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Imagine if the post-war recovery in Iraq had been implemented differently. Imagine if Iraq had been reconstructed successful? Would Syria look different today — would the Islamic State even exist? Would the terrorist threat be lessened?

It’s the Economy…

These questions highlight the old adage used by Bill Clinton, “It’s the economy, stupid.” It is a fundamental truth often ignored in the public debate on how to tackle geopolitical instability: Economic development is key to post-war recovery and the return of stability to economies. The same applies for general development efforts. And private sector involvement is essential to economic development; it is the main driver of poverty alleviation.

When looking at capital flows from OECD to non-OECD economies, over half the capital flows pass through the private sector, around a third through remittances, and the balance through official aid and philanthropy.

Even though the private sector is the key driver of growth — so critical to stability — it plays little role in post-conflict recovery or development planning. Perhaps ironically, the smallest set of stakeholders — aid and philanthropy groups — is often seen as the main driver of reconstruction and granted a big seat at the planning table.

It is time to change the balance of importance given to aid and private sector stakeholders and to recognise where the key engine of growth is.

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Imagine if the post-war recovery in Iraq had been implemented differently. Imagine if Iraq had been reconstructed successful? Would Syria look different today — would the Islamic State even exist? Would the terrorist threat be lessened?

It’s the Economy…

These questions highlight the old adage used by Bill Clinton, “It’s the economy, stupid.” It is a fundamental truth often ignored in the public debate on how to tackle geopolitical instability: Economic development is key to post-war recovery and the return of stability to economies. The same applies for general development efforts. And private sector involvement is essential to economic development; it is the main driver of poverty alleviation.

When looking at capital flows from OECD to non-OECD economies, over half the capital flows pass through the private sector, around a third through remittances, and the balance through official aid and philanthropy.

Even though the private sector is the key driver of growth — so critical to stability — it plays little role in post-conflict recovery or development planning. Perhaps ironically, the smallest set of stakeholders — aid and philanthropy groups — is often seen as the main driver of reconstruction and granted a big seat at the planning table.

It is time to change the balance of importance given to aid and private sector stakeholders and to recognise where the key engine of growth is.

Distorted Expectations

Time frames in post-war recovery and reconstruction seem to have been distorted recently too, and should likewise be changed.

Consider this: When did the last Allied soldiers leave Germany after World War II? Answer: They haven’t. When did the last Allied soldiers leave Japan after World War II? Answer: They haven’t.

In Germany and Japan, the commitment to rebuilding and reconstruction, integration into the world economy, and defense against aggressors (read the Cold War) lasted three generations.

When did the last peacekeepers leave Bosnia? Answer: They haven’t.  Western support for peace-building, reconstruction and recovery in Bosnia has already lasted a generation, with no end in sight.

So why were Western powers so foolhardy as to think that troops could walk in and out of Iraq and Afghanistan successfully in less than a generation, let alone three generations? Why do some people even now think Western powers could get in and out of Syria in a mere five or ten years?

Why have these recent foreign policy efforts not included an active involvement of the private sector in long-term economic planning to bring order from the post-conflict chaos? Capital provision through banks, employment through frontier extractive industries, and the creation of additional economic activity through retail and services were all absent from post-war planning.

Why do many activists think the private sector is the enemy in poverty alleviation and look only to the non-profit sector for solutions?

Imagine if the negative impression many activists have of the private sector were turned around in recognition of the private sector’s role in post-conflict reconstruction, or indeed generalized poverty alleviation through employment. How would businesses’ relationships with local and international communities (and their own staffs) change? Would this be a ‘win win’ where communities and corporations would both be better off both in the developed and less-developed world?

Imagine if corporations, non-profit and government agencies worked more in alignment. Would aid impact be increased and poverty be alleviated more effectively if government and non-profit interventions led to more effective long-term investment?

The truth is though the private sector is already active in job creation, poverty alleviation and post conflict reconstruction — it is just that they are not given credit for it. Activists see profit as “evil” rather than an enabler of growth, and therefore do not see how the not-for-profit sector should enable well-regulated private sector investment.

Nestlé has been active for many years improving nutrition — and yes expanding its markets. BASF has been helping farm productivity — and expanding its markets. Agco, through brands such as Massey Ferguson, has a specific small farmer product offering aimed at sub-Saharan Africa which sees small-scale farmer productivity improvements — and market expansion for Agco.

Surely a more sensible approach is for the for-profit and not-for-profit sectors work together based on their comparative advantages?

Imagine if the not-for-profit world and the aid sector concentrate on improving legal systems, anti-corruption processes and governance, and counted private sector job creation as a success?

A More Sensible Approach

Think of terrorist attacks over the past few years. Most radical extremist attacks in Western countries have been home-grown. This is where the majority of effort should be placed. At home. But how and where?

A recently publicized MI5 report confirms that most of these home-grown terrorists have not been particularly pious religious fanatics, have often been new converts to religion and come from many different demographics. Religion, according to MI5, is not the major factor. The one common thread in extremist attacks in the West is that home-grown terrorists almost always come from low-paying working-class backgrounds.

MI5 recognizes that ISIS has been a master manipulator of this disenfranchisement that victory in the home-war is more about economics than religion, and indeed that pious religious followers are allies against extremism, not an enemy.

Can the private sector play a role here too?

Since the release of Michael Porter and Mark Krammer’s articles raising the profile of ‘Creating Shared Value’ (CSV) as a concept, more companies are beginning to realize the benefit to profit and asset valuation with a more holistic understand of community relations beyond “Corporate Social Responsibility.” But have the benefits that come from this thinking been maximized?

Both the UK and Australian Governments have recently released reports calling for better alignment between the private sector, aid community and non-profit sector in foreign aid interventions — without fully realizing the same principles can be applied in their own economies. Equally, some leading NGOs are setting aside past antipathy towards the private sector, instead searching for collaborative partnerships.

Can Shared Value thinking be used as a framework for private sector involvement both in post-conflict planning and as a critical tool in lifting people from poverty and reducing the temptation to turn to extremism? Can this opportunity be married with long-term thinking to change the way policy makers address some of the great challenges of this generation?

Kings College London recognizes these gaps and opportunities in post-conflict, post-disaster and general development settings, and is looking to build on Porter’s and Krammer’s work. Kings is establishing a consortium of academics, corporate innovators, engaged foundations and policy experts to lead global thinking around building on shared value and to promote further uptake among the business community. Perhaps our way of thinking will lead to a “new order” in how we address these challenges.

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Andrew MacLeod is a former high-level UN official who has in the past negotiated humanitarian access guarantees with fundamentalist and conservative Islamic groups. He is a visiting professor to Kings College London and an Executive Board member of Cornerstone Capital.