The post-war economy

Some areas in the world have suffered from wars and their economies have been in deep trouble since the wars. Most of these areas are in oil-rich areas and it seems not very difficult for these countries to get rich again due to their rich natural resources; however, the facts are very different.

Why is it so difficult for these countries to recover their economies? The most obvious answer is that the political system is broken down after the wars, there is no regulator in the economy to reset up the market order. Maybe sometimes foreign forces may intervene, but such intervention is unwelcome domestically and often does not suit the local interests. Therefore, the market order is hard to be reset up after wars. In addition, the infrastructure is damaged in wars, the economies have to rebuild their infrastructure, but the incomes of the economies are too limited to satisfy such large expenditure. Without the necessary infrastructure, the economies cannot recover very fast by taking advantage of the rich natural resources. In addition, some countries have very complex domestic conflicts. When the people in the country cannot unite together, it is hard to restore a domestic order spontaneously.

Therefore, we can see that restoring a domestic political and economic order is important to restore the domestic economy. When we look into some post-war economy, we can find it seems it has all the institutions and markets required, just like some developed economies have. However, the problem is it does not have the order restored inside these institutions and markets and the communication in the system is confusing, unpredictable and often changes very fast. The lack of orders in the system could be concluded as the risk in the system is too high for any participation to satisfy their preferences.