The Economics of Peace

Published: 
September 19, 2011
By: 
Graciana del Castillo

Efforts to rebuild economies in postconflict zones around the world underscore a central lesson: development practices that work in peaceful countries often don’t apply to countries in transition.

Summary

  • The United States’ longest war, in Afghanistan, and one of the largest relief efforts in U.S. history, in Haiti, are testing U.S. leadership in the world, as well as its determination to deal with fiscal imbalances, the debt burden, and economic malaise at home.
  • U.S.-led reconstruction in both countries is lagging and becoming increasingly expensive, and it will not succeed without a major change in strategy. U.S. goals in both countries will be elusive unless the misguided policies and misplaced priorities under which reconstruction has been taking place change in fundamental ways.
  • Each country is different and will need to develop its own strategy. Nevertheless, we have identified basic rules, lessons, and best practices that national policymakers and the international community should keep in mind to improve the provision of aid and technical assistance.
  • During the immediate transition from war or chaos, reconstruction is not development as usual: The peace (or political) objective should prevail at all times over the development (or economic) objective. Without peace there cannot be development.
  • Policymaking should be tailored to four major differences from development as usual. Emergency policies should be adopted without delay, aid to groups most affected by crises should be prioritized, corruption should be checked, and national ownership of reconstruction policies must be assured.
  • For both Afghanistan and Haiti, a broad-based debate—including national leaders, U.S. government officials, members of Congress, military leaders, academics, think tanks, and aid practitioners in these countries—is urgently needed and should take place without delay, as it did at the time of the Marshall Plan.

About the Report

The record of countries coming out of war or chaos is dismal: roughly half of them fall back into crises, and among the other half, most end up highly aid dependent. This report, sponsored by the Center for Sustainable Economies, seeks to develop rules or guidelines to improve aid effectiveness in such countries. The author is grateful for the many comments and suggestions she received on a previous draft.

About the Author

Graciana del Castillo is an economic expert on countries in crises, including those affected by conflict, natural disasters, or financial collapse. She is a partner of the Macroeconomic Advisory Group and a member of several advisory boards. She received her PhD in economics from Columbia University in 1986 and was an adjunct/visiting professor there from 1990 to 2007. As the senior economist in the Office of the UN Secretary General, del Castillo designed the arms-for-land program for El Salvador. As the economic policy adviser to the UN Special Representative in Kosovo, she was involved in designing policies to jump-start the economy following the war in 1999. She is widely published and the author of Rebuilding War-Torn States (Oxford University Press).
September 19, 2011
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