Scholars of armed conflict argue that it must be feasible before it will occur and suggest that adequate finance is a key ingredient for organizing violence against a state. In Free Markets and Civil Peace, we argue that economic repression and market distortions create conditions that make armed conflict feasible. Economic repression and economic mismanagement supply the means, motive, and opportunity for groups to challenge states because economic distortions spawn underground economies that form the organizational bases of insurgency that allow groups to succeed and remain sustainable in the face of superior state forces. Greater economic freedom, on the other hand, raises the opportunity costs of violence, raising the premium for maintaining order. Our empirical analyses using standard data show that greater economic freedom is indeed associated with greater civil peace, greater respect for human rights, and produces greater peace between ethnoreligious groups within countries. The results are robust to sample size and to bias from endogeneity, or reverse causality.
