Rebuilding the economy, employment and livelihood opportunities are considered central to statebuilding and peacebuilding activities. Some donors – e.g. USAID (2009) – support starting economic programmes early on in post-conflict reconstruction, emphasising the likelihood of a return to conflict if the economy does not grow and sustain itself. The WDR 2011 suggests prioritising jobs, alongside basic security and justice. The report notes that people highlighted economic survival as third top priority in research from Voices of the Poor and country-level surveys.
Reforms in this area include: private sector participation in relief programmes; employment generation; reducing restrictions on movement and business; and macroeconomic reforms. Market-enhancing reforms focus on reducing transaction costs and making markets more efficient (Khan, 2007, p. 1). Growth-enhancing reforms address market failures in asset allocation, technology to boost productivity, and political stability (Khan, 2007, p. 1).
Key challenges, trade-offs and relationship with other state functions
Economists argue that security is a prerequisite for economic growth, while growth in turn enhances security (Lewarne & Snelbecker, 2004). A key question for policymakers is whether and when to promote economic reforms, and whether these can be promoted in the absence of a stable political settlement. Decisions over which economic reforms, and which economic sectors, to prioritise are highly political, and need to consider potential impacts on different conflict actors and dynamics.
Collier, Hoeffler and Söderbom (2007) argue that the two main challenges post-conflict countries face are economic recovery and risk of reversion to conflict. Based on statistical analysis of 74 post-conflict countries, they conclude that economic development (both growth and higher income levels) substantially reduces the risk of reversion to conflict, but that economic growth can take a decade. They also find that economic policy reform does not have adverse direct effects on risk of reversion to conflict. Moreover, they find that growth promoting reforms reduce this risk (Collier et al., 2007; Lewarne & Snelbecker, 2004). They argue therefore that state-(re)building efforts should focus on a ‘“politics +” strategy rather than a “politics alone” strategy’ (Collier et al., 2007, p. 3). Here the ‘+’ means promoting economic development through aid and a rapid reform programme (Collier et al., 2007, p. 3).
Thompson (2011) notes that insufficient understanding of informal economy actors can lead to policies that attempt to regulate, disrupt, or replace them with ‘formal’ structures. This can exacerbate missed opportunities in engaging with actors that are central to building peace and restoring normalcy after conflict (Thompson, 2011) (See Box 1).
- Collier, P., Hoeffler, A. & Söderbom, M. (2007). Post-Conflict Risks. Oxford: Centre for the Study of African Economies, University of Oxford.
See document online - Khan, M. (2007). Governance, economic growth and development since the 1960s (DESA Working Paper No. 54). New York: United Nations Department of Economic and Social Affairs.
See document online - Lewarne, S. & Snelbecker, D. (2004). Economic Governance in War Torn Economies: Lessons Learned from the Marshall Plan to the Reconstruction of Iraq (Long Report Prepared for USAID). Arlington: TSG.
See document online - Thompson, E. A. (2011). Trust is the Coin of the Realm. Lessons from the Money Men in Afghanistan. Oxford University Press.
- USAID. (2009). A Guide to Economic Growth in Post-Conflict Countries. Office of Economic Growth, USAID.
See document online - World Bank. (2011b). World Development Report 2011. Washington, DC: World Bank.
See document online