A Way Forward

Abstract

By way of conclusion, we will discuss how to secure broad-based recovery in the post-conflict period. The state’s role, versus that of the market, in driving economic development is a question as old as development economics itself (Collier 2005; Rodrik 2007). It is especially pertinent in a post-conflict context, for contemporary civil wars do a very effective job of liberalizing markets and transferring assets from state to private hands (often without much money going the other way — or none at all, when the assets are simply grabbed). Fiscal pressure propels privatization forward, as does IMF and World Bank policy, and economic reform sometimes starts in wartime (Mozambique and Sri Lanka, for example). Reform raises much the same issues as in non-conflict countries but in an attenuated form: revenue-constraints are usually much tighter (the tax base contracts along with wartime economic activity and trade); state capacity is often very limited, as is the state’s ability to regulate the market in the public interest; supply-responses to market liberalization are constrained by infrastructure’s destruction and the impoverishment of smallholders; and private investors are wary about making large fixed investments (vulnerable to predation, should war resume). Private investors find the highest (and safest) returns in: natural resource-rich sectors, commercial property in major cities, importing high-value consumer goods to supply urban elites, food-markets supplying major urban areas, and rehabilitating large commercial farms.