Causes of economic conflict

Question 1

Main Causes of economic conflict

Answer 1

• Scarcity of Resources
• Divergent Stakeholder Objectives
• Income Inequality
• Trade-offs in Policy Decisions
• Globalisation and Trade
• Resource Ownership and Distribution
• Market Failures
• Cultural and Ethical Considerations
• International Economic Dependencies
• Rapid Economic Change

Question 2

Scarcity of Resources

Answer 2

Explanation: The fundamental cause of economic conflict is scarcity. Resources such as land, labour, capital, and raw materials are limited, but human wants and needs are virtually unlimited.

Example: A government may face conflict over whether to allocate scarce land for agricultural purposes or urban development.

Question 3

Divergent Stakeholder Objectives

Answer 3

• Conflicting Business Goals: Businesses often prioritise profit maximisation, while governments and consumers may emphasise environmental protection, safety standards, or ethical practices.
• Consumer–Producer Conflicts: Consumers want affordable prices and high-quality goods, while producers aim to maximise profits, which may result in higher prices or lower product quality.
• Employee–Employer Tensions: Workers demand better wages, benefits, and working conditions, while businesses aim to reduce labour costs to remain competitive.

Question 4

Income Inequality

Answer 4

Explanation: Differences in income distribution often lead to tensions between high-income and low-income groups. Policies to address inequality, such as progressive taxation or welfare programmes, can generate conflict among stakeholders.

Example: Tax increases on wealthy individuals or corporations may be resisted by those who believe it discourages investment and economic growth.

Question 5

Trade-offs in Policy Decisions

Answer 5

Explanation: Economic policies often involve trade-offs that benefit one group while disadvantaging another, creating conflict.

Question 6

Globalisation and Trade

Answer 6

Explanation: Globalisation can create conflicts between nations and within societies due to unequal benefits or perceived threats.

• International Trade Conflicts: Countries may impose tariffs or subsidies to protect domestic industries, leading to retaliation and trade wars.
• Job Losses in Domestic Markets: Offshoring and outsourcing can lead to economic conflict as domestic workers lose jobs while companies benefit from lower costs.
  Example: Trade disputes between developed and developing countries over agricultural subsidies or intellectual property rights.

Question 7

Resource Ownership and Distribution

Answer 7

• Natural Resources: Competition over natural resources such as oil, water, and minerals often leads to economic conflict, especially in resource-rich regions.
  Example: Conflicts between countries over access to freshwater sources, such as the Nile River.
• Land Disputes: In regions where land is scarce or unequally distributed, disputes over ownership and usage
  can arise.
  Example: Urban development projects displacing rural communities.

Question 8

Market Failures

Answer 8

Explanation: When markets fail to allocate resources efficiently or equitably, conflict may arise.

• Negative Externalities: Activities such as pollution and deforestation create social costs that can lead to tensions between businesses and affected communities.
• Public Goods: Disagreements may arise over who should pay for or manage public goods such as national defence, healthcare, and education.
  Example: Debates over government intervention in healthcare markets to address inefficiencies or inequality.

Question 9

Cultural and Ethical Considerations

Answer 9

Explanation: Economic activities may conflict with cultural or ethical values, especially when global corporations operate in different cultural contexts.

Example: The introduction of genetically modified crops may create conflict in societies where traditional farming practices are valued.

Question 10

International Economic Dependencies

Answer 10

Explanation: Countries often depend on one another for trade, investment, and financial aid. Unequal dependencies or exploitative practices can lead to tension.

• Debt Conflict: Developing countries burdened by debt obligations may clash with creditors over repayment terms.
  Example: Disputes between developing nations and international financial institutions such as the IMF over austerity measures.

Question 11

Rapid Economic Change

Answer 11

• Technological Advancement: Automation and technological changes can lead to job losses in certain sectors, creating conflict between workers and employers.
• Economic Restructuring: Shifts from traditional industries to new sectors (e.g. the move from coal to renewable energy) can cause social and economic tensions.
  Example: The closure of coal mines leading to unemployment and community protests.