The private sector is a potential ally that can stimulate entrepreneurship, investment and incentives for peaceful behaviour.

The potential contribution of the private sector to post-conflict recovery and peacebuilding has long been contentious. Discussion of the role of economic incentives has often centred on the ways they prolong conflict, obstruct peacemaking and lead to an exploitation of natural resources to the detriment of peace, development and social progress. This has been the argument both in respect of aid flows, but also the role of the private sector, and even more so where it involves multinational companies involved in the extractive industries. While there has been some acknowledgment of the ability of economic instruments to provide incentives for peace, the prevailing interpretation among both scholars and development actors and donors, at least with regard to the foreign private sector, has been one of suspicion and disapproval.

Two sharply differing viewpoints, each with powerful ideological overtones, have to an unhelpful degree framed public debate. At one extreme, ‘market fundamentalists’ have proceeded from the ‘belief that there is a market solution to any question about the nature of society’. In the 1990s, the so-called Washington Consensus was widely seen to embody that belief – a consensus, as Joseph Stiglitz put it, ‘about the “right” policies for the developing world’ built around three key pillars: fiscal discipline; privatisation; and liberalisation of trade, capital and financial markets. He associated this ‘new orthodoxy’ above all with the policies of the International Monetary Fund (IMF) and highlighted their politically destabilising and socially disruptive effects in fragile and conflict-strewn societies. While Stiglitz’s critique of the IMF was sometimes too crude and applied with an overly broad brush, there is no doubt that one-size-fits-all neo-liberal prescriptions powerfully shaped IMF policies, especially in the 1990s.

With nearly two decades of peacebuilding experience to draw upon, there are now few practitioners who contend that the fundamentalist position, including the exclusive role it envisages for the private sector, is appropriate to fragile and complex post-conflict environments. Indeed, where it has been pursued, in wilful ignorance of political, social and historical contexts, the results have been disastrous. This has been nowhere more evident than in Iraq in 2003, when Paul Bremer’s Coalition Provisional Authority subjected Iraq, as IISS Senior Consulting Fellow Toby Dodge put it, ‘to the most thoroughgoing form of neo-liberal shock treatment of any country in the world’.

The failure and perverse consequences of that treatment strengthened the convictions of those who hold to the alternative extreme, that there can be no role for the private sector in post-conflict settings. In this view, the drivers and motivations for initial involvement, specifically the search for quick profits and markets, are bound to fuel rather than mitigate conflict. Private business activity and the interests of peace and conflict-resolution are deemed incompatible, because private enterprise will of necessity feed into and reinforce exploitative and predatory war economies that have evolved in the course of conflict.

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Mats Berdal is Professor of Security and Development in the Department of War Studies, King’s College London. He was formerly Director of Studies at the International Institute for Strategic Studies.

Nader Mousavizadeh is a Consulting Senior Fellow at the IISS. He was formerly an investment banker at Goldman Sachs and served as Special Assistant to UN Secretary-General Kofi Annan from 1997 to 2003. This article forms part of the IISS Economics and Conflict Resolution Programme, which is supported by the Portland Trust.

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