CHAPTER 8

Dealing with Failed States

The work that the U.S. government did on economic and financial reconstruction in Afghanistan and Iraq provided useful lessons on how to handle reconstruction and stabilization in other post conflict situations. Indeed, the Task force on Financial Reconstruction in Afghanistan and Iraq, which we set up at Treasury, was recently generalized and expanded to cover other post conflict countries such as Haiti and Liberia. (The new Task force is called he Task Force on Financial Reconstruction and Stabilization and coordinates with a corresponding office in the State Department).

As the items here illustrate, it looks like these lessons learned will indeed be needed. There have already been many articles written in the foreign policy community about how to deal with “failed states.”

The first two items in this section concern Haiti, discussing some of the practical difficulties the international finance and development community faces when dealing with such failed states. In the 1990s, many millions of dollars were raised by international donors for Haiti, but as Item 1 indicates much of this was wasted. The second item in this section calls on the international community to make sure the reconstruction assistance works this time, and encourages the right economic and political reforms. Indeed, that is a significant goal of the Treasury Task Force and the people they have on the ground.

Like Haiti, the situation facing the transition government in Liberia is very difficult, and experts from Treasury are working with the finance minister and with the central bank governor to resolve these difficulties.

Of course, the best way to deal with failed states is to prevent them. As with many issues in foreign policy, the best prevention is good policy in the countries, because only then will international support be useful. The situation in the last few years in Bolivia is a case in point for political stability depends both on international assistance and the adoption of good policy for the use of the energy resources.

Haiti

1. Supporting Economic Development in Haiti, Senate Foreign Relations Committee, July 15, 2003

2. Making Reconstruction in Haiti Work This Time, Roundtable Meeting with Haitian Community Leadership, Miami, Florida, August 23, 2004

Liberia

3. Economic Reform in Liberia, Monrovia, Liberia, September 12, 2004

Bolivia

4. Economic Reform and U.S. Assistance in Bolivia, Public Statement during Visit to Bolivia, La Paz, September 3, 2004