Finance in Conflict and Reconstruction
This paper explores the role of the financial sector in generating narrow development that exacerbates existing social tensions and creates new ones. It states that during conflict, finance (both internal and external) can be a decisive factor in determining who wins, as well as the duration of war. It argues that international action to reduce war-finance and increase its cost may encourage peace, provided that such action is implemented across the international community. Specifically, it:
- Traces the history of active conflicts looking at the linkages between the financial sector and issues of conflict;
- Financing narrow development and its linkages with poverty, inequality, and society's propensity to violent conflict;
- Financing conflict and;
- Finance in reconstruction.
The paper concludes that rebuilding the financial system is important to reconstruction from war, since otherwise private investment is constrained. But 'post-conflict' economies generally have weak regulatory authorities, and the financial system may be flooded with unsound loans, leading to economic problems that can endanger economic recovery and therefore peace.
