Should post-conflict economic policies be distinctive from other developing country policies? This paper by Paul Collier examines available evidence from post-conflict countries to assess the applicability of various economic policies in such settings. It concludes that post-conflict environments are distinctive situations and require different interventions to stimulate economic recovery and, ultimately, long-term peace.
One of the key ways in which post-conflict countries differ from most other developing countries is that they inherit economic policies that are highly dysfunctional. While such faulty policies are not confined to post-conflict countries, governments usually become desperate during civil war – resulting in greater likelihood of dysfunctional policies.
Allowing that post-conflict countries typically emerge from war with a legacy of poor economic policies, policies need to be distinctive for two overarching reasons: (i) Risk of further conflict is considerably higher in post-conflict societies than in other societies; bringing this risk down becomes the priority, affecting policy choices; and (ii) Economic consequences of conflict create both constraints and opportunities that are distinctive.
Evidence from post-conflict case studies, although tentative and inadequate, suggests that objectives, political opportunities, economic opportunities and fiscal strategies are all likely to be distinctive in post-conflict contexts. In the absence of such recognition, governments with limited economic expertise in conflict-affected countries are in danger of receiving conventional advice which is not adequately adjusted for their context.
Evidence also suggests that economic policies are important as a means of building peace. They are effective only in the longer term, however, and thus need to be complemented by other policies that maintain peace in the interim. Too little attention is paid though to economic reform in contrast to external peacekeeping and issues of political design. A post-conflict period is an opportunity for economic reform that is too often wasted by international actors.
Typically, the government in a post-conflict environment is acutely short of revenue, but some forms of revenue-raising are highly undesirable. Reliance on natural resource rents in lieu of other sources of revenue, such as taxation and aid, creates opportunities for a recurrence of conflict. Further, the pressing needs for public spending are liable to collide with acute constraints on the capacity to spend money effectively: the government may need to adopt new organisational forms for administering public spending. Rather than attempting to build a conventional system of public administration within spending ministries which did not work even when circumstances were easier, it may be better to adopt the more radical approach of leapfrogging to a more modern administrative technology.
The paper provides the following additional recommendations:
- Two economic policies that can reduce the risks of further conflict are to reduce military spending and to increase employment opportunities for unskilled young men, for example through the reconstruction of infrastructure.
- In terms of economic processes, it is important to attempt to induce the repatriation of people and capital, to improve the governance of mineral rights and to manage commodity and construction booms.
- In terms of fiscal strategies, a post-conflict package should consist of low taxation, high aid, a high scrutiny model of public spending, and low inflation.
