Peace studies & conflict resolution
June 2004
The Political Economy of the Kashmir Conflict
Opportunities for Economic Peacebuilding and for U.S. Policy
by Wajahat Habibullah
Recent efforts to develop warmer relations between South Asia’s two nuclear powers, India and Pakistan, will not succeed unless political violence in Kashmir is substantially reduced. One of the key factors sustaining that violence is the dearth of economic opportunities, which ensures a steady supply of disaffected recruits to terrorist and militant groups. This report sketches the turbulent history of Kashmir from its de facto division in 1947 through the revolt of 1989–90 to the present, and then explores the economic dimensions of the conflict and the economic opportunities for peacebuilding. The governments of India and Pakistan, together with political leaders in Kashmir, must take the lead in promoting economic development, but they require the assistance of international financial institutions and of the United States, which is well placed to act not as a mediator but as a facilitator.
