By Shalmali Guttal *

Over the past two decades, post-war or post-conflict reconstruction has emerged as the essential framework for establishing neo-liberal policy regimes in newly liberated nations (such as Timor Leste), countries emerging from protracted periods of violent conflict (such as Cambodia, Haiti, El Salvador and Nicaragua), and countries subjected to external aggression and occupation (such as Afghanistan and Iraq). Many elements of these policy regimes can also be found in countries undergoing structural changes to their national political and economic systems, as in the ‘transition’ countries of Central Asia and mainland Southeast Asia.

Although re-building communities and societies after periods of severe crises, upheavals and armed conflicts is not a new phenomenon, the recurring economic and political characteristics of the development model prescribed by external actors in the name of “reconstruction” and “nation building” have all the characteristics of an emerging paradigm.
Reconstruction literally involves everything, from the demobilization of armed groups and peace-keeping to writing new constitutions, formulating new national laws and fast-tracking foreign investment. Whether in Cambodia, Timor Leste, Haiti, El Salvador, Nicaragua, Iraq or Afghanistan, the elements that loosely constitute the emerging reconstruction model are more or less the same. These generally include: a UN-led mission for “transitional” administration, peace-keeping and donor coordination; efforts to shape the contours of national “leadership” through support for electoral, constitutional and governance activities; the development of national sectoral plans, economic and fiscal policies, and government and institutional capacity by foreign experts; the transfer of essential services provision to private sector firms; and a plethora of international non-governmental organizations (NGOs) and newly emerging national/local ‘civil society organisations’ (CSOs) engaged in activities ranging from micro-credit and primary health care to democracy and human rights training.
The similarity among reconstruction programmes in different countries is not co-incidental. Rather it reflects conscious and deliberate planning by a set of actors who have given themselves the responsibility of defining development and security for the rest of the world. Present day reconstruction efforts are led by a combination of actors with distinct, but often overlapping roles: rich donor nations from the North, international financial institutions (IFIs), the United Nations (UN) and other inter-governmental agencies, multilateral security forces, humanitarian relief and development agencies, private enterprises, and national and international NGOs. Reconstruction is financed largely through multilateral and bilateral loans and grants. Money for reconstruction is not free. It comes tied to conditionalities from donors and creditors. Governments of countries undergoing reconstruction generally have little input into the policy prescriptions doled out to them, although many officials among their ranks are more than willing to collaborate in the imposition of economic and political systems that help them corner power, influence, and wealth.
The fundamental tenets of concurrent reconstruction programmes are derived from neo-liberal ideology and emphasise rapid integration of domestic markets into the global market-place, free flow of capital, privatisation, deregulation and an overall reorientation of governmental responsibilities towards protecting and facilitating free market conditions for creating profit, much of which is expropriated by private sector actors from outside the country and consolidated by national elites. Although the fine print of the reconstruction model applied in each country might vary here and there, the overall systems and structures that the model defines are the same, regardless of the differing histories and economic and political contexts of the affected countries.
Further, the success and failure of reconstruction efforts are assessed not by the levels of sustained economic, social, political and physical security of domestic populations, but by the speed and extent of compliance with externally determined standards such as establishing a market economy, good governance, liberal democracy, etc. Conditions for national sovereignty are determined by those who front the cash for reconstruction rather than by democratically elected governments and empowered citizens, and ensure continued control by outside powers over the country’s resources and political direction.
Setting Up Failed States
Countries subjected to reconstruction programmes are generally regarded by the international development establishment as displaying characteristics of “failed states.” That is, their state apparatuses are unable to exercise full control over their respective territories, are unable to fulfill domestic and international development and legal obligations, lack effective national judicial systems to ensure the ‘rule of law,’ do not demonstrate the requisites of ‘liberal democracy’, and are unable to prevent their territories from being used in the perpetration of economic and other crimes. (1)
Although war, internal armed conflicts and upheavals caused by violent political and economic changes do result in weak and often dysfunctional national structures and institutions, the imposition of a neo-liberal economic and political order as a condition to financing reconstruction so debilitates national capacities that countries undergoing reconstruction remain in a continuing condition of state failure. The aspirations of local populations for peace, economic and social security, and political stability become secondary to the vision of reconstruction’s architects. The project of ‘nation building’ becomes captive to the economic and geo-political interests of those who finance and direct reconstruction, especially the countries of the G7 and primarily the United States (US).
With regard to the reconstruction of Guatemala, El Salvador and Nicaragua, Alejandro Bendana notes, “In this case, as in others the world over, ‘nation-building’ took the form of following an economic and political blueprint largely designed by the multilateral financial institutions in Washington. What we witness therefore is the transformation of nation-states and nation-building into the creation of neo-liberal national states.” (2) A study on trends in bilateral and multilateral emergency and development assistance in Cambodia from 1992-1995 notes that, “Unfortunately, aid flows in crisis periods are not necessarily adjusted to the needs and absorptive capacity of the recipient country, but are more attuned to the political needs of donors seeking to manifest foreign policy.” (3)
A question donors and multilateral institutions appear loath to confront is, who determines—and on what grounds–that one or another state or regime lacks legitimacy? Despite the obvious illegality of the US-led war on Iraq and the subsequent attempts to pillage the country’s resources under the banner of reconstruction, the handing out of plum contracts by the Coalition Provisional Authority (CPA) in Iraq to US-favoured corporations was not challenged on ethical grounds by either the UN or donor countries. A number of European corporations even applied pressure on their respective governments to take conciliatory positions towards the US and its “coalition of the willing” so that they could be eligible for a piece of Iraq’s reconstruction pie. UN envoy Lakhdar Brahimi’s endorsement of the US controlled Governing Council’s choice in selecting the Prime Minister and other top officials of the interim government in Iraq was viewed by the progressive peace movement as “blue-washing” by the UN of the illegal invasion and occupation of Iraq.
Theories about state failure produced by mainstream academic institutions, think tanks and donor agencies consistently ignore the systemic causes of such failure and their accompanying cycles of impoverishment and conflict. The draining of national wealth through colonial structures of production, debilitating debt repayment burdens and the structural adjustment programmes imposed by the World Bank and the International Monetary Fund (IMF) rarely figure in analyses of negative economic growth, deepening poverty and poor governance in so-called failed states. Nor do radical transformations of national economies and governance structures brought about by international political and economic pressures. We are exhorted to believe that countries in Africa, Central America and Asia have corrupt, unaccountable governments, lack the ‘rule of law,’ do not provide for their citizens and are susceptible to terrorist activities within their boundaries because they have not yet put in place the requisites of liberal democracies and market structures of the West. Iraqis are hungry and dissatisfied not because of ten years of back-breaking economic sanctions but because Saddam Hussein was a dictator. Palestinians are poor and insecure not because their rights to land, sovereignty, and self-determination are violated by Israel’s expanding settlements but because the Palestinian Authority is unable to stem the rising squads of suicide members.
A recurring theme in discussions on state failure is the abuse of state power by ruling elites, lack of adherence to the ‘rule of law’ and the urgent need for effective and good governance. Although the abuse of state power is a serious problem in countries undergoing reconstruction, it is not the sole preserve of their ruling elites. Many northern and other governments—especially the US—have propped up and colluded with dictatorial regimes to further vested interests. From 1950 through 1975, the US financed covert operations and government factions in the Lao Peoples’ Democratic Republic (PDR), Cambodia and Vietnam in a bid to stem the spread of communism. After the Khmer Rouge was ousted from power by Vietnamese-led forces in 1978, the US, in collaboration with the Thai military, started to channel covert aid to Khmer Rouge controlled regions along the Thai-Cambodian border, thus protracting a state of internal conflict in a country emerging from three years of the Khmer Rouge’s genocidal reign. In 1979, former US National Security Adviser Zbigniew Brzezinski said, “I encouraged the Chinese to support Pol Pot. Pol Pot was an abomination. We could never support him, but China could.” According to Brzezinski, the USA “winked, semi-publicly” at Chinese and Thai aid to the Khmer Rouge. (4)
The US, many European governments, and countries in the Association of Southeast Nations (ASEAN) maintained diplomatic and economic ties with Indonesia under President Suharto’s regime. It is now public knowledge that much of the money channeled to Suharto’s government by donor countries and the World Bank was used to brutally repress civil and political dissenters in Indonesia, and to finance Indonesian military actions in Timor Leste, West Papua and Aceh.(5) Ironically, these same actors now demand adherence to human rights and democratic principles by Timor Leste, Cambodia, Vietnam and the Lao PDR. Writing on US military, political and economic interventions in Afghanistan, Iraq, Vietnam and Haiti—all of which are labeled “failed states”– Rick Salutin notes that, “To the extent that Haiti has often ‘failed,’ it hardly did so on its own. In the real world—personal or political—almost no one fails by themselves.” (6)
The lack of historical and international dimensions in analyses of state failure renders them ideological, and thereby results in solutions that are also ideological rather than grounded in the political economy of conflicts and their impacts on states and peoples. According to this “logic”, if donors can attribute violence and poverty to corruption by greedy national elites and the absence of ‘good governance’ as defined by the World Bank, then surely the solution must lie in insisting that countries undergoing reconstruction apply World Bank prescribed conditions of good governance. The World Bank model of good governance demands that governments put in place legal and administrative systems that are private sector- and market-friendly and create an “enabling” environment for foreign investment. Good governance does not require a failing state to prioritise the development needs of its own population, provide jobs, food and affordable healthcare, protect its producers from cheap imports, or regulate the activities of foreign capital through national laws. Sovereignty is a great idea as long as it ensures that a struggling nation accepts its subservience to global capitalism and uses its state power to put in place free market reforms.
Privatisation Havens
An emerging tendency in post-conflict theorizing is to “normalise” situations of protracted instability so that development can carry on without a “well entrenched” or coherent state. (7) The World Bank, UN agencies and donor governments are content to turn over development activities to private actors on the grounds that weak, dysfunctional, and authoritarian governments are unable to meet their national development obligations. Services provision, humanitarian relief, and even security and conflict management responsibilities are routinely farmed out to corporations and national and international NGOs.
In Cambodia, national NGOs emerged as a conditionality of development aid demanded by donors during the early reconstruction phase led by the United Nations Transitional Authority in Cambodia (UNTAC). While UNTAC was busy trying to demobilize soldiers, establish law and order, repatriate refugees and establish a civil administration, the work of development was handed over to international NGOs. It quickly became apparent to donors that development activities managed entirely by international NGOs contradicted claims of sustainability and building national capacity. Thus came the push for the Royal Cambodian Government to create legal provisions for the establishment of national NGOs that could receive development aid directly from donors. From 1992 onwards, international and national NGOs were engaged in a wide range of activities in Cambodia – from clearing landmines and emergency relief to setting up schools and hospitals, providing job training and running micro-credit banks. From 1992-1995 huge amounts of development aid were disbursed by donors for reconstruction and development, but much of this money did not pass through Cambodian government channels. According to a study on aid flows during this period substantial amounts of this aid was not even spent inside Cambodia and the funds were managed largely by non-Cambodians.
“In the rush to repatriate people from the Thai-Cambodian border and to jump-start rehabilitation efforts, the participation of the government bureaucracy was largely ignored. In effect, a parallel structure was created with NGOs, multilateral agencies, and consultants performing many of the tasks normally assumed by government personnel. The urgency of donors to implement high-cost emergency programmes was, ironically, in conflict with the slow process of rebuilding societal institutions needed to manage aid effectively.” (8)
A decade later, a similar pattern appeared in Timor Leste, except that there, consultants, “experts” and specialized private sector firms completely dwarf local civil society organisations (CSOs) in the amounts of donor funds they receive for rehabilitating the country’s infrastructure and providing “technical support” to every sector and line ministry. Many service delivery arms of the government have been outsourced to private firms and it is common to see expatriates carrying out key government functions. Although Timorese themselves agree that there is indeed a serious shortage of skilled and experienced local organizations and personnel to meet the country’s development needs, none would deny that reconstruction in Timor Leste is a enormous cash cow for the international reconstruction industry.
Further to the west in Iraq, another type of out-sourcing has burgeoned: the privatization of security. The public killings of four private security personnel in Fallujah in March 2004 brought the world’s attention to the extensive presence of mercenary soldiers in Iraq. The CPA, which served as Iraq’s administrative power before the establishment of the interim government, attracted thousands of private military personnel from private military companies (PMCs). In May 2004, the US State Department listed more than 25 PMCs doing business in Iraq, most of them from the United States or Britain. (9) These include Blackwater, DynCorps, Kellog Brown and Root (KBR), Control Risks, Global Risk Strategies and Erinys. PMCs have provided security for senior members of the CPA as well as for high-end corporations such as Bechtel and Halliburton.
According to some researchers, the numbers of private military personnel in Iraq is unprecedented in both scale and scope. Under the misleading label of “civilian contractors,” PMCs provide personal security, guard food shipments, oil pipe-lines and military installations, feed and house coalition troops, maintain key weapon systems and increasingly get drawn into gun battles with the Iraqi resistance in place of coalition soldiers. (10) Although a high-risk business, private security in Iraq and Afghanistan is tremendously profitable. “Security” has become Britain’s most lucrative post-war export to Iraq and British PMC revenues have gone from 200 million pounds before the war to over 1 billion pounds. (11) As the cost of doing business goes up in an increasingly insecure Iraq, so do the profits of the PMCs. And future multi-billion dollar World Bank and UN reconstruction funds for Iraq are likely to increase these profits even more.
The Politics of Democracy
Given that countries undergoing reconstruction have been either deemed failed states, or diagnosed as heading towards state failure, “democracy promotion” is identified by donors as a high priority activity and figures prominently in all reconstruction programmes.
In Cambodia during the early 1990s, bilateral donors and the UNTAC spent tens of millions of dollars preparing the country for the impending elections. Key features of this preparatory work were “human rights education” and “democracy education,” which were carried out by international NGOs and sought to educate the Cambodian public about liberal democracy and liberal notions of “good governance.” Cambodians reeling from over thirty years of political turmoil instigated and manipulated by external political forces were understandably mystified by the aggressive promotion of yet another system of political and economic governance by yet another set of external actors. Given their long and first-hand experience of physical violence and political repression, Cambodians did not need to learn what their human rights were; they were more interested to know what the international community could do to ensure these rights –foremost among them the right to self-determination and justice. To date, this guarantee still proves elusive.
In Timor Leste, the vanguards of democracy promotion are USAID–the international aid arm of the US Government–the International Republican Institute (IRI) and the National Democratic Institute (NDI). The IRI and the NDI are the foreign policy wings of the US Republican Party and Democrat Party respectively, and both are part of an umbrella group funded by the quasi-governmental National Endowment for Democracy (NED) in the USA. These are the same groups that were involved in the attempted coup against the Chavez Government in Venezuela and the successful coup against the Aristide Government in Haiti. (12) USAID funds non-governmental media groups, CSOs working on legal reform, media training and policy research, and fledgling political parties who form the opposition to FRETILIN, Timor Leste’s ruling party. IRI’s “democracy promotion” activities have deepened tensions and mistrust between FRETILIN, opposition parties and local CSOs. In 2003, rumors were rife in Dili, Timor Leste’s capital, that the IRI was supporting a shadow government in the country. Many view the implementation of a repressive immigration law banning foreigners from engaging in political activities as a direct response by FRETILIN to IRI’s political meddling. (13)
The increasing involvement of NGOs in donor-driven democracy promotion indicates a cross-over from more conventional humanitarian and developmental activities into the open realm of politics. Based on his experience in Afghanistan, Conor Foley argues that it is becoming increasingly difficult for NGOs to argue that their work is unconnected with politics.
“Since the advent of the Bush administration and September 11, the ‘humanitarian space’ in which aid workers can operate has been steadily shrinking. During the 1990s some aid NGOs moved away from their traditional position of neutrality by calling for Western military intervention, for humanitarian purposes, in certain circumstances. Aid workers now cooperate with the military in conflict and post-conflict zones through practical necessity. Britain’s Department for International Development links the provision of humanitarian assistance to objectives such as restoring peace and human rights. The US government has, even more overtly, called on NGOs to help US foreign policy goals; in Iraq, humanitarian aid has been politicised on an unprecedented scale and its impartiality undermined.” (14)
Since the 1990s, international NGOs from wealthy countries have increasingly acted as semi-official distributors of relief and humanitarian assistance in place of bilateral and multilateral institutions. In Afghanistan, as elsewhere, international NGOs have assumed responsibility for state-type functions such as the provision of public services, health and education. Donor governments are channeling a significant amount of humanitarian relief through their national NGOs. While this assistance is sorely needed in local areas, by virtue of their reliance on donor government funds, relief programmes are extremely susceptible to political meddling and manipulation. It is not surprising that people in Afghanistan, Iraq and Timore Leste view many NGOs as carrying out the foreign policy objectives of their respective governments in the guise of reconstruction and development.
Institutional and Economic Windfalls
Reconstruction has provided excellent opportunities to multilateral institutions and IFIs such as UN line agencies, such as UNICEF, UNDP and the World Food Programme, the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB) to carve out new roles for themselves and keep institutional irrelevance at bay. In a global economic climate of increasing private capital flows, their involvement in national reconstruction programmes ensures that policy and structural changes that suit the interests of wealthy and powerful donor countries are put in place as “national development frameworks.”
Coupled with domestic peace-building, reconstruction – as broadly applied by multilateral organizations and donors – tends to be extremely centralized, externally imposed, supply-driven, and interventionist. (15) It assists in the formation of new national elites who – in collaboration with external actors – lay the ground for a neo-liberal policy environment that facilitates the expropriation of national wealth by foreign as well as domestic private interests. Reconstruction also provides a quasi-legitimate avenue for wealthy and powerful countries to consolidate their claims on the natural resources and economic opportunities of entire regions—as in the case of the United States in relation to Central Asian and Middle East oil reserves.
The World Bank is one of the most influential institutions involved in reconstruction. The Bank views conflict prevention and post-conflict reconstruction as critical to its mission of poverty reduction. Its Articles of Agreement permit the Bank to “assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by war [and] the reconversion of productive facilities to peacetime needs.” (16) The Bank is playing a significant role in shaping economic and social development policies in Afghanistan, Cambodia, Africa’s Great Lakes region, the Balkans, Liberia, Nepal, Sierra Leone, Timor Leste, Sri Lanka, the West Bank and Gaza, and other war-torn areas.
In Haiti, an interim Cooperation Framework—the Cadre de Cooperation International (CCI)—was drawn up in April-May 2004 behind closed doors by about 300 mostly non-Haitian consultants, many from the USAID and the World Bank. Release of the plan followed the assumption of power by Haitian Prime Minister Gerard Latortue and his ministers, who were hand-picked by an eight person “Council of Eminent Persons” backed by the US, France and the UN Security Council. The two-year social and economic plan lays out a framework for Haiti’s reconstruction, which will be carried out under the protection of a UN peace-keeping mission of over 8000 security personnel.
Many Haitians have denounced the plan as “disguised colonialism” because of its neo-liberal economic recipes and the role of external institutions—particularly the World Bank—in formulating the plan. The “expert” group preparing the plan did not consider it necessary to consult with Haiti’s large and diverse civil society—which includes labour unions, peasant associations, women’s groups, NGOs, producers’ cooperatives and numerous other associations –about a reconstruction plan for their country. Critics of the programme say that the CCI “reinforces the structures and forms of [foreign] domination of Haiti.” (17)
By its own admission, “mitigating the effects of war” accounts for about 16 per cent of the Bank’s total lending. (18) The Bank has a special unit to design development programmes for conflict affected countries (the Conflict Prevention and Reconstruction Unit) and a special fund to provide financing for reconstruction in “post-war societies” (the Post-Conflict Fund). It has an operational policy (OP) on “Development Cooperation and Conflict” (OP 2.30) that sets the scope and the terms of the institution’s interventions and explicitly opens the door for the Bank to work in conflict prevention. (19) Combined with a policy on “Dealing with de facto governments” (OP 7.30), OP 2.30 clarifies the Bank’s capacity to intervene in countries where it is unclear who is in power and permits the Bank to provide grants on request from the international community as “properly represented” (for example, by UN agencies). This means that the World Bank (and the IMF) can operate in a country in the absence of a sovereign government, as in the case of Iraq and until recently, Afghanistan. In the case of Iraq however, Bank interventions have until now been limited to “needs assessment.” (20)
In order to expand its reconstruction work, the Bank has developed “new products” for situations where normal lending instruments cannot apply. These allow the Bank to “position itself” early on in shaping the affected country’s development path. In a number of countries emerging from conflict, the World Bank prepares a Transitional Support Strategy (TSS). The TSS is a short to medium-term plan for comprehensive reconstruction through which the Bank can provide emergency recovery grants and loans. Angola, Macedonia, Kosovo, Timor Leste and the Democratic Republic of Congo all currently have a TSS. The Bank has also established and managed joint donor trust funds in countries such as Afghanistan, Kosovo and Timor Leste, and in the Great Lakes region in Africa. (21) Most recently, the World Bank pledged US$660 million dollars to help Indonesia, Sri Lanka and the Maldives “make the transition from disaster relief efforts to reconstruction” in the wake of the tsunami that devastated the region on December, 26, 2004. Sourced mainly from the International Development Association (IDA), the Bank’s soft loan institution, financing and “technical support” for post-tsunami reconstruction is expected to rise over time. (22)
An important area of World Bank-IMF involvement is overseeing debt repayments and scheduling. In Afghanistan, donors moved quickly to ensure that debt arrears were cleared, paving the way for new lending. Administered by the World Bank, bilateral donations “skimmed off the top before the remaining funds were made available to the Afghan government.” (23) In Timor Leste, both the World Bank and the ADB have pressured the Government to move from grants to loans, on the grounds that the country’s reconstruction cannot be funded by grants alone. The ADB has claimed that the loans it would offer the Timorese Government would practically be “free money,” given their low interest rates and favourable repayment schedules. However, as all IFI watchers know, the danger in these loans do not lie in numbers, but in the policy prescriptions that a borrowing country must adopt as conditions to receiving this “free money.” (24)
In November, 2004, the Paris Club of Creditors agreed to write off a portion of Iraq’s debt in three stages. (25) The first 30 per cent ($11.6 billion) is to be written off unconditionally. A second 30 per cent will be reduced as soon an IMF reforms package is approved. And a final 20 percent will be reduced after the IMF certifies that Iraq has faithfully implemented the reforms package. Iraq owes less to the Paris club (about $42 billion) than to various Arab governments (about $80 billion). However, the debt cancellation deal ensures that the country’s economic future will be defined by the Paris Club nations and particularly the US, acting through the IMF and the World Bank. Iraqis, including the Iraqi National Assembly, have rejected the debt deal, on the grounds that Iraq’s debts are “odious”— that is, they are illegitimate and were used against the interests of the Iraqi population. At the same time, the legitimacy of the National Assembly, being a product of a political process under occupation, is itself in question. The voices of ordinary Iraqis, who have to repay past and future debts as well as bear the costs of reconstruction through deals that reward their occupiers, appear to be of little interest to the deliberations of the international debt cartel.
Common in all World Bank reconstruction programmes is the immediate application of free market reforms, including legal provisions for foreign investment, full repatriation of profits for foreign investors, private property rights, zero subsidies for food and essential services, and the now ubiquitous “good governance.” In a study on IFI involvement in Afghanistan, Anne Carlin notes that IFIs are seeking “new lines of business” at a time when large borrowers such as India and China turn to other sources for major projects. (26)
“Language in some World Bank documents—‘new products for a new era’—is more evocative of a commercial strategy than of development assistance. Reforms under way in Afghanistan include a law on private and foreign investment that ‘expedite the investment process, grant tax waivers based on terms of investment, exempt some exports from taxes, and allow for tax-free repatriation of funds.”’ (27) It is doubtful that Afghans themselves will benefit from such business activity.
The free market oriented policies demanded by the World Bank, IMF, ADB and other donors as a condition for reconstruction financing have made reconstruction an extremely lucrative business for the IFIs themselves, bilateral and international technical support agencies, development “experts,” international consulting and contracting companies, multinational corporations, NGOs and national elites, all of whom reap large profits in the guise of rebuilding economies and societies. They have also led to increased inequality, hardship and social polarization among local populations who do not have the professional skills or political clout to benefit from the new market opportunities that reconstruction offers.
During the early 1990s in Cambodia, qualified doctors, teachers and technicians could be found working in low-end service or support jobs while the reconstruction of their country was being planned by expensive, foreign professionals. After the election in 1993 and the formation of a national government, the average monthly salary of a mid-level government official did not exceed US $40, while an equivalent position in an international organization could fetch 100 times as much. Government officials had to find additional means of employment to supplement their meager incomes. Many started local NGOs and/or businesses on the side in order to tap into donor funds for reconstruction. In Timor Leste, a similar scenario is emerging where donors and the World Bank insist that government salaries be kept low in order to ensure “sustainability” and avoid bloated government expenditures. The same principles, however, seem not to apply to the international aid and reconstruction industry.
Countries undergoing reconstruction display characteristics of what could be called a “reconstruction economy,” in which food, housing, services, recreation facilities and business opportunities abound for international peace-keepers, administrators, development and security professionals, NGOs and contractors, while the majority of the local population struggles with dysfunctional infrastructure, non-existent or poor quality services, dead-end jobs or unemployment. A services and construction boom geared towards expatriates creates pockets of affluence in capital cities and select tourist and recreational areas while the economy in the rest of the country falls apart. The resultant obvious disparity in living standards contributes to rising crime rates, social unrest, conflicts over land, water and other natural resources, and communal tensions that threaten to escalate into serious conflicts and violence.
The Violence of Reconstruction
Post-war and post conflict reconstruction programmes are generally tied to UN and donor-led peace and conflict resolution initiatives where ending conflicts and building peace are conflated with the formal cessation of hostilities and the establishment of conflict resolution mechanisms, new economic policies, new institutions and capacity, and new governance structures in affected countries. In most cases, a reconstruction blue-print would be in lock-step with a peace agreement or accord, which, in the words of Alejandro Bendana, is itself a “value-laden text abounding in references to universal human rights principles, informed by understandings of peace with justice, setting forth specific steps and stages to achieve justice in terms of political and economic democratisation.” (28)
A convenient assumption made by many actors involved in post-war reconstruction is that formal cessation of hostilities by warring parties signifies the end of violence and the beginning of development. Referring to the peace accords signed in El Salvador in 1992, Bendana observes, “At the moment of the signing perhaps all domestic and external actors believed that democracy and development would flow naturally from the peace accords as a binding framework. Good intentions however do not produce win-win situations because the full and forceful implementation of the accords, as in Guatemala and elsewhere, entailed a ‘loss’ for the traditional landed elite and business sector.” (29) Bendana points out that the Farabundo Marti Para La Liberacion Nacional (FMLN) and its sympathizers visualized a peace deal that would address economic and resources issues (especially land) in return for the demobilization of FMLN guerillas. Although some of these concerns were integrated into the peace accords, life for the average Salvadoran did not improve. On the contrary, the daily lives of Salvadorans remained as bad–if not worse—as before the war, with increasing poverty, inequality, street violence and lack of security.
El Salvador and other countries in the grips of post-war reconstruction show that the economic violence institutionalized through reconstruction programmes can be every bit as destructive and debilitating as the physical violence of conventional armed conflicts and wars. However, the structural conditions that result in economic violence are rarely recognized as a form of war, or even associated with continuing armed conflicts and civilian unrest. Once wars are officially “settled” qualifying for reconstruction assistance presupposes immediate adjustment to a market system.
Naomi Klein has pointed out the devastating impacts on ordinary Iraqis of the economic reforms imposed on Iraq by the US-dominated CPA. Between May 2003 and June 2004, Lt. Paul Bremer, the Head of the CPA, fired 500,000 state workers (including soldiers and civilians), opened the country to unrestricted imports, started to privatise state enterprises, and enacted a set of radical free market laws to entice multinational corporations to set up operations in Iraq. These included: lowering Iraq’s corporate tax rate from about 40 per cent to 15 per cent; 100 per cent ownership of Iraqi assets (except for oil) by foreign companies; full repatriation of all profits by foreign investors; forty-year long leases and business contracts, and; allowing foreign banks to conduct unregulated business in the country. According to Klein, “Overnight, Iraq went from being the most isolated country in the world to being, on paper, its widest-open market.” Klein reports that according to Joseph Stiglitz, former chief economist at the World Bank, Bremer’s reforms were “an even more radical form of shock therapy than pursued in the former Soviet world.” (30)
Contracts worth millions of dollars were routinely handed out by the CPA to its favoured corporations (mostly from the US) while top posts for shaping Iraq’s future “sovereign” government and Iraqi civil society were farmed out to highly paid and ideologically motivated professionals from the Bush Administration’s pet think tanks and investment banks. Prominent among them are the Research Triangle Institute (RTI), the National Endowment for Democracy (NED) and Bearing Point, all of whom were tasked with constructing economic, social and political structures and institutions most conducive to US and transnational corporate interests even after direct occupation ends. (31)
The US formula for Iraq’s reconstruction is not different in substance from what the IMF and World Bank would prescribe in a standard structural adjustment package: a shrunken state, privatization, a “flexible” workforce (that is, workers can be hired and fired at will), removal of subsidies for food and public services, open borders with no tariffs, market-friendly laws, minimal taxes for investors, no capital mobility restrictions, and private property protection. The people of Iraq would have to suffer some short term pains—such as joblessness and dire poverty–but this would be more than made up for by future gains as foreign investment floods in. But as is evident, the CPA’s dream of making Iraq a “capitalist dream” has not materialized. Instead, thousands of unemployed Iraqis, battered by both, the military war as well as the violence of the US’s reconstruction ideology, are finding employment, security and community in the growing resistance to the US-led occupation.
For most populations in countries under reconstruction, peace cannot be separated from socio-economic and political justice. A reconstruction programme that creates joblessness and food insecurity, strips public assets and hands them over to private profiteers, inhibits the access of children to clean water, health-care, nutrition and education, exacerbates the insecurity of women and vulnerable groups, and weakens the economic prospects of local producers by opening the country’s economic borders to unchecked imports, is every bit as violent and destructive as the past they sought to escape.
The unwillingness and inability of those who design reconstruction programmes to confront market-generated inequalities and injustice is not surprising. The architects of these programmes are after all the same set of actors who invented structural adjustment programmes with its “no pain no gain” mantra and deep, ideological adherence to free market economics as the most efficient way to allocate resources and power. In their book, good and effective governance is judged by how friendly governments are to international capital, and not by a government’s commitment towards its citizenry.
Whose Reconstruction?
Post-war reconstruction is an openly political project and raises complex questions about state sovereignty and legitimacy, self-determination, democracy (local and national) and social, economic and political justice. The question is not whether reconstruction and peace-keeping are needed or not, but rather, what types of reconstruction and peace-keeping are needed, who they are designed for, who leads them, and whose interests they serve. There is no denying that resources for re-building physical infrastructure, essential services, national institutions and administrative capacity, and for re-vitalising domestic economies and political systems are urgently needed in countries emerging from crises. Strong and effective governance is important, based on rules and regulations of accountability applied to governments and the private sector equally and supported by a well-defined legal system. A robust and accountable domestic private sector can also play a role in re-building a shattered economy.
However, the experiences of Cambodia, Timor Leste, Haiti, El Salvador, Nicaragua, Iraq and Afghanistan—to name just a few—show that the resources for rebuilding lives, economies, societies and polities come at an extremely high price with long term implications that are not always visible at the onset of reconstruction programmes. (Iraq is a special case in that the US occupiers made no bones whatsoever about the returns they expected from their invasion and occupation of the country.) Experience also affirms that despite the repeated failure of the reconstruction model to prevent state failure, the model continues to be applied with minor revisions in country after country.
The post war/post conflict reconstruction model in evidence today is an essentially neo-liberal enterprise through which states and societies can be de-constructed in order to remake them as market-friendly utopias where the accumulation of wealth by external corporate powers and select national elites is considered normal. The World Bank, donors and many inter-governmental agencies view reconstruction as a “marrying” of post-war economies and societies to free market-oriented development, in the framework of structural adjustment. (32) As such, reconstruction becomes a more egregious and extreme form of the neo-liberal development model promoted by capitalist powers and the IFIs. By ensuring continuing state failure, the reconstruction model guarantees that countries become the “burden of the international community” and thereby hostage to whatever form of intervention this community decides.
As long as neo-liberal intervention is not recognized as a conflict-producing factor, it will continue to be offered as one of the solutions to conflict. According to Bendana, the problem is not the association of peace with development, but the association of peace with a particular model of development that generates poverty and inequality.
“Economic crisis underpins major social tension and instability, so that social conflict and violence are both effect, as well as cause and effect, of economic crisis. Economic crisis is fed by northern governmental insistence on the extension of deregulated market globalization intensifying poverty and social polarization, instability and conflict.” (33)
Although the language of reconstruction programmes is rife with terms such as “rights,” “good governance,” “sovereignty” and “democracy,” countries undergoing reconstruction do not appear to have the “right” to break with macroeconomic orthodoxy, challenge imbalances of global power and resource distribution, and chart their own paths towards rebuilding their societies and economies. But as reconstruction descends into chaos, one is compelled to ask what an alternative model of reconstruction based on local and national aspirations and priorities, and on principles of equity, justice and peace-building would look like. How would people in these countries rebuild their lives if given the political and economic space, resources, and autonomy to do so?

*Shalmali Guttal is a senior associate with Focus on the Global South, [email protected]. This article also appears in the Focus’ dossier “Silent War: The US’ economic and ideological occupation of Iraq” available on the Focus website

1. For a comprehensive discussion on the subject, see Failed and Collapsed States in the International System, a report prepared by the African Studies Centre, Leiden; Transnational Institute, Amsterdam; Centre of Social Studies; Coimbra University; and The Peace Research Centre-CIP-FUHEM, Madrid. December, 2003.
2. Alejandro Bendaña, From Peace-Building to State-Building: One Step Forward and Two Backwards? Centro de Estudios Internacionales, Managua, Nicaragua. Presentation “Nation-Building, State-Building and International Intervention: Between ‘Liberation’ and Symptom Relief, CERI, Paris, October 15, 2004.
3. John P. McAndrew, Aid Infusions, Aid Illusions, Bilateral and Multilateral Emergency and Development Assistance in Cambodia, 1992-1995. Working Paper number 2, Cambodia Development Resource Institute, January 1996.
4. See the resources gathered by the Campaign to Oppose the Return of the Khmer Rouge (CORKR),; The Campaign to Oppose the Return of the Khmer Rouge, sometimes known as “CORKR” or the “Cambodia Campaign,” was a coalition of non-governmental organizations (NGOs) founded in 1989 to advocate progressive change in U.S. policy towards Cambodia. In February 1995, CORKR merged with several other Asia-oriented advocacy groups into the Asia-Pacific Advocacy Center, based in Washington, DC.
5. See, for example: Teuku Samsul Bahri, Aceh: A Land of Silenced and Marginalised Voices, January 2004. [email protected] ; Eyal Press, The Suharto Lobby. The Progressive,; Edward S. Herman and David Peterson, The Western Betrayal of East Timor. Z Magazine.; Edward S. Herman, Good and Bad Genocide, Double standards in coverage of Suharto and Pol Pot. Extra! September/October 1998.; Edward S. Herman, From Vietnam to Iraq.; John Gershman, East Timor Violence: Legacy of U.S. Indonesia Policy. The Progressive Response, 3 September 1999, Vol. 3, No. 32.; Stephen Van Evera, American Intervention in the Third World, Less Would be Better. Boston Review, October 1991.
6. Rick Salutin, Failed States All Over. The Globe and Mail / Canada, Friday, March 5, 2004
7. Mark Duffield, “Globalization and War Economies: Promoting Order or the Return of History?,” Fletcher Forum of World Affairs, Vol. 23, no. 2, 1999.
8. John P. McAndrew, Aid Infusions, Aid Illusions, Bilateral and Multilateral Emergency and Development Assistance in Cambodia, 1992-1995. Working Paper number 2, Cambodia Development Resource Institute, January 1996.
9. Sami Makki, Business of war, Privatised violence. Le Monde Diplomatique – English edition, November 2004.
10. Brendan O’Neill, A new kind of private war. 16 April 2004,
11. The Economist, The Baghdad Boom. March 25th, 2004.
12. Ben Moxham, Taming the “Banana Republic”: The US in East Timor. Z Magazine, January, Vol 18 No.1, 2005.
13. Ibid.
14. Conor Foley, “Humanitarian Aid Workers Getting Caught in the Crossfire.”The Guardian Weekly, November 5, 2004.
15. Alejandro Bendaña, What Kind of Peace is Being Built? Critical Assessments from the South, A Discussion Paper. Centro de Estudios Internacionales, Managua, Nicaragua. Prepared on the occasion of the tenth anniversary of An Agenda for Peace for the International Development Research Centre (IDRC), Ottawa, Canada, January 2003.
16. World Bank website. See also, World Bank Conflict Prevention and Reconstruction Unit, World Bank web page.
17. Jane Regan, Haiti: A Development Plan Written ‘Behind Closed Doors.’ IPS/GIN, Port-au-Prince, June 21, 2004.
18. World Bank Conflict page, World Bank website.
19. See “Bank’s policy on development cooperation and conflict,” World Bank web page.
20. Bretton Woods Project:[126]=x-126-16554
21. Ibid.
22. The World Bank, Tsunami Countries: World Bank Supports Transition From Relief To Reconstruction For Countries Hit By Tsunami Disaster. News Release No:2005/315/S, The World Bank, February 2, 2005. See also,
23. Bretton Woods Project:[126]=x-126-43345
24. Remark made in a personal interview with the author by Ms. Meeja Hamm, Resident Representative of the ADB in Timor Leste, in April, 2003.
25. The Paris Club of creditor countries includes Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.
26. Anne Carlin, Rush to Reengagement in Afghanistan: The IFI’s Post Conflict Agenda, Bank Information Centre, December 2003.
27. Bretton Woods Project:[126]=x-126-43345
28. Alejandro Bendaña, What Kind of Peace is Being Built? Critical Assessments from the South, A Discussion Paper. Centro de Estudios Internacionales, Managua, Nicaragua. Prepared on the occasion of the tenth anniversary of An Agenda for Peace for the International Development Research Centre (IDRC), Ottawa, Canada, January 2003
29. Ibid.
30. Naomi Klein, Baghdad Year Zero, Pillaging Iraq in Pursuit of a Neocon Utopia. Harper’s Magazine, September 2004
31. Herbert Docena, The Other Reconstruction: How private contractors are transforming Iraq’s state and civil society. Focus on Trade, Part 1, Number 101, July 2004.
32. David Moore, Leveling the Playing Fields & Embedded Illusions: ‘Post Conflict’ Discourse & Neoliberal ‘Development in War-torn Africa. Review of African Political Economy, March 2000, No. 93, Vol. 27.
33. Alejandro Bendaña, What Kind of Peace is Being Built? Critical Assessments from the South, A Discussion Paper. Centro de Estudios Internacionales, Managua, Nicaragua. Prepared on the occasion of the tenth anniversary of An Agenda for Peace for the International Development Research Centre (IDRC), Ottawa, Canada, January 2003.