Rebuilding Economics

by Alfio Cerami

REV: 12/12/2017

Members of Iraqi security forces gather at the site after a suicide car bomb attack in Baghdad

 

Introduction

Rebuilding economics is concerned with all those interventions that aim at the reconstruction, stabilization and consolidation of countries affected by war, disaster or, more generally, by state fragility. Its key characteristic is an integrated and multi-disciplinary approach to economic development and human security (see Burgess et al. 2007). So far, current economic approaches aimed at peace-building and reconstruction have been fragmented and characterized by a unilateral orientation towards interventions. This has implied not only a duplication of efforts, but also a lost in efficiency due to a lack of synergies.

In an article in Foreign Affairs, Schramm (2010) has introduced the concept of ‘expeditionary economics’ that refers to all those economic activities conducted by the military which can help the process of reconstruction and stabilization of countries affected by war or disaster. Despite undeniable merits, I argue that such an approach entails important deficiencies, which depend on its one-sided approach towards interventions, often too focused on ‘emergency’ and ad hoc situations and responses. Stabilization of fragile states requires, instead, a more sustainable and long-term approach (Cerami 2013).

Rebuilding economics represents, in this account, a new research area of social sciences and not simply of economics. Synergies between economics, political science, sociology and cultural anthropology must be established. The partners involved in rebuilding economics include: (1) academic institutions (universities, research centers, etc.); (2) international organizations (such as UN, UNDP, IMF, World Bank, etc.); (3) donor countries involved in zones affected by war, disaster or state fragility; (4) recipient countries; (5) local communities; (6) military active in peace-keeping and reconstruction; (7) NGOs and iNGOs involved in humanitarian assistance; (8) enterprises (nationals and multinationals); and local peace & socio-economic development committees.

The challenge for the international community at large is, therefore, to establish new forms of ‘culturally sensitive capitalism’, able to integrate and to pacify different hostile factions of the society. The number of firms must increase, but also the human security and the political integration of the affected population must do. In order to achieve these objectives, there is a need to focus on three main pillars (see Table 1):

  1. Economics of Change1;

  2. Human Security; and

  3. Democratization (operationalized in three phases: liberalization, institutionalization and consolidation).

Table 1. The Pillars of Rebuilding Economics

Pillars

Content

Actors involved

Pillar 1: Economics of Change

  • Beliefs, Empathy & Choice;

  • The Economics of Power;

  • The Dynamics of Competition and Cooperation;

  • Culture & Economics.

    • rebuilding infrastructures (such as bridges, roads, hospitals, schools, etc.);

    • putting in place a functioning labor market (e.g. entrepreneurial activities);

    • favoring investments in socio-technical advancement;

    • supporting free and fair trade (international and regional);

    • fostering the growth of environmental-friendly local economies (sustainable local capitalisms); and

    • controlling corruption and political clientelism through good governance mechanisms

  • academic institutions;

  • international organizations;

  • donor countries;

  • recipient countries;

  • local communities;

  • military;

  • NGOs; and

  • enterprises (nationals and multinationals);

  • local peace & socio-economic development committees.

Pillar 2: Human Security

  • socio-economic security;

  • health security;

  • environmental security;

  • migration and security;

  • cultural identity;

  • personal liberty;

  • political security.

  • academic institutions;

  • international organizations;

  • donor countries;

  • recipient countries;

  • local communities;

  • military;

  • NGOs; and

  • enterprises (nationals and multinationals).

Pillar 3: Democratization, (liberalization, institutionalization and consolidation)

  • helping the establishment of an open civil society;

  • favoring stateness;

  • promoting civil rights;

  • political liberties;

  • horizontal accountability;

  • effective power to govern;

  • access and representation in the electoral regime.

  • academic institutions;

  • international organizations;

  • donor countries;

  • recipient countries;

  • local communities;

  • military;

  • NGOs; and

  • enterprises (nationals and multinationals).

Economics of Change

Countries affected by war, disaster or state fragility are characterized by several different systemic problems and structural challenges that hinder a faster economic convergence to more developed nations and which made them more vulnerable to foreign dependence (Offe 2006). As correctly emphasized by Huck (2017), beside human security shortcomings (the subject of Pillar 2), the systemic problems and structural challenges present in these countries can be summarized into four main groups:

  • Beliefs, Empathy & Choice;

  • The Economics of Power;

  • The Dynamics of Competition and Cooperation;

  • Culture & Economics.

Addressing these systemic problems and resulting structural challenges has important consequences for the achievement of the reconstruction of the states, but also for their stabilization and consolidation. To give just one simple example, the systemic dependence on foreign investments and aid that almost all countries affected by war, disaster or state fragility have in order to improve their limited infrastructural capacity does not simply involve a lack of autonomy in policy making (in several cases, this has been conducted through the implementation of wrong policy recommendations that have, in turn, led to increasing poverty and income inequality); it also entails additional negative consequences for their development possibilities.

In more practical terms, the sectors where urgent interventions are required involve: (i) rebuilding infrastructures (such as bridges, roads, hospitals, schools, etc.); (ii) the establishment of a functioning labor market (e.g. entrepreneurial activities); (iii) supporting free and fair trade (international and regional); (iv) favoring investments in socio-technical advancement; (iv) fostering the growth of environmental-friendly local economies (sustainable local capitalisms); and (v) controlling corruption and political clientelism through good governance mechanisms. This includes paying attention to the structure of actors’ choice (including beliefs and empathis), the power relations between and among economic and political actors, their dynamics of competition and cooperation and the economic cultural repertoires.

Human Security

Human security is a second important element to take into account for obtaining a correct understanding of the prospects for future and more successful reforms, as it is the non permanent emergency character of most of the measures implemented in countries affected by war, disaster or state fragility (for a discussion see Burgess et al. 2007; Cerami 2013). The following crucial areas of human security need to be put at the front and the center of every rebuilding and conflict resolution attempt:

  • socio-economic security;

  • health security;

  • environmental security;

  • migration and security;

  • cultural identity;

  • personal liberty;

  • political security.

The importance of including several different areas that do not usually belong to the classical spheres of social security depends on two interrelated reasons. On the one hand, it has to do with the necessity of providing the most comprehensive information about the human security challenges that these countries currently face. On the other, it depends on the fact that human security policies are defined rather differently in countries affected by war, state fragility or disaster.

Democratization: Liberalization, Institutionalization and Consolidation

A correct understanding of the facilitators of democratization becomes particularly important, especially in the presence of state fragility where conflict, poor development status, vulnerability to endogenous and exogenous threats, and the lack of a developmental state capable of addressing the emerging socio-economic problems in a consistent way are the key characteristics. According to O’Donnel and Schmitter (1986), democratization, as a process, can be operationalized in three phases: liberalization, institutionalization and consolidation. Liberalization refers to the liberalization of the political regime and to the promotion of the associated political and civil liberties. Institutionalization implies the institutionalization of norms and practices, so that democracy becomes ‘the only game in town’ (Przeworski 1991, p. 26). Consolidation denotes, instead, the consolidation of democratic institutional and cultural repertoires. These include the consolidation of the constitution, the consolidation of the system of interest and political representation, the consolidation of the democratic behavior and the consolidation of civil culture and civil society (Merkel 2010, p. 105).

In this context, the costs associated with the existence of ‘fragile’ states are enormous and can affect the economic development and system stabilization possibilities of the countries for several years to come (Naudé et al. 2011). Despite the persistence of some shortcomings, aid for democracy-enhancing projects continues to represent the most important element in democracy promotion and consolidation. However, while external democracy aid remains among the most important element in democracy promotion, it would be false to state that it is the only possible means. Here, it is also important to better understand and carefully examine the consequences of democracy. In fact, the evaluation of democracy by citizens is far from an irrelevant factor in system stability and change because it is a strong determinant in forecasting the durability of democracy in one country, as well as influencing future stages and waves of democratization. So far, the focus of experts has been on the positive consequences of democratization.

 

1For more detailed information, please see WZB Research Unit “Economics of Change”, which also includes a list of publications. Available at:https://wzb.eu/en/research/markets-and-choice/economics-of-change

 

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