Functional Markets in Yemen's War Economy. Issue 2 (23rd February 2021)

• Record Type: Journal Article
• Authors: Huddleston, R. Joseph; Wood, David
• Is Part Of: Journal of illicit economies and development. Volume 2:Issue 2(2020)
• Page Start: 204
• Page End: 221
• Publication Date: 2021-02-23
• Subjects: Yemen -- war economy -- civil war -- shadow economy -- illicit economy -- rebel governance -- political economy -- new wars -- protracted social conflict; Informal sector (Economics) -- Periodicals; Black market -- Periodicals; Corruption -- Periodicals; Economic development -- Periodicals; 338.9
• DOI: 10.31389/jied.71
• Languages: English
• ISSNs: 2516-7227

Abstract

Our article explores the economic activities of households operating in Yemen's protracted conflict. We examine the growth and maturation of what we call the 'Functional Economy' in Yemen, in which Yemenis engage in economic transactions away from standard regulatory bodies through agreements of 'how to do business' with a range of authorities that are not internationally recognised. We distinguish this from 'black markets' and 'illicit' economic behaviours because most of the transactions would take place in a controlled environment in normal times or under peacetime governance, but the civil war has displaced them. In Yemen, the functional economy has come to serve Yemeni households providing essential goods and income, and for some activities, such as currency exchange, are preferred to any official regulated markets. On the other hand, alternatively regulated markets may be less functional as they also present opportunities for rent-seeking and, more importantly, can reinforce the political and economic bonds between Yemenis and non-recognised authorities, weakening the internationally recognised central state. Further, such activity has an impact on the potential for peaceful resolution of the conflict. The paper proposes that the 'good' of such activity, and hence the extent to which it is 'functional', should be judged by whether it provides access to essential goods and income, and whether it helps promote peaceful resolution. This evaluation framework enables better international policy responses to the economic situation that arises in protracted conflict. We use household surveys, focus group discussions, and key informant interviews to explore these developments from several angles.