Summer School: Development Assistance for Economic Development

by: Lejla Sadiku

In the context of fragile countries, economic development is key to building and preserving peace in the long run. Unfortunately, despite international involvement through development assistance in post-conflict areas for decades now, evidence of successful policies and interventions is still lacking at best.

Support for economic development in developing contexts in the last two decades especially, but also since the rising popularity of Reagonomics, has been driven by principles of Chicago school economics, namely liberalize, privatize and de-regulate. The fall of the Berlin Wall, and with it the end of the Cold War, established supremacy of one economic system, capitalism, over communism, as a competing ideology, and thus giving birth to what would be called ‘shock therapy’ as a way to quickly reboot and revive state-planned economies.

The principles of shock therapy – a time-wise condensed version of neoliberal policies – has been widely applied as a way to address state failure. However, over time we have seen that even the most prominent propagators of this type of approach have pulled away from this concept, specifically Jeffrey Sachs. These reforms came at a high social cost, followed by market failures, and it became clear that no one solution could be applied to all countries. As Jürgen Ehrke from GIZ in Bosnia and Herzegovina paraphrases Tolstoy, “Successful economies are all alike; every unsuccessful economy is unsuccessful in its own way.”

Even if there is divergence of opinion over the merits of shock-therapy as a mode, the underlying neoliberal principles continue to be applied in development. A rising number of academics and practitioners are contending the rules of globalization and the mode of international involvement in countries receiving assistance, but by and large on the ground change is slow. At the very least there is debate about how to best tailor the intervention to the conditions on the ground, thus change should follow.