The Kosovo and Afghanistan Experience
by Lieutenant Colonel Jan Willem Maas and Dr. David A. Anderson
Download the Full Article: Establishing a Banking System During Stability Operations
Economic growth is an important factor in establishing peace and security in a post-conflict environment. Without broad economic improvements, stability is difficult to achieve, let alone maintain. Research conducted by Paul Collier (2007) empirically affirms the need for economic growth in order to achieve enduring stability. In the absence of economic growth, his research shows that forty percent of all post-conflict countries return to violent conflict within a decade.
Common features of conflict-ridden economies are vulnerability to external economic shocks, "fragmented markets, limited access to credit, reduced confidence, depleted human capital, increased illicit economic activities" and debilitated economic institutions. These circumstances increase both the costs and risks of commercial activities and investments, thereby increasing the risk of delay in establishing sustainable economic solutions to conflict.
In order to achieve sustainable economic development, the host nation needs an effective banking system. Empirical research conducted by Ross Levine (2000) on forty-nine countries between 1976 and 1993 affirms this necessity. Levine found that the development of the banking system is strongly associated with growth per capita, physical capital accumulation and growth in productivity. The banking system also facilitates economic activity by providing payment services, mobilizing deposits, and easing investment financing. An effective financial system provides funds and connects lenders and investors. Levine's research further indicates that in countries where the legal system emphasizes the rights of creditors and where contracts are rigorously enforced, there will be better-developed banks. His results are consistent with the results of other scholars.
Because a healthy banking system is indispensable for economic development, this paper assesses the impact of the Kosovo and Afghanistan governments, the two primary international financial institutions (the World Bank and the International Monetary Fund ) and the primary U.S. development facilitating organization (the US Agency for International Development), have in establishing post-conflict banking systems within Kosovo and Afghanistan. The analysis is conducted utilizing widely accepted macroeconomic and banking assessment and efficiency variables. Finally, because economic growth and security are interrelated and interdependent, the study will further determine an appropriate role for the military (the U.S. in particular) in facilitating this effort.
Download the Full Article: Establishing a Banking System During Stability Operations
Lieutenant Colonel Jan Willem Maas LL.M. is from The Netherlands. He fulfilled multiple staff and command assignments in The Royal Netherlands Army. As an International Military Student, he attended the Intermediate Level Education Class 11-01 at the U.S. Army Command and General Staff College in Fort Leavenworth, Kansas. He is also selected to attend the Advanced Military Studies Program at the U.S. Army School for Advanced Military Studies.
Dr. David A. Anderson is a retired U.S. Marine Corps officer. He is now a professor of Strategic Studies and Odom Chair of Joint, Interagency, and Multinational Operations at the U.S. Army Command and General Staff College, Fort Leavenworth, Kansas, where he teaches strategic and operational studies, as well as economics. He is also an adjunct professor for Webster University, where he teaches various international relations courses including International Political Economy and Globalization. He has published numerous articles on military, economics, and international relations related topics.
