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Swords into Bank Shares: Financial Approaches to Mitigating Political Violence and Polarization
Saumitra Jha, Associate Professor of Political Economy, Stanford
Abstract: The failure to align the incentives of conflictual groups in favor of peaceful coexistence and socially beneficial policies is often seen as a major cause of persistent underdevelopment around the world. However, much less is known about strategies that have been successful at overcoming such challenges. One approach that holds much promise, and in fact appears to have had some historical success, is the provision of financial assets that align the interests of winners and potential losers from reform by providing claims on the future.
This project analyzes the promise and limitations of financial ideas and approaches as means for fostering broad political coalitions that favor peace and beneficial reforms. The project examines a range of historical cases in which the introduction of financial assets have succeeded or failed at making politics less conflictual over time, focusing on three revolutionary states that subsequently led the world in economic growth: England, the early United States and Meiji Japan. Next the project exploits a series of field experiments to test whether financial mechanisms can help raise support for peace in contemporary settings which face the threat of violence and polarization, including in Israel, the UK, and elsewhere. Finally, the project draws upon theory, the historical cases and the field experiments to assess the promise and limitations of financial approaches in reducing the grave challenges of violence and political polarization that we face today.
Saumitra Jha is an associate professor of political economy at Stanford Graduate School of Business, and, by courtesy, of economics and of political science at Stanford School of Humanities and Sciences; and convenes the Stanford Conflict and Polarization Lab. He is also a senior fellow at the Center for Democracy, Development and Rule of Law within the Freeman-Spogli Institute for International Affairs and at the Stanford Institute for Economic Policy Research. Jha’s research focuses upon understanding the effectiveness of organizations and innovations that societies have developed to address the problems of violence and other political risks, and to seek new lessons for fostering peace and development.
Jha’s research has been published in leading journals in economics and political science, including Econometrica, Quarterly Journal of Economics, American Political Science Review and Journal of Development Economics, and he serves on a number of editorial boards. His research on ethnic tolerance has been recognized with the Michael Wallerstein Award for best published article in political economy from the American Political Science Association in 2014 and his coauthored research on heroes with the Oliver Williamson Award for best paper by the Society for Institutional and Organizational Economics in 2020. Jha was honored to receive the Stanford MSx Teacher of the Year Award, voted by the students in 2020. Jha holds a BA from Williams College, master’s degrees in economics and mathematics from the University of Cambridge, and a PhD in economics from Stanford University. Prior to joining Stanford GSB, he was an Academy Scholar at Harvard University. He has been a fellow at the Center for Advanced Study in the Behavioral Sciences at Stanford and at the Niehaus Center for Globalization and Governance and the Center for the Study of Democratic Politics at Princeton University. Jha has consulted on economic and political risk issues for the United Nations/WTO, the World Bank, government agencies, and for private firms.
