International Journal of Peace Studies, Volume 10, Number 2, Autumn/Winter 2005

THE POLITICAL ECONOMY OF PEACEBUILDING:

A CRITICAL THEORY PERSPECTIVE

Michael Pugh

Abstract
The ideology of the liberal peace has propelled the political economies of war-torn societies into a scheme
of global convergence towards “market liberalisation”. This orthodoxy was an uncontestable assumption
underlying external economic assistance. However, the project faltered under its inherent contradictions
and because it ignored the socio-economic problems confronting war-torn societies, even aggravating
them by increasing the vulnerability of populations to poverty and shadow economic activity. Although
revisionists have embarked on a mission to boost the UN’s peacebuilding capacity and also rescue the
Millennium Development Goals, the basic assumptions of the liberal peace are not challenged and
potential alternatives are overlooked.

How far are external agencies dictating the pattern of economic transformation in
societies emerging from conflict? From current practice in a variety of situations, and
from proposed reforms to peacebuilding and development, the answer seems to be: “as
far as the eye can see!” The hubris of peacebuilders keys the political economy of war-
torn societies into a map captioned “the liberal peace project;” that, in its economic
dimension, requires convergence towards “market liberalisation.” This became an
aggressively promoted orthodoxy, with variations, derived from the late 1990s
Washington Consensus on the logically correct path of development for undeveloped
states. Perhaps not treated as a high priority in stabilising peace per se (the vanguard of
which has been allocated to fostering security, rule of law and democratic forms),
neoliberal economic policies were nevertheless barely-contested assumptions underlying
external economic reconstruction assistance and management in war-torn societies.
This article interrogates the current, and proposed revisions of, political economy
as it affects peacebuilding from a critical theory perspective in international relations.
This perspective concerns the power of post-industrial capitalism and the agency behind
globalisation ideology. Certainly, there is considerable disagreement among critical
authors about the ontology of so-called market democracy, the power of its non-state
networks and agencies vis-à-vis states, and the pre-eminence of a fundamentalist version
24 The Political Economy of Peacebuilding

of neoliberalism (its passing having been identified by John Ralston Saul, 2005).
Theorists from rather disparate standpoints have grappled with the problematique of
global capitalism (Cox, 2002; Van der Pijl, 1998; Baumann, 2000; Murphy, 2005; Hardt
and Negri, 2000). They have in common, however, a concern to construct an inclusive
and emancipatory concept of political economy, an approach that can also be applied to
peacebuilding.
In applying a critical approach, this analysis focuses on the politics of the
economic projects within the liberal peace framework, drawing examples from south-east
Europe. First, it deals with the orthodox rationale of the political economy of
peacebuilding. Next, the article notes the virtual death of the Washington Consensus and
identifies a millennial revisionist agenda that emerged internationally during the course
of 2004–05. This interrogation, then, allows reflection about the objectification of war-
torn societies as well as reflection on the essentialist rationale of the political economy of
peacebuilding and its dysfunctional and normative/ethical contradictions. The article
contends that, although the depiction of an aggressive, undifferentiated liberal
peacebuilding has been refined, the millennial revisionist project ultimately fails to
address these contradictions. An inclusive/emancipatory participation of local actors and
structural diversity in political economies indicates alternative options to the revisionist
ideology that is embedded in a liberal structuring of global political economy.

The Economic Peacebuilding Rationale

The rationale for determining rules and frameworks for the development of
societies that will release them from so-called “conflict traps” (Collier et al., 2003)
attributes economic dysfunctionalism to societies, in their pre-conflict, conflict and post-
conflict stages, rather than to any dysfunctional economic precepts, structures and
conditionalities generated by expressions of capitalist power and “global governance.”1 A
key aspect of the “liberal peace” thus promotes a form of economic control and
regulation to establish market correctives in societies that have been resistant to
conventional marketisation imperatives (Paris, 1997; Duffield, 2001; Richmond, 2005).
Although its modern version derives from the 1989 Washington Consensus (to
which Kofi Annan subsequently acceded on behalf of the United Nations) the project has
not been revolutionary. Its antecedents can be traced to Cobdenite teachings concerning
the peaceful benefits of free trade, though it was not so much “free” as imposed by the
hegemon, the UK and its powerful navy. Nevertheless, the ideology survived the First
World War, and only in the Second did it give way to a system of international
management on Keynesian lines. Even so, poverty reduction was conceived as serving
the security interests of the most powerful. Robert McNamara’s “war on poverty” at the
World Bank in 1972 was driven by the notion that the poor went communist (George,
1994: 48-57). Subsequent pressure on the US dollar in the Vietnam War and the collapse
Michael Pugh 25

of trade proposals in the New International Economic Order (NIEO) that would have
assisted the poor countries cemented the rise of neoliberalism. In historical terms, then,
one can legitimately argue that the liberal peace has been a fluid response to the logic of
industrial and post-industrial capitalism (Murphy, 2005: 142).
In its most modern manifestation, t he liberal project has gained enormous strength,
less perhaps from the economics of profiteering and driving down costs of production
than from the rationale of globalisation. The future vision has been constructed as
economics without borders. State and international regulation should survive mainly to
preserve fair competition and guard against fraudulence or the worst excesses of
environmental degradation – less to ensure that people make a living. The liberal peace
has promoted transformation through macro-economic stability, reduction of the role of
the state, the squeezing of collective and public space, a quest for private affluence, and a
reliance on privatisation and on exports and foreign investment to stimulate economic
growth. Concerns about large (often corrupt and wasteful) state-run infrastructure
projects in developing countries may also have had an affect on donor policy. For
instance, the European Bank for Reconstruction and Development (EBRD) did not fund
state infrastructure reconstruction in Bosnia (EBRD: 1997); though when normal
commercial circumstances apply, these concerns are generally brushed aside.
Nevertheless, the “small state” rationale appears to have worked for the wealthiest post-
industrial societies, and so it must also work for the poorest and most disrupted. Indeed,
the US State Department’s Coordinator for Reconstruction and Stabilization has a
mission to help post-conflict societies to install market economies (Office of the
Coordinator for Reconstruction and Stabilisation, 2004).
However, there is plentiful evidence that choices made for war-torn societies are
serve to maintain wealth imbalances and poorly implemented. The liberal project not
only ignores the socio-economic problems confronting war-torn societies, it aggr avates
the vulnerability of sectors of populations to poverty and does little either to alleviate
people’s engagement in shadow economies or to give them a say in economic
reconstruction. As Balakrishnan Rajagopal (2006: forthcoming) contends, development
interventions have been socially costly and divisive, with:

forced privatization of key national industries and increased unemployment,

speculative bubbles in international finance transactions that have massive impact
on real estate and housing markets, displacements of vast populations, great
waves of migrations including to urban areas, elimination of subsidies for food
and services and the introduction of user fees.

War results in destabilising changes in employment, production and “[t]he ensuing

collapse of market entitlements for large groups of people makes it highly dangerous to
rely exclusively on the market to allocate resources, set prices and fix factor incomes”
(Nafziger, 1996:16). Prices alone cannot correct injustice.
26 The Political Economy of Peacebuilding

Together with the interim Iraq constitution perhaps the most striking example of
external imposition has been in Kosovo, in spite of its status as a province of Serbia in the
state of Serbia–Montenegro. Although varying in their degrees of enforcement and
consensus, both Iraq and Kosovo have experienced top-down, military-backed
impositions. External actors determined Kosovo’s framework constitution, its
international status, and its official economic development. Indeed, the North Atlantic
Treaty Organization (NATO) came armed with an economic vision that its most powerful
members had already inserted into the Rambouillet ultimatum of 23 February 1999
(before the war). This diktat stated that “the economy of Kosovo shall function in
accordance with free market principles,” and became integral to the NATO war aim of
securing the territory from Serb authority Interim Agreement. Article II specified the
reallocation of ownership and resources of government-owned assets, pensions and social
insurance, revenues and any other matters relating to economic relations (Interim
Agreement for Peace and Self-Government in Kosovo, 1999). The economic principles
were only sketched out at Rambouillet, but it was assumed that they were valid and
should be imposed. Security Council resolution 1244 of 10 June 1999 was less
presumptuous but supported economic development through the Balkan Stability Pact,
which in turn specified free market economies throughout the region of south-east
Europe. In contradiction to numerous declarations that Kosovo was to be governed in
accordance with democratic principles, economic policy has been determined by the
European Union (EU), the international financial institutions, and national aid agencies.
Under the constitutional framework, the peoples of Kosovo are entitled to protect their
ethnic, cultural, religious, and linguistic identities, and to be free from economic
discrimination; however, they are not entitled to determine their own economic future if
they want reconstruction aid (Pugh, 2006).

Virtual Death of the Neoliberal Consensus

Critical analysis of the links between neoliberalism and unrest (Chua, 2004) and
the construction of lessons to be learned from the failures of economic transformation in
general and in conflict areas such as Sierra Leone, Bosnia, Afghanistan and Iraq in
particular has led to reassessments of the liberal peace. Resistance to the power of
neoliberalism as a framework for sustainable development and peacebuilding have also
apparently been influential. These include in the present case: pressures for “fair trade”,
fulfilment of the Millenium Development Goals (MDGs), debt reduction, demands for
social protection for the poor, and abandonment of aid conditionality. This has a
historical provenance in the agency of system building noted by Craig Murphy (2005: 51-
53), many of the ideas for moving capitalism onwards have originated with the various
resistances to the impacts of global capital.
Michael Pugh 27

Such pressures have also affected the introduction of development policies in war-
torn societies under the aegis of peacebuilding. Preliminary work by Oliver Richmond
(2005) provides a nuanced typology of liberal peace that disaggregates it into several
modes. At one extreme a non-consensual, hyper-conservative model attempts to maintain
peace through military superiority. At the other extreme an emancipatory model
combines top-down and bottom-up peacebuilding, focuses on a range of actors, and
emphasizes social justice. In between, conservative models have been attempted in
Kosovo and East Timor respectively.
In practice, in spite of the economic diktat of Kosovo’s constitution, for example,
neoliberalism was modified in Kosovo, in the light of experience in Bosnia. The United
Nations Mission in Kosovo (UNMIK) learned the necessity of tackling shadow
economies from experience in Bosnia and Herzegovina, where anti-crime measures and
institutions had been established slowly. UNMIK Customs was the first public body to be
set up and together with European Union (EU) Customs Assistance Mission reformed the
collection system, tripling revenues between 1999 and 2003 (Caplan, 2004). The
neoliberal credo of Rambouillet and the constitutional framework have been tempered in
rhetoric and practice by programmes of social protection. Thus the EU’s 2002 Action
Programme gave priority to the delivery of public services, institution building, public
administration and socially-oriented projects (European Agency for Reconstruction,
2003). The United Nations Development Programme (UNDP) emphasized employment
generation through training programmes and social justice projects for ending ethnic and
gender discrimination (UNDP, 2003a). The World Bank provided significant sums for
social and public welfare and for poverty reduction through a Trust Fund, and its Bank’s
Post-conflict Reconstruction Unit has produced pro-poor diagnostics and appears to
accept that a linear model of transition is generally unviable (World Bank, 1998 and
2002). Together with the UNDP, the Bank also supported community initiatives for
infrastructure rehabilitation and attempted to strengthen the income generation capacity
of vulnerable rural families. Even the International Monetary Fund (IMF) proposed
reform to facilitate long-term planning and stressed the need for investment in education,
health, and social policy (IMF, 2003). In Kosovo, therefore, several partners in economic
restructuring have acknowledged the importance of social justice and have undertaken
investment in poverty reduction and public services.
Even here, however, in spite of slackening growth, rising unemployment and
falling purchasing power in 2002–03, the IMF welcomed curbs on spending and advised
further controls on wages, social welfare, public sector employment, and compensation
for workers thrown out of work by privatization (IMF, 2003). Deficit financing was not
part of its lexicon, even in conditions of social distress. In the last quarter of 2001, an
estimated 50 per cent of the population lived in poverty and 12 per cent in extreme
poverty (USAID, 2001). In the first quarter of 2003 the unemployment rate was estimated
at between 49 and 57 per cent (70 per cent among 16-24 year olds); about 25 per cent of
the labour force was registered as job seekers (UNDP, 2001; UNDP, 2003b: 11, tab 2.1).
28 The Political Economy of Peacebuilding

Not surprisingly, opinion surveys ranked unemployment and poverty among the greatest
problems facing Kosovo (UNDP, 2003b: 31, tabA10). These were not, however, the top
priorities of the external agencies.
Debates on peacebuilding have paralleled debates on development. As Murphy
(2005: 97) argues, the development project has been essential to capitalism for its
promise of global stability. Weak states and weak development have not only been held
up as catalysts of conflict, war has also had devastating impacts on development. War-
torn societies have thus tended to be treated as particular, and sometimes acute, cases of
under- or disrupted development.
The debate on development in general has evolved to the point that the
Washington Consensus has been declared “dead” except as an inaccurate term of abuse
(Maxwell, 2005; Ritzen, 2005). Certainly, the neoliberal agenda is now contested more
seriously than in the 1990s; consequently, it has ceased to be an unquestioned “common
sense”, ideology or doxa. Revisionists in the mainstream of international thought have
recognised the chill of failure evident in neoliberalism – though without challenging the
fundamentals of an ideology that, in the words of Günter Grass (2005: 5), “sees mankind
as nothing more than something which consumes and produces.”
A salient example was the report by an International Commission on the Balkans:
chaired by former Italian Prime Minister, Giuliano Amato, comprised almost entirely of
serving and former politicians of impeccably conservative and (apparently) masculine
credentials (only two of the 18 were women), smart suited in the group photograph, and
presenting an appearance of conventional authority (International Commission on the
Balkans, 2005). In spite of the huge scale and intrusive scope of international intervention
in Southeast Europe, the Commission announced that the returns had been meagre and
that the region was becoming a marginalised black hole. This remarkable document
reiterated points made by individuals such as General Fabio Mini commander of UNMIK
(who categorically announced after the ethnic cleansing of Serbs in March 1994, that the
mission had failed) and of critical think tanks such as Human Rights Watch (Human
Rights Watch, 2004: 3; Mini, 2005). According to Human Rights Watch (2004), “The
international community appears to be in absolute denial about its own failings in
Kosovo. While international actors have been universally – and accurately – critical of
the failures of the Kosovo Albanian leadership during and after the crisis, the dismal
performance of the international community has escaped similar critical scrutiny.” But
the Amato report’s provenance among interested political leaders served to undermine
the many scripts by international interventionist that claimed they were achievi ng
success. The Commission on the Balkans (2005) concluded that the alternatives for the
region were either integration with Europe or an even more exacting neo-colonialism, the
two being regarded in this exercise as antithetical. The Commission argued that EU
expansion to the region would solve its problems – a widely-supported solution even by
critics of external intervention (Steil and Woodward, 1999).
Michael Pugh 29

But recognition that protectorate power and weak economies in southeast Europe
were marks of failure did not mean that the ideological goals, or the fundamental
principles for generating homo economicus, were flawed. Rather, the process for getting
there was all wrong. Integration with the EU and new political perspectives (Kosovo’s
independence, for example), were required. In effect, the Balkan Commission’s report
not only treated the region as a referent, and threatening, object, for which “Balkan” was
the operative signifier of fragmented chaos, it relied heavily on a “common-sense”
renewal of economic neoliberalism through European integration. Indeed the evolving
debate marks out dynamics in the liberal peace project that protect and reproduce its core
assumptions. The old-style unthinking Washington Consensus about development may be
merely a virtual death, with a liberal peace redivivus emerging from the ashes. Moreover,
the linkage between post-conflict reconstruction, development, and human security has
been made explicit in a series of reports that appear to be setting the framework for pro-
poor debates in mid-decade.

Millennial Revisionism: A New York Consensus?

One of the most prominent, and influential, revisionist programmes has come from
the Millennium Project Report to the UN Secretary-General, Investing in Development,
released in February 2005. Indeed the Millennium Project analysis provided the nucleus
of the first half of the UN Secretary-General’s subsequent UN reform programme.
(United Nations, 2005). The Millennium Project was conducted by economists headed by
Jeffrey D. Sachs of Columbia University. A special adviser to Kofi Annan, he had been a
chief architect of structural adjustment and a proponent of “short sharp shock treatment”,
which had devastating consequences for vulnerable sectors of society in the Russian
Federation. Sachs, however, is one in a line of economists who have experienced a
Damascene conversion. George Soros and Joseph Stiglitz have been there before (Soros,
1998; Stiglitz, 2002).
Punctuated by such stirring phrases as “scaling-up success”, Investing in
Development was remarkable for its commitment to pro-poor and social protection
economics. Its springboard was the measurement of uneven and halting progress towards
the achievement of the MDGs by the target date of 2015. These include ten items:

• reduction of extreme poverty and hunger by 50%;

• universal primary education;
• equal primary and secondary enrolment for girls, literacy parity for men and women,
equal representation of women in parliaments;
• a two-thirds reduction in mortality among the under fives;
• measles immunization;
• a 75% reduction in maternal mortality;
30 The Political Economy of Peacebuilding

• a halt to and reversal of the spread of HIV/AIDS, malaria and tuberculosis;

• a 50% reduction in those without improved drinking water and sanitation;
• improvement in the lives of slum dwellers;
• reversal of deforestation.

The Sachs team’s review showed that by 2004 many of the goals were nowhere
near being achieved and were even further away from the benchmarks in some cases, for
example tuberculosis in sub-Saharan Africa had increased. Investing in Development
(Millennium Project, 2005) acknowledged that the shock of market therapy would not
work for Africa, and recommended a bold revision of international strategy. Its key
components were as follows:

• developing countries should adopt MDG-based, poverty-reduction strategies, to be in

place by 2006;
• MDG strategies should anchor the scaling up of public investment, capacity building,
resource mobilization, and development assistance to strengthen governance, human
rights, civil society, and promote the private sector;
• strategies should be transparent and inclusive;
• donors should fast-track a dozen or more countries to scale-up good governance;
• partners should launch Quick Win actions for economic growth (such as the
distribution of anti-mosquito nets);
• developing countries should align national strategies with regional initiatives such as
New Partnership for Africa’s Development and the Caribbean Community;
• Overseas Development Aid should increase (from 0.25% of GNP in 2003 to 0.44% in
2006 and 0.7% in 2015) with improved quality of aid and more generous debt relief;
• high-income countries should open their markets to developing country exports and
raise their export competitiveness through investment;
• scientific research should be mobilized to address the needs of the poor;
• the UN should be strengthened at various levels to support the MDGs.

There seems little doubt that such a programme has considerable appeal because it
is a significant step towards managing the crisis of capitalism in a way that benefits the
poor and vulnerable populations of the world. Massive reduction in the number of deaths
from structural violence (though the report never uses that term) can only please
supporters of pro-poor causes, from debt relief to the provision of cheap, life-saving
drugs to human security ideals. Nevertheless, embedded in the text of Investing in
Development (Millennium Project, 2005) are assumptions that, taken as a whole, indicate
that the liberal peace project is alive and well, even if the Washington Consensus itself is
moribund. The main features of what might be called Sachs 2 can be summarized as
follows:
Michael Pugh 31

• its consumerist teleology frames the problem of development in terms of

convergence and integration into the world trading system;
• entrepreneurial zeal is what drives human beings: homo economicus is reified without
taking into account the human values outlined in the “Millennium Declaration” of the
General Assembly (UN General Assembly, 2000);
• there is a common solution: “Whatever one’s motivation for attacking the crisis of
extreme poverty… the solutions are the same. All that is needed is action”
(Millennium Project, 2005: 1);
• responsibility for failures (e.g. corruption and bad governance) lie with “them” and
the poor need to be changed because they deplete the environment, for example;
• “sound economic policy” is a matter of rationality; rational economic management
works;
• public investment should be used to establish market reforms: in other words, public
funds for private enterprise;
• the MDGs can be met without dirigisme in politics and state command over the
economy;
• progress can be achieved through Quick Win fixes.

The merger of development and peacebuilding had already been made explicit in
the High-level Panel Report (HLP), A More Secure World: Our Responsibility which also
carried the burden, and sway, of UN’s sponsorship (HLP, 2004). The UN Secretary-
General’s reform programme of 2005, In Larger Freedom, was largely a composite of the
Sachs team’s review, Investing in Development, and the HLP Report. Development and
peacebuilding revisionism can be said to have staked a claim in the UN Secretariat as the
foundation for the developmental dynamic in human security, and Sachs 2 seems to be
supported by various other countries.
Among member states, the UK’s pro-poor document, Fighting Poverty to Build a
Safer World, produced by Department for International Development (DFID), also
merges security, development, crime, terrorism and economic growth. The UK
government supports in general terms the UN Secretary-General’s reform programme
and specifically encourages the international financial institutions to engage in security
issues, so that the IMF for example incorporates conflict analysis into Emergency Post-
Conflict Assistance agreements (DFID, 2005: 22). The DFID document conforms to the
Sachsian line in several respects: that crime hinders growth, foreign direct investment is
the engine of growth, and problems are significantly rooted in issues of governance as
well as poverty.
The High-level Panel and the Secretary-General placed great store by the
establishment of a voluntary standing fund of US$250 million for peacebuilding and the
creation of a Peacebuilding Commission and a UN Peacebuilding Support Office. They
also recommended the involvement of economic agencies such as the World Bank at an
32 The Political Economy of Peacebuilding

early stage in peace processes. In principle, this could present an opportunity to

institutionalise lessons learned from past experiences in the transformation of political
economies from war to peace. However, the new structure will be answerable to the
Security Council, where the power lies, rather than to the Economic and Social Council
and the General Assembly. Moreover, without wholesale change to the policies and
programmes of the International Financial Institutions (IFIs), the participation of
international economic institutions in peace processes will likely reinforce aspects of the
liberal peace.
Furthermore, in the light of disagreements at the September 2005 UN summit, it is
unlikely that the revisionist programme or a variant will forge a broad “New York
Consensus”. In particular, the project was jeopardised by the Bush Administration’s
determination to contest the summit agenda, as antithetical to US foreign policy, to the
point that mention of the MDGs was eliminated from the summit declaration, thereby
downgrading the revisionist programme to a contested aspiration (Borger, 2005a, 2005b).

Protecting the Liberal Peace

This analysis now draws out some of the underlying assumptions of revisionism
from a critical perspective under five headings: the silence surrounding of structural
violence; economics as natural law; the objectification of war-torn societies; squeezing
public goods; and global integration.

The Silence Surrounding Structural Violence

First, the hubris that pervades the revisionist view is part of a familiar critique of
weak regulation, such as that in Breaking the Conflict Trap (Collier, et al., 2003). The
Collier critique calls for tough controls, regulation and monitoring of parties in zones of
conflict, and an end to “bad governance” by corrupt, undemocratic elites in developing
countries. Malfeasance, abuse, torture, and even genocidal operations are certainly
conducted by elites, rebels, and followers against fellow inhabitants in the South. Most
casualties are perpetrated by governments against citizens; and there is an ethical
imperative to prevent this. Setting ethical standards for state behaviour and intervention
are, to be sure, exceptionally difficult to establish without reinforcing the hubris of
powerful states. Although this is not the focus of this essay, from a critical theory, and
particularly a Habermasian, perspective, a key to the problem of such universal
discourses lies in dialogue with local civi l societies.
But the millennial critique has also consistently maintained a silence around
structural victimization and policies that have emanated from the zones of peace and
probity (and the financial agencies that they dominate). The asymmetry of external
pressure on state-welfare economies, protected economies, co-operative organisation, and
Michael Pugh 33

collective production denies communities economic options and can produce a politics of
victimhood that stratifies and emnifies others, as occurred in Rwanda (Azar and Farah,
1981; Nafziger and Auvinen, 2003; Uvin, 1998).
The divide between rich and poor is, by definition, the precondition for having
MDGs in the first place, but the Collier team’s agenda for international action contains
one paragraph of barely ten lines recommending a re-examination of the development
and trade policies by the Organisation for Economic Development and the removal of
subsidies to its producers and traders (Collier et al., 2003: 181).
In similar vein Investing in Development (The Millennium Project, 2005) contains
a single bullet point that fires the equivalent of a blank at the way capitalist cores are
themselves protected from competition and the need for reform of the World Trade
Organisation (WTO) and IFIs (Millennium Project). In a less brutal way, perhaps, the
revisionists of this decade may be replicating suppression by the Reagan administration
in the 1980s of the South’s demands for a New International Economic Order (NIEO)
that might foster alternatives to economic fundame ntalism. Silence surrounds the role of
interventionary core capitalism in perpetuating proverty through discriminatory policies
that structure the global economy.

Economics as Natural Law

Second, the revisionism still takes economics as largely independent of politics and
social values. It results, as Robert Cox (1992) has suggested, in the de-politicisation of
economic issues, as if a natural law or a primordial economic equivalent of the sex drive,
rather than powerful interests, were guiding economic activity. Consequently, there is
only one solution to all inadequately developed societies, whether East Timor or Haiti,
and it is a solution based in the economic rationalism of (capitalistic) entrepreneurship.
The project is completely transparent in its notion that public monies, whether from
revenues raised in developing countries or from aid derived from the public purse in the
donor countries, should be used to provide profit-seeking business with a leg up.
Unsurprisingly, the contradiction inherent in this so-called ‘rationalism’ is not addressed
by the revisionists, though it is of acute concern to societies in the process of
transformation from war to peace. Notoriously, aid often privileges the purchase of donor
goods and expertise rather than local products and employment. Privatisation has been
pursued at the expense of public goods and public space – where public goods are
defined as accessible to all, non-exclusive, and whose value for one consumer does not
diminish their value for others (Kaul, 2005). Values other than those of economic
rationalism are neglected, including the freedom to decide how markets are conducted,
even though they figure in the UN “Millennium Declaration” (2000) and have been
espoused by, among others, Armartya Sen (Sen, 1999). Inequalities and non-
physiological needs are considered more significant than either absolute poverty or,
beyond a survival point, physiological needs. This means that provided people are not
34 The Political Economy of Peacebuilding

destitute (which might be equated to the deep poverty scale of the UNDP); they may
choose to live humbly in order to feel fulfilled. Such an approach recognises that the
paths to modernisation may not be convergent at all, and the marginalised peoples of the
world are entitled to choose the extent to which, and how, they integrate in the global
economy.

Objectifying War-Torn Societies

Third, the discursive trope of imperial peacebuilding pathologises populations in

war-torn societies as if suffering from congenital incapacities that needs treatment
through forms of therapeutic governance. In their critique of the psychosocial treatment
of states as “failed service providers run amok,” Caroline Hughes and Vanessa Pupavac
(2005: 2) note that political processes divorced from the depiction of problems of
conflict, oppression and poverty has opened the way for therapeutic approaches to
intervention. Archived as congenitally incapable of governance and statehood, these
societies require forms of trusteeship that inevitably reflect the priorities of the trustees.

The Mantra of Global Economic Integration

Fourth, the revisionists continue to regard development, at least rhetorically, as a

matter of convergence and integration. Although the Sachs report (Millennium Project,
2005) does subscribe to fairer, if not fair, trade, it regards replication of an economic
system, advanced in New York as the goal of development. Whether this is an ideal that
pervades economic representations to give hope to the undeveloped, when in practice
policy makers sometimes act as though there are parallel and even divergent economic
development(s), or whether the convergence/replication programme is a matter of self-
delusion is less important than its role in reinforcing a particular model of sustainable
development. Similarly, the integration and participation in the global trade fetish,
manifest in the Balkan Commission’s Report, learns nothing from research on
development by Kamal Malhotra’s team (Malhotra, et al., 2003) for the UNDP and from
critical work on the political economy of peacebuilding. Inverting the neoliberal/Sachsian
mantra that integration produces trade and growth, the critical perspectives that map both
historical and current transformations demonstrate that integration follows growth, which
follows protectionist policies, much as the UK, United States and EU protected, and
continue to protect vital economic interests while promoting freer trade. The vulnerable,
it might be legitimately argued, need to be protected from the risks of integration.

Squeezing Public Goods

Fifth, a significant deficit in all strands of revisionism, however, concerns public

goods. Recovery generation and poverty reduction is constructed as a matter requiring
Michael Pugh 35

physical security, state building, therapeutic governance, private (therefore largely

foreign) direct investment, and welfare pluralism. In the economics of social policy, for
example, “welfare pluralism” remains the order of the day. In addition to residual state
supply and community/civil society provision for such basic services as health,
education, and water, market mechanisms and the private sector have been integral to
development (World Bank, 2004). Indeed, economies have been opened up to
liberalisation; public goods have been poor quality; and budget deficits have deprived
governments of resources (Carbonnier, 2004; Hilary, 2005). Detailed analysis indicates,
however, the absence of intrinsic benefits from the process:

This welfare pluralism takes the clock back to an earlier historical era when social
advances and capabilities enhancement proceeded at a much slower pace than
during the decades of state- led welfare provision…. [yet] there is no reason to
believe that developing countries should already embark on a path of extensive
privatisation in social services, especially as large part of their populations are
still not covered by the most basic education and health services (Mehrotra and
Delamonica, 2005: 141).

Alternative Options

Other straws in the wind, however, indicate a more substantial departure from the
old liberal orthodoxy. The Department for International Development (DFID), for
example, denies that aid should be placed at the service of global security, and the
institution is itself committed to refocusing its work on governance to include more direct
support for the security of the poor (DFID, 2005: 13, 24). This not only entails
therapeutic governance to establish accountable political systems, combating crime and
promoting transparency in the management of resources and public finance. It also
proposes more emphasis on the provision of basic services such as health and education,
security and justice. DFID even bawls into the silence surrounding the adverse impacts of
structural adjustment, citing the role of the IMF in precipitating the crisis in former
Yugoslavia (DFID, 2005: 9). Furthermore, the UK claimed to relax its aid conditionality
in March 2005. Aid would continue to be linked to poverty reduction, human rights,
military spending levels, and misuse of aid but would no longer be tied to global security
goals. The UK would also cease demanding specific commitments from aid recipients to
privatise state industries and liberalise trade, and would urge the World Bank and others
to follow (Foreign and Commonwealth Office and DFID, 2005; Beattie and Daneshku,
2005). Whether the proposals are simply part of an internal debate and whether, if
activated, they will carry weight in either UK or international politics might be doubted.
The 2005 G8 summit in Scotland promised much, but – as indicated by the inclusion of
debt relief in the aid figures and relief limited to repayment write-offs for 18 countries for
only three years – claims for an historic deal for Africa reflected the interests of donors
36 The Political Economy of Peacebuilding

under pressure rather than the Africans seeking justice (Monbiot, 2005). DFID itself has
spent huge sums on consultancy firms to advise on privatisation in developing countries;
firms whose own analytical frameworks reflect the privileging of investor interests. For
example, the, pro-privatisation Adam Smith Institute (International) received over £34
million from the UK aid budget in 1998–2003, and £700,000 of £3m British aid to
Malawi was spent on US consultants (War on Want, 2004; Hilary, 2005; Hencke, 2005).
Others have challenged some of the tenets of the liberal peace in a more
fundamental way. James Boyce, for example, not only calls for substantial abandonment
of conditionality but also for reform of the aid donation system and for support to state
economic direction. While rampant inflation can lead to social unrest, so can vicious
austerity, and thus the current priorities may be ill-suited to societies emerging from
conflict (Boyce, 2002). Similarly, Simon Maxwell suggests that social protection should
be a high priority and pro-poor growth needs to be complemented by distributive
measures. Although Maxwell assumes a common destination for developing countries,
pursued at different speeds, he contends that they should not be suddenly exposed to
liberalisation without safety netting for vulnerable sectors. Furthermore, international
“governance reform” should be a precondition of more money going through the World
Bank (Maxwell, 2005: 5-6).
Another macro-level approach would be to draw upon the traditions of
protectionism. Even on their own, statist terms, proponents of the liberal peace tend to
overlook plenty of examples of protectionism and dirigisme that nursed vulnerable
societies through difficult times: France, Sweden, Cuba, Asian states (including Vietnam
which recovered from war quicker than Cambodia). To soften the impact of integration
pressures in southeast Europe, for example, the development of a regional customs union
has been suggested (Horvat, 1999: 136-149, 170-171). As with the original European
Payment Union and the European Community after the Second World War, this would
concede that mutual protection to replace national protection is a reasonable starting
point, rather than aiming to engineer integration on the basis of complete free trade. A
regional payments and customs union would work towards abolition of import duties
between the members but maintain common tariffs, though gradually lowered, against
selected imports for a period of, say, 10-15 years.
Investment in public goods, infrastructure, social welfare systems, and public
employment may be necessary to help redress a situation in which a few individuals
flaunt obscene affluence, but public facilities are often squalid. Such dirigisme may entail
controls and a degree of political authoritarianism every bit as irksome as that employed
by international civil administrations in post-conflict societies. But a strong and active
state role in planning and implementation (Ballentine and Sherman, 2003) with
expansionist policies to increase employment, income generation, and consumption
power to wean vulnerable people off illegal activities through investment in public
services and social protection, may be less dysfunctional than the orthodox neoliberal
model. Specifically, the statist measures might include these aspects:
Michael Pugh 37

• production generated by import controls and protection of critical sectors, especially

agriculture;
• high taxes on luxury items and rationing or subsidies for basic foodstuffs;
• government intervention to boost re-training, employment and public services;
• maintenance of public sector salaries;
• increased purchasing power through public works;
• deficit financing;
• controls on donor corruption;
• reduction in tied aid.

On the other hand, the emphasis on state building in the liberal peace project has
only lately paid attention to the political economy of grass-roots levels. In particular
collective and cooperative production and marketing, whether part of the formal or
informal economy, are often viable mechanisms for economic organisation. This is not
invariably the case. Many African co-ops are not so much member-owned, as financed
by, and accountable to, governments which have used them as channels for implementing
economic policy (International Co-operative Information Centre, 1994). However,
independent, self-help co-operatives have been important in war-torn societies where
central economic authority has been weak. They have been especially important to
women (from Rwanda to Bosnia), for whom they have been vehicles of empowerment as
well as economic survival. Similarly, credit unions have emancipated people from
centralised banking and insurance companies. For people who have limited access to
towns, who are penalised by traditional bank profiling and charges – or who need to
receive remittances from diasporas abroad – credit unions serve various needs. Over £2
billion is estimated to be sent from Britain to other countries in this way, and other
estimates indicate that over US$200 billion is transmitted globally through such informal
channels. Credit unions number 40,000 wo rldwide (the largest number in the United
States) with an aggregate membership of over 136 million. The world coordinating body,
with support from USAID, opened two unions in Afghanistan, which in the first two
years attracted 2,000 members (World Council of Credit Unions, 2004a; 2004b.) Both
co-ops and credit unions appear to have alliances and linkages with aid organisations and
are given credence in the UN system, especially in the International Labour Organisation
and the Food and Agriculture Organisation.

Conclusion: Who is Peacebuilding For?

In conclusion, there have certainly been notable shifts in the development and
peacebuilding debates. There is now a potential institutional merger of the two through
UN reform. The liberal peace has come under sustained pressure as a consequence of
38 The Political Economy of Peacebuilding

critiques and failures in practice. Pragmatic shifts, to some extent towards pro-poor and
emancipatory engagement with local populations, have occurred.
But we are still entitled to ask the critical question: who is peacebuilding for, and
what purposes does it serve? The means for achieving the good life are constructions that
emerge from the discourse and policy frameworks dominated by specific capitalist
interests – represented as shared, inevitable, commonsensical or the only available option
– when they correspond to the prevailing mode of ownership. Economic wisdom resides
with the powerful. As Murphy (2005: 18) notes, political inequality leaves many with no
control over the major decisions that affect their lives. For Cox, too, “whereas the right of
self-assertion is celebrated, in a social and economic context the individual’s capacity to
exert control over the systemic factors that determine its implementation is removed.
Consequently, just as in one-party, authoritarian regimes, politics is about depoliticizing
people, by removing the economic determinants of everyday conditions from political
control” (Cox, 1992). The millennial revisionism represents a significant shift. But
ultimately it may perpetuate asymmetries that maintain the liberal peace, albeit in less
orthodox forms. Indeed, the revisionism may intensify the grip of capitalist-dominated
financial and trade institutions. The recommendations of the 2004 UN High Level
Panel’s report on boosting the UN’s attention to peacebuilding activities includes
provision for international financial institutions to be more actively involved in peace
processes. However, without transformation of the IFIs, and the liberal agenda itself,
subjugation rather than emancipation will continue to be injected into the political
economy of peacebuilding.

Notes

1. Global governance has been defined as the following: “a world-wide management strata sharing neoliberal
ideology, a growing network of both public and private regimes that extends across the world’s largest regions, the
system of global intergovernmental; organizations, some of which are relatively autonomous and powerful, and
transnational organizations both carrying out some of the traditional service functions of global public agencies and
also working to create regimes and new systems of international integration” (Murphy, 2005: 139).

Acknowledgements
Research for this article has benefited from an ESRC grant (Res: 223-25-0071) and a British Academy
travel grant to the World International Studies Conference, Istanbul, 24-27 August 2005, where it was
originally presented. I am much indebted to those who made useful comments, particularly to Claire
Heristchi, Nicole Short and Giovanna Bono.
Michael Pugh 39

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