A ‘Good Governance’ Paradox? Reexamining Reform of Economic Institutions in Post-Conflict Contexts

When pursuing economic reforms in post-conflict and fragile states, development practitioners typically seek to establish an institutional framework within which markets can effectively function, price signals are accurate, and rents are eliminated. Establishment of market-enabling ‘good governance’ institutions is expected to lead to improvements in resource allocation, supporting improved living standards, employment creation, and access to services, thereby mitigating conflict pressures. Recent political economy theory, however, directly challenges the current ‘good governance’ orthodoxy, suggesting that the rents that reformers seek to eliminate through ‘good governance’ reforms serve a vital social purpose in maintaining elite pacts and thereby preventing violence. Through a survey of recent theoretical and empirical literature, I identify core unresolved contradictions and incompatibilities between the ‘good governance’ agenda and recent institutionalist theories of political order. Given limited empirical evidence that orthodox approaches are delivering expected results, I conclude that those working on economic reform in post-conflict and fragile states may need to revisit core assumptions that efforts to embed ‘good governance’ institutions will lead consistently to security and development.