Summary

• Iraq's economic reconstruction under coalition occupation was notable for both impressive accomplishments and serious shortcomings. Many successful reconstruction initiatives shared essential elements: they were not affected by security disruptions; they were treated as top priorities; their funding was streamlined and their impact was quick; and they built on existing Iraqi capacity. Unsuccessful reconstruction initiatives had very different elements in common. Policy failure often coincided with security headaches, lack of powerful coalition patrons, funding delays, and weak Iraqi implementation capacity.
• Postconflict reconstruction entails painful trade-offs rather than easy choices. Because it begets losers as well as winners, and requires destruction as well as creation, it runs the risk of deepening political instability and economic disruption. Consequently, reconstruction policy choices are rarely straightforward. Every option entails adverse consequences. Apparent failures may actually represent "least-worst" options, while seeming successes may come at considerable cost to the sustainability of reconstruction.
• Because of the scarcity of reliable data and the complexity of key tasks, planning for postconflict reconstruction should incorporate multiple contingencies. It is crucial to factor eventualities such as economic disruption, persistent violence, and state collapse into calculations of the feasible pace of reconstruction. Promises to deliver immediate and dramatic improvements create unrealistic expectations that jeopardize the legitimacy of reconstruction efforts.
• Postconflict reconstruction depends upon adequate security; yet security depends upon successful reconstruction. Reconstructing the economy and restoring security are so interconnected that strategies to achieve these two goals must be fully integrated to be successful.
• Because reconstruction tasks are interdependent, effective reconstruction strategies must integrate short-term needs provision with the pursuit of long-term development objectives. In the short term, initiatives to stabilize the economy and respond to basic needs are essential. However, reconstruction momentum dissipates unless short-term measures are supported by long-term programs that establish the foundations for self-sustaining development.
• The transition from a state-controlled system to a market economy involves four broad tasks: stabilization, liberalization, privatization, and legal and regulatory reform. But there is no blueprint for carrying out these tasks. Determining the optimum pace, sequencing, and content of reform measures requires deep understanding of local economic structures and relationships. Transition strategies that succeeded in one context cannot be mechanically replicated elsewhere.
• Reconstruction under occupation will be shaped by the priorities of the occupying power. A short-term occupying power may prefer quick action by decree to lengthy consultation, and may be tempted to put off difficult decisions with potentially destabilizing consequences. From the perspective of the occupier, imposing policies it can quickly enact, while deferring difficult decisions, makes sense. But the perspective of the occupying power may not coincide with the interests of the occupied nation.
• The authority to enact reconstruction policies must be matched by the capacity to carry them out. Adopting a facilitative legal and regulatory framework is the first step toward economic recovery. But this step leads nowhere if it is not followed by robust actions to create the institutions and enforce the regulations that allow economic initiative to flourish.
• Promoting private-sector growth in postconflict environments requires more than removing legal barriers to private economic activity. Private sectors that have been ravaged by war and repressed by state controls cannot recover without aggressive assistance to provide credit, training, and opportunities.
• Reform and reconstruction initiatives imposed from above—whether by an occupying power or a centralized regime—are vulnerable to failure because they create so few empowered owners with the capacity and desire to ensure their implementation. Diffusing authority over reconstruction is cumbersome and time-consuming, but it can strengthen accountability and stimulate recovery in the long term.
• Corruption thrives in environments of postconflict reconstruction, and there are no "quick fixes" for the problem. Enacting anticorruption laws does not automatically engender a culture of responsible stewardship and transparent governance. Fighting corruption in reconstruction requires extensive knowledge of how local corruption networks operate as well as the willingness to confront entrenched interests once corruption is uncovered.

About the Report

This report is a product of the United States Institute of Peace's Iraq Experience Project. It is the second of three reports examining important lessons identified in Iraq prior to the country's transition to sovereignty in June 2004 and is based on extensive interviews with 113 U.S. officials, soldiers, and contractors who served there.

This report is focused specifically on economic reconstruction in Iraq under the Coalition Provisional Authority. The other two reports examine security and governance, respectively. These reports are intended for use as training aids in programs that prepare individuals for service in peace and stability operations, so that lessons identified in Iraq may be translated into lessons learned by those assigned to future missions.

Anne Ellen Henderson, formerly a program officer in the Institute's Professional Training Program and currently assistant vice president for academic affairs at Trinity University, prepared the report. The Association for Diplomatic Studies and Training conducted the interviews under a contract with the Institute.

The views expressed in this report do not necessarily reflect views of the United States Institute of Peace, which does not advocate specific policy positions.