draining development.pdf - Khazar University

56 Draining DevelopmentWe should not, however, pretend that blocking particular flows is inany way neutral or necessarily beneficial for the construction of viablepolitical settlements, because there are likely to be many possible settlementsthat different groups are trying to impose. Moreover, competinggroups of outsiders are also likely to be providing aid, guns, and, sometimes,their own troops to their clients within the country. There is noeasy way to claim that some of these resource flows are legitimate andconstructive and others are not without exposing significant politicalpartiality toward particular groups.The real problem is that we do not know the outcomes of these conflicts,and the internal distribution of power is both unstable and changing.Because the sustainability of the eventual sociopolitical order thatmay appear depends on the emergence of a sustainable distribution ofpower among the key groups engaged in conflict, we cannot properlyidentify ex ante the resource flows that are consistent with a sustainablepolitical settlement. The resource flows are likely to help determine thepolitical settlement as much as sustain it.It follows that the analysis and identification of illicit capital flowsmust be different across intermediate developers and across fragiledevelopers. Fragile societies typically do not have internationally competitivesectors in their economies, nor do their competing leaders havethe capacity to encourage productive sectors effectively. The adverseconditions created by conflict mean that significant countervailing policieswould have to be adopted to encourage productive investment inthese contexts. Though this is not impossible, as the example of the PalestinianAuthority in the five years immediately following the OsloAccords shows (Khan 2004), the likely direct growth effect of particularfinancial flows is a moot question in most cases of fragility.Globally competitive economic activities do take place in many conflicts,but these are of a different nature from the development of technologicaland entrepreneurial skills with which intermediate developershave to grapple. One example is natural resource extraction that is a specialtype of economic activity because it does not require much domestictechnical and entrepreneurial capability. The returns may be largeenough for some foreign investments or for extraction based on artisanaltechnologies even in war zones. A similar argument applies to the