Can Financial Innovations Mitigate Ethnic and Civil Conflict?

The failure to align the incentives of self-interested groups in favor of beneficial reform is often considered a major cause of civil conflict and persistent underdevelopment around the world. However, much less is known about strategies that have been successful at overcoming such challenges. This article discusses the role of financial instruments as a means for fostering broad political coalitions that favor beneficial reform and mitigate social conflict, drawing on historical cases in which innovative financial assets, often introduced by technocratic reformers, have succeeded at making politics less conflictual over time.