marketplaces' for countries without strong institutions where political loyalty in exchange for financial support is commonplace. In these countries, for example in parts of Sub-Saharan Africa, those in power are faced with difficult decisions not to jeopardize their position. In order to maintain the loyalty of key figures in politics, economics and the military, a continuous flow of money is essential. When income is lost, difficult choices have to be made about whose loyalty is worth the most and for whom money can no longer be spent. In the past we have seen that wrong decisions can lead to attempted coup attempts by disgruntled officers or violent uprisings led by regional rulers.

To have an example of the possible impact of lower raw material prices we can look at Algeria. When the oil price collapsed by almost two thirds in 1986, this triggered a series of events in the oil- and gas-rich country that led to an extremely violent civil war. At the time, the already tense political situation in the country was brought to a head by necessary cutbacks, with major riots in the streets of Algiers and other cities. At the next elections, the incumbent power was voted out in favor of the Islamists. A military coup followed to prevent this takeover of power. The situation escalated into an armed conflict between the army and Islamic groups, which would last a decade and cost more than 150,000 lives until 2002.

As the example of Algeria shows, the collapse of commodity prices can have fatal consequences. Whether the unstable countries of the global South will face similar problems as a result of the Covid-19 pandemic will depend on the capacities of those in power. They will have to be able to maintain stability with fewer resources. But even more so, the length and depth of the recession will determine whether this will succeed. The longer prices remain low, the greater the chance that the powder keg will explode in some places. This way, the coronacrisis could claim many more victims worldwide than the disease alone.