06 Aug 2007  Research & Ideas

High Hills, Deep Poverty:
Explaining Civil War in Nepal

Nepal, the home of Mount Everest, has been gripped in recent years by civil war. A new paper by Harvard Business School professor Lakshmi Iyer and Quy-Toan Do of the World Bank looked at the roots of Nepal's conflict from a variety of angles. For the future, investing in poverty reduction strategies is a key for peace, Iyer says. Key concepts include:

  • Nepal went through a dozen different governments in 12 years beginning in 1991.
  • Diversity could be a contributing factor to civil wars, and Nepal is tremendously diverse—ethnically, economically, and geographically.
  • Geographic diversity and poverty were the greatest predictors of violence in Nepal.
  • The root cause of Nepal's civil war was economic, not social.
  • Investments in poverty reduction strategies bring direct economic as well as political benefits to countries like Nepal.

 

Civil wars have been the dominant form of conflict around the world since World War II, resulting in approximately 20 million deaths. But it's not just sociologists who are diving into the roots of conflict. Increasingly, economists are examining these events to learn more about civil wars and how to prevent them.

"The main conclusion from this whole stream of research is that investing in poverty reduction strategies not only has direct economic benefits but also political benefits," says Lakshmi Iyer, a Harvard Business School professor with expertise in political economy.

A new working paper that Iyer coauthored with Quy-Toan Do, of the World Bank, probes this topic in depth by examining the country of Nepal, the land-locked home of Mount Everest. Nepal's internal conflict has killed more than 13,000 people since 1996.

While many serious studies have examined conflict dynamics, including Nepal's, they have leaned toward one of two approaches: a broad view of several different countries together, or the sharp focus of a case study. Iyer and Do's method combines the best of both worlds by examining a variety of factors within a single country that could explain the descent into violence. For Nepal, these factors for study included poverty, social and language diversity, and even geographical conditions.

What Iyer and Do found: poverty trumps all, yet in a complex, nuanced way. As Nepal's conflict developed, the intensity of violence shifted from the poorest areas to areas which were relatively better off. The results and research method could aid in understanding, explaining, and perhaps preventing civil war elsewhere.

"We are filling in a methodological hole," says Iyer of their paper, "Poverty, Social Divisions, and Conflict in Nepal" [PDF]. "There are many detailed case studies of conflict, and many broad-brush, cross-country studies. Within-country studies, such as we conducted on Nepal, fill in the gap between the two different approaches. Our econometric analysis tells us whether what you observe in a couple of case studies is a general phenomenon; in this sense, this approach is complementary to detailed sociological or anthropological case studies."

"If people want to do something about poverty there—and it's a very poor country," she continues, "it is important that the political situation is first stabilized."

Iyer explained more in an interview.

Martha Lagace: What sparked your interest in Nepal?

Lakshmi Iyer: I was in Nepal before the conflict started. It is a beautiful country and it's a real pity they have descended into civil war. A peace agreement was signed last year, which I hope will last.

My primary research interests are political economy and development. In the past few years economists have been very interested in analyzing political phenomena like civil wars. Civil wars are the dominant form of conflict since World War II; they're much more common than interstate wars now and they've killed more than 20 million people.

Quy-Toan Do and I talked with people who were doing poverty assessments in Nepal, and we realized that we had an ideal setting to study the factors that influence conflict.

"We could see how the conflict's relationship with poverty changed. This observation reinforces the fact that poor areas are always at more risk."

Most of the empirical literature has been cross-country. That's always a little bit of a problem because you're almost comparing apples and oranges. Here we had the same conflict and the possibility to check how it progressed in different parts of one country. We could keep many things constant—the conflict's ultimate goals, the personality of the leader, the tactics, the kind of a political system they already have—and focus on the role of economic and social variables.

Q: Why did you think geographic and ethnic diversity were important?

A: These factors have been hypothesized in the prior literature to affect the probability of civil war. Some findings in the cross-country literature are quite robust, such as the fact that poor countries tend to be at greater risk of civil war. The evidence is mixed on whether ethnically diverse countries have a greater risk of civil war. Scholars have argued it both ways. Some say that if a society is very diverse it is very hard to coordinate rebel forces; you cannot get a large enough bunch of people to fight against the government, so the risk of civil war is low. Others say that many different groups cannot agree on anything, so such differences lead to a greater chance of civil war. The role of geography is also open.

Nepal has a huge amount of diversity in all these dimensions. Geographically it has 3 major zones: the high mountains, which include Mount Everest, the hilly regions, and then the Himalayan foothills, which contains most of the good agricultural land.

Economically there are huge variations, too. Nepal is a poor country: GDP is only around $270 a year, and right before the conflict started, in 1996, 42 percent of the population lived below the poverty line. But this varied from less than 10 percent in the capital Kathmandu to more than 50 percent in several districts.

Nepal is very diverse socially as well. One of our innovations over much of the existing literature was to look at two dimensions of social diversity: linguistic diversity (can people communicate or not?) and caste diversity (how much do some people want to keep away from other people?). About 90 percent of the population in Nepal is Hindu, but within Hindu society there are many castes and a lot of discrimination against the lower castes. We constructed an index of caste diversity using 76 different caste categories listed in the Census. The Nepali language is spoken by about 60 percent of the population, but there are 13 different languages spoken by more than 1 percent of the population. We used this to construct a measure of linguistic diversity as well.

Q: What did your research show were the greatest predictors of conflict in Nepal?

A: Geography and poverty. Mountainous and forested areas had greater conflict intensity. That makes sense for guerilla warfare, since these conditions enable rebels to hide easily. And poor areas were much more likely to see a lot more deaths: a 10 percentage point increase in poverty is associated with 10 additional conflict-related deaths. Once we control for poverty, measures of caste and linguistic diversity are not significant predictors of the intensity of conflict. There's been a lot written about the conflict, and many accounts say that the conflict is supported by lower caste members, such as the Magar community. Our conclusion for Nepal is that the root cause of the conflict is economic, not social—but social conditions can contribute to economic backwardness. In fact, we find that areas with greater caste diversity tend to be poorer.

You also hear a surprising number of accounts of women being involved as fighters in the Maoist insurgency. And of course women in Nepal face a lot of discrimination just like they do in many poor countries of the world. But again, empirically, this doesn't turn out to be a very important factor, in the sense that we do not see a higher concentration of conflict in places where women are more discriminated against.

Another thing we did, which cross-country studies often do not do, was track the evolution of the conflict over time. We could see how the conflict's relationship with poverty changed. This observation reinforces the fact that poor areas are always at more risk: once the Maoists gained control of the poorest areas, we see the highest intensity of the conflict shifting to the relatively better off areas. It's important to keep the history of the conflict in mind, when doing such analysis, and not just look at one point in time.

Q: Did Nepal have a long history of conflict prior to the civil war?

A: Not this kind of armed insurgency. It had popular movements for democracy: street protests, marches, demands. Nepal was a monarchy and became a democracy in 1991. Democracy didn't work very well for Nepal: starting in 1991 and over the next 12 years it had 12 different governments. The Communist Party of Nepal (Maoist), which had contested the first election, turned to violence in 1996.

When the insurgency became very serious in 2005 the king (Gyanendra Bir Bikram Shah Dev) decided to take back power. In 2006, bowing to popular pressures just like in '91, he gave it up again. And now Nepal is back to elective representatives of the people. There is a power-sharing agreement with the Maoists, and Nepal hopes to have elections in November for a constituent assembly to frame a new constitution.

Q: What else do you plan to study?

A: I can think of two related research questions: the first is how to end conflict. What's the stage at which peace agreements might last? Nepal had two prior ceasefire agreements—both were broken by the Maoists. But the latest one at least seems to be holding up for now. Many peace agreements are brokered by a third country. Is that necessary? Under what conditions is that kind of agreement going to work?

The other branch of research I would like to work on is the impact of conflict. How do households cope? After a conflict ends, how long does it take for households to recover? How do mechanisms like occupational change or migration contribute to recovery from crisis? Quy-Toan Do and I are planning to study this question, in the context of either Nepal or Bosnia.

I'm also trying to find similar conflict data for India right now because India also has Maoist insurgents in many parts of the country. More than a hundred districts in India are currently affected by Maoist insurgencies, and it would be interesting to see whether the conflict has evolved in the same way as in Nepal. In fact, the Communist Party of Nepal-Maoist was known to be in touch with Indian Maoist groups.

In addition, because my primary field of research is political economy, I'm studying interactions between politicians and bureaucrats in India. How much do politicians control bureaucrats, and how much does it matter for policy?

Q: What can our readers—business people—keep in mind about civil conflict?

A: Investing in poverty reduction strategies can lead to political benefits in addition to direct economic benefits. Therefore, the right investment at the right time can have very important long-term consequences, making a place better off now and, by ensuring political stability, contributing to future growth as well. We should all keep that in mind whether we are business managers, policymakers, or international institutions.

About the author

Martha Lagace is the senior editor of HBS Working Knowledge.