Post-conflict reconstruction aims at the consolidation of peace and security and the attainment of sustainable socio-economic development in a war-shattered country. The term ‘post-conflict’ does not signify the obliteration of the root causes of the outbreak of conflict in the first place. Nor does it imply a complete cessation of hostilities that often recur even after the signing of a peace agreement or the waging of elections. It frequently denotes merely an abatement of hostilities, or a ‘window of opportunity’ for peace in a conflict that can again escalate if mismanaged (Fischer 2004, 2-3, Hamre and Sullivan 2002, 90). Post-conflict reconstruction is broadly understood as a complex, holistic and multidimensional process encompassing effort to simultaneously improve military (restoration of law and order), political (governance), economic (rehabilitation and development) and social conditions (justice and reconciliation). The economic dimension of post-conflict reconstruction usually involves tasks such as distribution of relief assistance, restoration of physical infrastructure and facilities, reestablishment of social services, creation of appropriate conditions for the private sector development, and implementation of essential structural reforms for macroeconomic stability and sustainable growth.
The theme of reconstruction has been studied since the 19th century. While imperialists associated reconstruction with greater involvement of the metropolitan centers in the affairs of their colonies, liberals remarked the beneficiary role of commerce for the improvement of states and people within them (Williams 2005, 542). David Ricardo examined in 1815 the subject of post-war economic recovery and dealt with issues such as the reorientation of capital flows towards peace activities (Coulomb 2004, 92-94). And John Stuart Mill elaborated in 1848 on the potential of individuals for recovery (though from natural disasters) (Coyne 2005, 325). The intellectual and practical origins of the modern meaning of reconstruction are traced in the rebuilding of the South after the defeat of the Confederacy in 1863 and in the discussions about the controversial role of Northern businessmen (Williams 2005, 541-2). The first in history international post-war reconstruction effort was carried out in Austria after the end of the First World War. It was undertaken by the League of Nations and was based on the work and the suggestions of a fact-finding economic commission. Austrian reconstruction entailed the suspension of reparation payments, the initiation of economic reforms and the appointment of a High Commissioner for the country’s economy. A similar but less extensive work was subsequently carried out in Hungary, while the third international reconstruction program of the interwar period focused on the repatriation of expelled ethnic Greeks from Turkey after the 1922 war (Williams 2005, 546-8). The most impressive post-war reconstruction effort was carried out following the end of the Second World War. It concerns the work of the United Nations Relief and Rehabilitation Administration towards Europe and China (1943-1946), the loans of the International Bank of Reconstruction and Development to Europe, the Marshall Plan for Western Europe (1948-1951) and the economic assistance to Japan. Of all these programs, the Marshall Plan stands out as the most successful initiative. It implied a transfer of $13.3 billions of aid from the United States to Western Europe for the accomplishment of the following objectives: increase of production, expansion of foreign trade, enhancement of internal financial stability, and development of European economic cooperation. It was comprised mainly of grants in commodities and services plus technical assistance and its success has been largely attributed to its use of the instrument of conditionality for the implementation of structural adjustments. The program achieved all of its targets as inflation, unemployment and budget deficits were significantly reduced, the GDP of the recipient states grew by 35% and intra-European trade increased by 80% (de Long and Eichengreen 1993, Lewarne and Snelbecker 2004, 55). During most of the Cold War period, international recovery operations consisted of development assistance and natural disaster relief. Indeed, it was the outbreak of several civil wars in the early 1990s that brought the post-conflict reconstruction theme back into the policy agenda. Nevertheless, the recovery needs of states emerging out of civil wars do not resemble to the needs either of countries afflicted by natural disasters, or of the Western European states following the end of the Second World War. The most importance difference is that countries coming out of civil war are usually ‘weak’ or ‘failed’ states that require extensive institution-building as well. Moreover, economic reconstruction efforts are nowadays far more complicated involving a great variety of actors encompassing the United Nations and its agencies, the International Financial Institutions (IFIs), regional development banks, multilateral and bilateral donors, and a large number of national and international NGOs and private companies. The special circumstances surrounding the reconstruction of weak or failed states induced the donor community to review its policy tools and methods. For instance, the IMF revised in 1995 its policy on emergency assistance in order to address the needs of countries in post-conflict situations. The World Bank established in 1997 a Post-Conflict Unit (later renamed to Conflict Prevention and Reconstruction Unit) and a Post-Conflict Fund. The United Nations Development Programme founded in 2001 a Bureau for Crisis Prevention and Recovery to work for the restoration of the quality of life of people who have been victims of natural disaster or violent conflict. The United Nations established in 2005 a Peacebuilding Commission (and a Peacebuilding Support Office and a Peacebuilding Fund) with the aim of bringing together and improving coordination among all relevant actors who get involved in a reconstruction effort. And the UK, to mention a donor country, set up a Conflict and Humanitarian Affairs Department within its Department for International Development. The international community also adopted a more complex approach to reconstruction and merged efforts towards relief, rehabilitation and development from the beginning of its involvement in post-conflict situations. Above all, donors ascribed to more interventionist practices. They have attempted to influence the policies of recipient countries, prescribing reforms to streamline institutions in war-affected countries in accordance with the norm of ‘good governance’.  For a discussion of the initial attempts of the IFIs to adjust their policies to the needs of post-conflict emergencies see Boyce (2004).  For a presentation of how the United States has distributed responsibility over foreign economic reconstruction to different state agencies, see Kress (2004-2005).
The post-conflict reconstruction literature is overwhelmingly focused on the security and political dimensions of peace-building operations. Most research is confined to the disciplines of history, political science, and public policy (Coyne 2007, 1). As one analyst put it, the majority of studies dealing with reconstruction address economic issues ‘only tangentially, or as an afterthought, and with little economic rigor, specificity, or comprehensiveness’ (del Castillo 2008, 20). No-one, of course, denies the need of war-affected countries for external assistance and financing. Although conflicts differ in duration and intensity, their impact in most of the cases is devastating in terms of human, social and physical capital. Their ramifications may include: • deterioration of human development and human security indicators (e.g., life expectancy, infant mortality, access to health and education services); • destructions of infrastructure (e.g., transport, communications, water and energy infrastructures and housing stock); • internal population displacement and emigration causing brain-drain; • a dramatic increase of people needing social assistance (e.g., disabled, elderly, children, internally displaced persons and war veterans); • economic decline sometimes far below pre-war levels; • large fiscal deficits caused by high military expenditures (at the expense of social expenditures) and meager revenues during wartime; • rise of inflation due to war financing by printing of money; • departure from the country of invested assets; • increase of debts that were not serviced during wartime; and • disruption of external trade (World Bank 1998, 15-6, World Bank 1999, 2.7). The literature on post-conflict economic recovery shares as common ground the assumption that each reconstruction effort is unique. Every post-war situation differs in relation to factors such as: the causes of the outbreak of conflict and the way it was resolved; the complete (or not) cessation of hostilities in the entire territory of the country; the initial economic conditions and the level of development of the country; the extent of international political support to the settlement; and the donor interest in the country (del Castillo 2008, 9-12). As a result, reconstruction work ought to be tailored-made to the particular needs of each recipient country. Nevertheless, beyond this common assertion, the scholarship on economic reconstruction diverges over several issues. The relevant literature includes studies from different academic disciplines and across different methodologies. For instance, many studies seem to endorse the overall framework of donor policies. They commonly identify the most critical tasks underpinning the reconstruction of war-torn states and seek to discover the essential conditions for success of this type of operations. They attempt to draw policy recommendations from comparative analyses of past cases, frequently with the use of econometrics. Other studies are more detractive of the way international policies of reconstruction are carried out on the ground. Some of them are influenced by the critical tradition of social sciences rather than by work in the field of economics. However, the discussion on economic reconstruction is not crystallized along the lines of different clearly identifiable approaches. For the time being, there is no such a thing as an intra-topic debate. This is possibly owed to the relative underdeveloped state of theoretical work on the topic. Besides, much valuable criticism to the practices of the donor community springs from relatively conventional approaches to economic reconstruction too. A recurrent theme in the literature is the identification and discussion of some core tasks that commonly feature in the work of donors. Absolute priority is given to relief work and the rehabilitation process aiming at the restoration of basic services to meet the subsistence needs of the most vulnerable segments of the society. It concerns repairs to the physical infrastructure – such as medical facilities, schools, sanitation infrastructure, houses and roads – and provisions for immediate distribution of humanitarian assistance such as food, health care and temporary shelter (World Bank 1999, 3.12). It is also about the development of the recipient country’s human capital through the reconstruction of the health and education sectors and the improvement of the population’s employment opportunities through training programs. Particular interest is paid to the economic reintegration in the society of certain categories of people such as internally displaced persons, demobilized former combatants and women household heads (del Castillo 2008, 29, Kreimer et al. 1998, 30). Another critical task of post-war economic reconstruction is the diminution of the risk factors that originally caused the outbreak of conflict. Some analysts suggest the imperative of reducing ‘horizontal inequalities’ (i.e., inequalities between groups defined by region/ethnicity/class/religion) through specially-targeted programs aiming at stimulating broad development (Addison, Le Billon and Murshed 2001, 6, Humphreys 2003, 20, Stewart 2009). Others recommend the diminution of dependence on natural resources in cases where armed hostilities were about their exploitation (Bigombe, Collier and Sambanis 2000, 325-31). Reconstruction, is argued, should not be about the recreation of the past when that past gave rise to conflict (Luckham 2004, 488, Addison, Le Billon and Murshed 2001, 6). Instead, it should be about dismantling the structures of war economy (and its elite) that maintain interest in the protraction of conflict. Some scholars study the impact of aid flows on post-conflict reconstruction. Paul Collier and Anke Hoeffler (2002) argue that aid can be very effective in stimulating growth in post-war situations. Nevertheless, donors are usually not very efficient in managing aid. This is because aid flows peak at peace onset, when the war-torn countries have limited absorption capacity, and usually fall after three years, when recipient countries have greater administrative capacity. As a result, aid commitments should spread over time and increase gradually between the fourth and the seventh year of peace and return to normal levels after a decade (Collier and Hoeffler 2002, Elbadawi, Kaltani and Schmidt-Hebbel 2008). Another study suggests that aid to the budget of war-shattered countries can have very positive results. It may support the effort of recipient countries to reduce inflation and foster confidence in peace (Adam, Collier and Davies 2008). Moreover, some analysts examine the problem of debt arrears of these countries and recommend different policies to the creditors on the best timing and the most efficient way for its resolution (Alvarez-Plata and Brück 2008, del Castillo 2008, 89-93, Addison and Murshed 2003). Still, Murshed (2010, 186) warns that donors should be aware of the danger of aid dependence of recipient countries and, thus, they should take care not to inhibit the development of domestic resource mobilization efforts. The reconstruction of war-ravaged countries routinely requires the implementation of economic reforms. Although most recipient countries usually need extensive structural adjustments, the international community should proceed cautiously to the adoption of relevant policies in order not to steer social discontent and renewed hostilities. Considering that 40-50% of war-torn countries relapse to conflict within a decade, peace consolidation should take precedence over the stimulation of development. War-affected countries should occasionally adopt sub-optimal economic policies (e.g. maintain certain non-profitable production units) out of political and security considerations (e.g., preservation of jobs) (del Castillo 2008). In this respect, some argue that immediate priority should be given to small-scale reforms such as the reduction of inflation and the designation of a monetary policy (Lewarne and Snelbecker 2004, 39). A key concern is also the development of the private sector whose role is crucial for the generation of growth and employment. War-affected countries need to attract foreign direct investments and, to this end, they should put in place an adequate institutional framework for the registration of firms, the protection of private property, and bankruptcy (Lewarne and Snelbecker 2004, 43, Kusago 2005). A World Bank (1999, 6.5) study also underscores the importance of rebuilding the agricultural sector owing to its potential to contribute to the subsistence of rural population as well as offer job opportunities to demobilized ex-combatants. Another important question is the designation of the political authority that should take chief responsibility for post-conflict reconstruction. Ideally, it is argued, the recipient country’s authorities should manage themselves the reconstruction process, by setting the most urgent priorities and coordinating the respective policies (de Soto and del Castillo 1994, 77). Nevertheless, this is not possible in cases of weak or failed states in which international transitional administrations are increasingly put in place to perform basic governing duties. Interim administrations, however, lack the legitimacy to adopt key economic decisions. And foreign investors are reluctant to enter markets in which, local authorities might anytime reverse policies that were initiated by transitional administrations (del Castillo 2008, 43). As a result, international administrations are prompted to be attentive to the needs and requests of local societies and make some resources directly available to local institutions in order to cultivate a sense of ownership of the reconstruction process (Chesterman 2004, 196-200). The end of mandate of international missions and the termination of external post-conflict operations are questions that have predominantly preoccupied analysts focusing on political and military reconstruction. Arguably, the international community is concerned with the large costs of sizeable international contingents, the danger of conflict resumption, and the problems of political legitimacy that were explained before. Nonetheless, the question of the completion of economic reconstruction has not received equal scholarly attention. Although economic reconstruction is usually a decade-long effort, aid availability is supply-driven, lasting for as long as a recipient country is on the media spotlight (Chesterman 2004). As for the donors themselves, they do not need an ‘exit strategy’ if they no longer want to realize their pledges. Overall, the completion of the rehabilitation process and the emancipation of economic policies from the post-conflict political and security constraints signify, on a conceptual level, the passage from reconstruction to ordinary development work. Many studies highlight shortcomings and inconsistencies in donor-driven reconstruction programs. The first criticism concerns the adoption by the international community of a uniform approach towards all post-conflict settings – giving priority to liberal democracy, good governance, and economic liberalization – without allowing the governments of recipient states to have any input in the policy prescription (Guttal 2005, 74). The IFIs are accused of adopting a ‘development as usual’ approach to reconstruction, failing to grasp the particular needs of war-torn states (del Castillo 2008, 20, Paris 1997). Donors are additionally criticized for not reflecting on their own complicity to the outbreak of conflicts through the imposition of structural adjustment programs that generate sentiments of relative deprivation. Reconstruction programs are perceived to suffer from a so-called ‘nirvana fallacy’, denoting that donors assume that their policies in war-torn countries always generate better results than what would have occurred if they had not intervened (Coyne 2006, 343-4). Roland Paris (2002) argues that contemporary peacebuilding resemble to ‘a modern version of the mission civilisatrice’ that underpinned European colonial policies. For Tim Jacoby, international reconstruction assistance is guided by entirely different motives. It represents ‘a valuable opportunity’ for the hegemon (i.e., the United States in the case of Iraq) ‘to preserve and extend an international order friendly to its principles, its security and its prosperity’ (Jacoby 2007, 523). Another criticism concerns the emergence of the so-called ‘relief and reconstruction complex’, being comprised of the United States, the World Bank, corporate contractors and humanitarian and development NGOs. It refers to the fact that private contractors, consultancy firms, and national and international NGOs currently become recipients of hundreds of millions of dollars for the implementation of almost every reconstruction task from construction activities to the distribution of food and training programs (Bello 2006, 281-96). A great amount of these funds is not distributed through government channels and is not even spent inside the countries in question. Many NGOs have become ‘ambulance chasers’ who deploy in crisis situations with little or no funding in order to provide services to donors (Chesterman 2004, 186). Moreover, foreign professionals receive salaries several times higher than those of the local population and live in reconstructed pockets of affluence inside cities while the rest of population frequently struggles with dysfunctional infrastructure and poor quality of services (Guttal 2005, 79). The heavy international presence causes distortions to the local economy and brings about the emergence of a type of ‘Dutch disease’ (Tzifakis and Tsardanidis 2006, 80). Rents, prices and salaries rise dramatically in disharmony with changes in the local economy’s competitiveness. A bubble economy is created that frequently revolves around the transient needs of internationals (e.g., restaurants, bars and prostitution). Many highly qualified local officials often quit their posts to get better paid jobs in supportive services to international missions (for instance as drivers or translators) and both the public and private sectors are deprived of the most capable workers that would drive forward the development process (del Castillo 2008, 75, Chesterman 2004, 200-1). What is more, foreign contractors have occasionally been accused of being unaccountable, corrupt and wasteful of precious resources for the reconstruction of war-affected countries. Finally, donors are criticized of providing insufficient assistance to post-conflict reconstruction efforts. In some cases, they seriously delayed, or even failed to deliver substantial amounts of aid that they have earlier pledged to provide. In addition, Chesterman (2004, 190) observes that the generous pledges of some donors in multilateral conferences are frequently little more than repackages of previously committed funds. Lastly, donors are accused of directing disproportionately more funds towards the military (i.e., security) than the socio-economic reconstruction efforts (Bhatia 2005, 209).
Notwithstanding that donors have in recent times participated in numerous post-conflict reconstruction programs, the Western Europe’s recovery following the end of the Second World War has been considered as the most successful story. This is not due to the amount of money that was provided to Western European countries. While Germany received about $200 per capita (in constant 2001 $US) during the first two post-war years, Bosnia and Herzegovina was the recipient of over $1,400 per capita following the signing of the Dayton agreement (Lewarne and Snelbecker 2004, 21). Indeed, in Bosnia’s case, the availability of so extensive aid has had as negative side-effect the aid dependence of the local economy (Tzifakis and Tsardanidis 2006, 78). Moreover, when the United States announced the Marshall Plan, the outcome of the Second World War was universally recognized. On the contrary, contemporary reconstruction work is often initiated in highly unsettled post-conflict conditions in which resumption of hostilities is still very probable (Chesterman 2004, 185). Two cases at point of renewed hostilities are Angola and Liberia. The course of development in these war-affected countries (and more recently in Afghanistan) demonstrated how imperative is not to delay the demobilization, disarmament and reintegration of former combatants once armed clashes have ceased (del Castillo 2010, 199-200). Furthermore, Kosovo’s experience showed that it is extremely difficult to initiate a privatization process and attract foreign investors, while the final status of a region is not settled and property rights are not unequivocally resolved. Differences in policy outcomes are also owed to the increased complexity of reconstructing failed or weak states in which governance capacity should additionally be rebuilt. For instance, the reconstruction of Bosnia demonstrated that the adoption by the international community of preeminent role in the management of a recipient’s economy could have as a side-effect the absence of ‘local ownership’ and the development of passivity towards the reform process (Tzifakis and Tsardanidis 2006, 79). The Bosnian case also showed that serious coordination problems may arise when several donors get involved in the reconstruction effort and each of them designates on its own its assistance programs. Finally, the limited success of contemporary reconstruction programs is explicated by the emergence of the ‘relief and reconstruction complex’. In places such as Afghanistan, Bosnia, Cambodia, East Timor, and Iraq private corporations and NGOs have performed many reconstruction roles supplanting the local authorities. As a result, most foreign aid did not reach the local population. Moreover, the deployment of large international missions generated distortions to the local economies and contributed to the appearance of the earlier mentioned ‘Dutch disease’. What is more, the occasional revelations of instances of foreign contractor misconducts damaged the legitimacy of international missions and also raised questions concerning their accountability.
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