Columbia International Affairs Online: Working Papers

CIAO DATE: 07/2012

Entrepreneurship in Postconflict Zones

Gayle Tzemach Lemmon

May 2012

Council on Foreign Relations


Economic development is a critical component of promoting stability and U.S. security interests, particularly in conflict and postconflict zones. Reviving institutions and rebuilding an economic base are among the first priorities after fighting ends and reconstruction begins.1 According to the U.S. Agency for International Development (USAID), negative economic shocks of just 5 percent can increase the risk of a civil war by as much as 50 percent in fragile environments.2 Additionally, donor assistance, which can account for 20 percent to as much as 97 percent of a country’s GDP, is unsustainable in the long term.3 Building local business capacity and supporting homegrown entrepreneurs can help curb this risk.4 Research from Iraq has found that labor-generating reconstruction programs can reduce violence during insurgencies, with a 10 percent increase in labor-related spending associated with a 10 percent decrease in violence.5 And as Shari Berenbach, director of the Office of Microenterprise Development at USAID, argues, the development of “private enterprise is an important stabilizing force,” particularly for countries suffering from the political uncertainty and civil unrest that often characterizes the postconflict period.