The reconstruction economy: who gets rich when a country is rebuilt, and what that predicts about recovery

Five million dollars. That was the contract awarded to al-Bunnia, an Iraqi construction company — the single local firm among the initial wave of reconstruction contractors hired to rebuild Iraq after the 2003 invasion. Bechtel, out of San Francisco, collected $2.3 billion for infrastructure rehabilitation. KBR, a Halliburton subsidiary headquartered in Houston, collected even more: its Iraq contracts — spanning reconstruction, oil infrastructure, and military logistics — totaled $39.5 billion over the following decade. From its first purchase orders, the reconstruction of Iraq was an American commercial enterprise that happened to take place in Mesopotamia.

Stuart Bowen spent nine years documenting what this enterprise produced. As the Special Inspector General for Iraq Reconstruction, he ran the most comprehensive public audit of wartime spending ever conducted — 220 audits, 170 project assessments, more than 600 criminal investigations. His verdict, in the final report to Congress in 2013: “Not enough was accomplished for the size of the funds expended.”

Polite. And precisely wrong about the problem.

“Not enough was accomplished” implies the goal was accomplishment and the system fell short. But the United States appropriated roughly $60 billion for Iraq’s reconstruction, and that money didn’t disappear into sand. It moved along designed channels, to designed recipients, under designed rules. At least $8 billion was lost to fraud — SIGIR’s own estimate — and that figure generated the headlines. The remaining $52 billion, spent on completed projects that passed every audit, also failed to produce a functioning economy. Not because the projects were poorly executed. Because they were the wrong projects, selected by the wrong criteria, for the wrong beneficiaries. The reconstruction economy was engineered to serve the interests of the reconstructing country. And it did.

The question has present-tense stakes. US-Iran ceasefire negotiations, conducted through Omani intermediaries following the coordinated US-Israeli strikes of February 28, 2026 — which hit Iranian nuclear facilities, military infrastructure, and senior leadership, killing Supreme Leader Khamenei — produced a tentative 60-day memorandum of understanding around May 28. The MOU covered the Strait of Hormuz, nuclear commitments, and sanctions relief. It never received President Trump’s approval. Iran suspended all negotiations on June 1, citing Israeli ceasefire violations in Lebanon. The framework is fragile, but the reconstruction question doesn’t wait for frameworks. Iran’s infrastructure has sustained massive damage, and the question of who rebuilds it — the US, China, Russia, the Gulf states — is already the subject of active geopolitical positioning. The historical record has a prediction. It’s been making the same one since Baghdad.

The anatomy of a reconstruction economy

When the Coalition Provisional Authority began awarding contracts in 2003, it didn’t write a rule barring Iraqi firms. It didn’t need to. The procurement system ran on US federal acquisition regulations — proposals submitted in English, American compliance frameworks, relationships with American contracting officers as the price of entry. An Iraqi construction company with decades of local experience was, for the purposes of this system, invisible. Not prohibited. Illegible. The system wasn’t designed to exclude Iraqi companies. It was designed for American ones. The distinction matters, because it means the exclusion wasn’t a correctable policy failure. It was structural — embedded in the procurement architecture and reproducible every time that architecture was deployed.

The contracts that were awarded confirm the design. KBR operated under cost-plus arrangements: reimbursement for all expenses plus a percentage fee, a structure that incentivises spending more rather than spending well. Pentagon auditors flagged hundreds of millions in questioned costs under its no-bid oil infrastructure contract. Bunnatine Greenhouse, the Army Corps of Engineers’ chief contracting officer, testified to Congress that KBR’s arrangements represented “the most blatant and improper contract abuse I have witnessed during the course of my professional career.” She was demoted. Congressional witnesses testified that Iraqi firms could have performed equivalent work for roughly 90% less. None of this was hidden. The Government Accountability Office flagged it. SIGIR flagged it. Congress held hearings. The contracts continued.

The spending circuit tells the story as clearly as the contract awards. Money moved from the US Treasury to American corporations, through American subcontractors and American supply chains, with American employees rotating through on annual deployments. The fraction that entered Iraq’s domestic economy — local hires for manual labour, locally sourced materials where available — was residual, not designed. The reconstruction stimulated an economy. Not Iraq’s.

The SIGIR archive

The Special Inspector General for Iraq Reconstruction was established in 2004 as an independent oversight body with direct reporting authority to Congress. Over nine years, SIGIR produced 220 audit reports and 170 project assessments, initiated more than 600 criminal investigations, and secured 104 indictments and 82 convictions along with $191 million in court-ordered penalties. Its audits identified $1.61 billion in potential financial benefits through cost recoveries and renegotiated contracts. SIGIR ceased operations on September 30, 2013, leaving behind the most comprehensive public record of wartime reconstruction spending ever assembled.

But the individual firms aren’t the argument. The argument is the system they operated within — one where accountability ran in a single direction: toward Washington. SIGIR could audit whether American taxpayer money was spent according to American procurement rules. Whether the spending produced anything recognisable as Iraqi economic recovery was not a question the system was designed to answer.

The fraud made the news. But fraud is the system malfunctioning. The more important question is what the system produced when it functioned as designed.

Here is what the $60 billion built: power plants that generated 4,000 to 4,600 megawatts against a target of 6,000. Water treatment facilities, of which only 36% of those originally planned were completed. Schools, hospitals, roads. Each item had a completion date, a capacity figure, and a line in a quarterly report. Each satisfied the audit. And each was selected because it satisfied the audit — not because it was what Iraq’s economy needed.

What the $60 billion didn’t build: commercial courts capable of enforcing contracts between strangers. Property registries that could establish ownership in a country where records were destroyed or contested. Legal frameworks for resolving the commercial disputes that any market economy generates daily. Regulatory predictability. The informal credit networks — hawala systems, personal guarantees, community lending — that had actually financed small enterprise in pre-war Iraq and that collapsed not under bombs but under the disintegration of social trust and the physical displacement of whole communities. None of these appeared on any reconstruction project list. They couldn’t. Congress wanted deliverables. Institutions aren’t deliverables.

Bowen came to see this. He advocated for “contracting methods that support smaller projects” and publicly praised the Commander’s Emergency Response Program — a modest fund that let military commanders hire locally for small-scale work — because it “put Iraqis to work.” The endorsement is a quiet indictment of the larger enterprise. The man who spent nine years auditing a $60 billion programme concluded that its most effective element was a side fund operating entirely outside the programme’s logic. Its success was its own indictment: the reconstruction enterprise’s design was the obstacle, and bypassing that design was the solution. Nobody redesigned the enterprise. The CERP stayed marginal. The main contracts kept flowing to Houston.

The structural pattern beneath all of this is simple. The countries that deploy military force to a conflict award themselves the reconstruction contracts afterward. Those contracts arrive immediately post-conflict, when local governance is weakest and urgency highest, guaranteeing that procurement flows to external actors with no accountability to the local population and no commercial incentive to develop local capacity. The countries providing the military force are the same countries providing reconstruction funding, and their commercial firms are the same firms collecting the contracts. This isn’t corruption in the legal sense. It’s something more durable: an incentive structure in which donor commercial interests and recipient recovery interests are in permanent tension, and every design choice — procurement rules, accountability frameworks, project selection, timelines — resolves that tension in favour of the donor.

The timing compounds the structural advantage. Reconstruction money arrives when the recipient country’s leverage is at its lowest — government in ruins, population in crisis, institutions destroyed or displaced. Urgency demands speed. The donor country has capital, contractors ready to deploy, and procurement systems already in place. The contracts are signed in the first months, under emergency authorities, and they lock in the structural relationships — who gets paid, who sets the terms, who defines success — for the duration. By the time anyone evaluates whether the design is producing recovery, the money is committed and the contractors are entrenched.

The reconstruction economy wasn’t a botched recovery effort. It was a functioning commercial system with a recovery label.

But suppose the contracts had gone to Iraqi firms. Suppose every dollar flowed through companies in Baghdad and Basra, managed by Iraqis, employing Iraqis. Would the reconstruction have produced a working economy?

No. And the reason exposes a problem deeper than who gets paid.

What reconstruction doesn’t build

The reconstruction enterprise operates under donor-country reporting requirements. Congress appropriated $60 billion for Iraq. That money carried obligations: measurable outcomes, auditable deliverables, quarterly progress reports. Reasonable accountability for public funds. Also a filter. Projects get funded to the degree they can be measured, reported, and completed within a budget cycle. A power plant has a commissioning date and a megawatt rating. A functioning commercial court does not. Neither does a culture of contract enforcement, a network of trusted commercial intermediaries, or a regulatory environment stable enough for a foreign investor to commit capital beyond a single budget cycle.

Douglass North drew the distinction that matters here. In Institutions, Institutional Change and Economic Performance, he separated formal institutions — the laws, regulations, and property rights that exist on paper — from informal ones: the norms of behaviour, customs of exchange, and relationships of trust that make formal rules operational. A property law means nothing without enforcement, and enforcement means nothing if the population doesn’t believe it will be applied consistently. Reconstruction sees the formal layer — destroyed buildings, missing infrastructure, broken systems — and builds replacements. The informal layer, which makes formal structures productive, is invisible to the procurement system. You cannot contract for trust.

Daron Acemoglu and James Robinson extended the insight. Institutions imposed by external actors without domestic accountability, they argued, tend toward extraction — serving whoever controls them rather than the population living under them. The description fits Iraq’s reconstruction precisely. Every project audited by American inspectors, funded by American appropriations, managed by American contractors. The Iraqi population was the notional beneficiary. In no operational sense was it the customer.

The CPA’s early decisions accelerated the institutional destruction. Orders 1 and 2, issued in May 2003, dissolved the Ba’ath Party and disbanded the Iraqi military, eliminating approximately 400,000 positions and removing the administrative apparatus through which the state had functioned. That apparatus was authoritarian and corrupt. It was also how permits got processed, how property disputes were mediated, how institutional memory was stored. What replaced it was not a functioning alternative but a vacuum, into which the reconstruction enterprise poured concrete while the institutional foundations stayed shattered.

De-Ba’athification did more than create unemployment. It erased the operational knowledge of the Iraqi state — the understanding of how decisions actually moved through the system, which local relationships mattered for enforcement, how the gap between written regulation and practical reality was navigated. This knowledge existed in people and in their relationships with each other, not in manuals or organisational charts. Removing 400,000 officials didn’t just create vacancies. It destroyed the human network that constituted the state’s functional capacity. Reconstruction then built physical infrastructure on top of this institutional void — as if the problem were missing buildings rather than missing institutional knowledge.

SIGIR documented the consequences in detail. Its “Hard Lessons” report in 2009 and the final report in 2013 described a recurring pattern: facilities completed to specification that deteriorated rapidly after handover. Water treatment plants ceased functioning within months because the Iraqi government lacked trained maintenance personnel, spare parts supply chains, and operating budgets. This is not a verdict on Iraqi capability. It is the inevitable result of building physical assets without investing in the human and institutional systems that keep them running. The reconstruction enterprise had no mechanism for such investment. Maintenance capacity is not a deliverable. You cannot put a completion date on it. And you cannot get it from a contractor rotating staff through twelve-month deployments.

The trajectory was consistent across sectors. SIGIR assessed hundreds of completed projects and found a recurring arc: construction to specification, handover ceremony, deterioration, abandonment. A primary healthcare centre built for a population of 25,000 would be completed, inspected, transferred to the Iraqi Health Ministry, and within a year lack the staff, supply chains, and operating budget to function as a clinic. The building stood. The healthcare centre did not. This gap — between a physical structure and a functioning institution — was the gap the reconstruction enterprise could not close, because its accounting tracked the structure and its architecture prevented it from investing in the institution.

Meanwhile, the things Iraq’s economy actually needed went unaddressed. Commercial legal frameworks became non-functional. Property records were destroyed or contested — try starting a business when you can’t prove you own the building. The informal credit networks that had financed small enterprise collapsed with the displacement of communities and the erosion of social trust. None of this made a project list. These aren’t projects. They’re conditions, and the reconstruction enterprise was built to deliver projects.

Consider a merchant in Basra in 2005, deciding whether to extend credit to a new supplier. Before the invasion, this transaction rested on a web of informal guarantees — a shared tribal connection, a mutual acquaintance who could vouch for reliability, an understanding that disputes could go to a local figure whose authority both parties recognised. Reconstruction destroyed the substrate for all three. Displacement scattered the communities that underwrote reputation. Violence eliminated local arbiters. The formal court system the CPA was building resolved nothing in practice. The rational decision was not to extend credit. Multiply that decision across every commercial transaction in every market in the country, and you have the difference between a reconstructed economy and a functioning one. No reconstruction project addressed this. No quarterly report to Congress could even describe the problem.

Even if every contract had gone to an Iraqi firm, the project selection criteria — megawatts, buildings, kilometres of road — would have produced the same outcome. The system’s blindness is not about who holds the contracts. It’s about what the system can see. An audit framework designed to track physical deliverables cannot measure institutional health. A reporting requirement built for congressional appropriations committees cannot quantify commercial trust. Reconstruction doesn’t just misallocate who gets the money. It misidentifies what the money should buy.

The Marshall Plan delusion

There is one case where post-war reconstruction worked — unambiguously, durably, at scale. It happened in Europe between 1948 and 1952. And it has been invoked to justify every reconstruction effort since, despite sharing almost nothing with any of them.

Every few years, someone calls for a new Marshall Plan. For Ukraine. For Africa. For climate. For the Middle East. Graham Allison observed that “the Marshall Plan has become a favorite analogy for policy-makers. Yet few know much about it.” Benn Steil, writing for the German Marshall Fund, noted that “hardly a year goes by” without the invocation. The phrase has detached from any specific policy content and become pure rhetorical gesture: it signals ambition and seriousness and means nothing more.

The analogy persists because it flatters. It says: we’ve done this before and it worked. It is also wrong in ways that are diagnostic, not incidental.

The European Recovery Program distributed approximately $13.3 billion — roughly $137 billion in today’s dollars — across 16 Western European countries. But the money wasn’t what made it work. The recipients were not shattered states. They were countries with intact legal systems, experienced bureaucracies, educated workforces, established commercial traditions, and recent memory of operating modern industrial economies. The factories were bombed. The institutions were not. The workforce knew how to run the factories. The bureaucracies knew how to process trade permits. The courts knew how to adjudicate commercial disputes. The Marshall Plan didn’t need to build any of this. It needed to restart it.

J. Bradford DeLong and Barry Eichengreen, in the definitive economic analysis of the programme, concluded that continued European recovery had been “held back by institutional and geopolitical factors rather than the lack of productive capacity.” The Marshall Plan didn’t create capacity. It provided capital and coordination to economies that already had the institutional machinery to deploy capital productively. Eva Bellin, in comparative research published through Harvard, stripped the mystique: post-war Germany and Japan were “a firm whose building has burned down” — the organisational knowledge, the trained workforce, the management systems were intact. Iraq was “like a firm that is putting a business together for the first time.”

What the Marshall Plan actually built

The European Recovery Program was not primarily a construction programme. Its central mechanism was the counterpart fund: recipient governments deposited local currency equivalents of American aid into special accounts, spendable only with US approval. This created leverage for structural reform — trade liberalisation, monetary stabilisation, reduced state controls — without direct American management of domestic economies. The OEEC, forerunner to today's OECD, was created specifically to coordinate implementation, embedding inter-European economic cooperation into the aid architecture. The Marshall Plan worked as a reform and coordination instrument that happened to include capital transfers. In no meaningful sense was it a reconstruction programme.

The comparison, applied to Iraq or Afghanistan or Bosnia, inverts the problem. It frames reconstruction as a capital shortage — buildings gone, money needed. Move enough money, build enough things, recovery follows. This framing conceals the actual constraint, which is institutional. And concealment serves the interests of the concealer: if reconstruction is a capital problem, the answer is contracts. If it’s an institutional problem, the answer is something no contractor can deliver and no appropriations committee can evaluate on a fiscal-year timeline. The analogy makes the problem solvable on terms that benefit the actors tasked with solving it.

Its persistence is itself the diagnostic. A comparison this wrong, surviving this long, invoked by people who should know better, is not a failure of historical memory. It is a technology — one that converts an institutional challenge into a capital challenge, so that the same actors who caused the destruction can profit from the repair.

Afghanistan proved the point at full scale. The United States spent approximately $148 billion on Afghan reconstruction over two decades, according to SIGAR’s final report in December 2025 — exceeding the Marshall Plan’s inflation-adjusted total for all of Europe. SIGAR found that $26 to $29 billion was lost to waste, fraud, and abuse — a staggering sum, but not the structural point. The structural point was that $148 billion and twenty years could not produce institutions capable of surviving the withdrawal. When American forces left in 2021, the entire state apparatus collapsed in weeks. The money bought buildings. The institutions that had never been built couldn’t collapse, because they’d never existed.

If the Marshall Plan predicts recovery and the actual architecture of reconstruction predicts dependency, the question becomes empirical. What does a “completed” reconstruction look like, twenty years on?

Bosnia and Kosovo answer the question. The answer is not encouraging.

The completed reconstructions

The objection to the Iraq case writes itself: Iraq was uniquely catastrophic. Too violent, too sectarian, too vast. Grant all of that. Now look at two cases where conditions were more favourable — smaller interventions, stronger coordination, European countries with institutional heritage. If the pattern holds here, the problem is the structure, not the circumstance.

Bosnia first. The Dayton Agreement ended the war in 1995 and opened the international aid taps. Approximately $5.1 billion in reconstruction money flowed in under a World Bank and European Commission priority reconstruction programme. The early economic growth this produced was not the product of domestic economic capacity but of the aid inflows themselves — growth that masked underlying structural weaknesses rather than resolving them. The trajectory since: official development assistance dropped from roughly 60% of gross national income in 1995 to about 1% by 2023. The economy did not replace aid with productive capacity. It replaced aid with remittances.

The numbers tell the structural story. Personal remittances ran at approximately 10.2% of GDP in 2023, according to World Bank data — double the global average. Manufacturing contributes roughly 13% of GDP, concentrated in low-value-added sectors: raw materials, basic metals, wood products. The country runs a structural trade deficit exceeding $6 billion annually, importing nearly twice what it exports. Foreign direct investment hovers below 4% of GDP despite three decades of theoretical stability — capital doesn’t flow to economies where productive capacity is weak, and productive capacity doesn’t develop where institutions can’t support it.

The population has declined roughly 24% since 2000, from about 4.16 million to 3.16 million. A 2021 UNFPA survey found that nearly half of Bosnia’s young people were considering emigration. Tens of thousands leave each year, disproportionately the educated and the skilled — the people an economy needs most to develop endogenous capacity.

Thirty years after Dayton, reconstruction’s visible outputs are in place: the roads, the buildings, the power grid. Underneath, an economy that never developed the internal capacity to sustain itself — hemorrhaging its most productive citizens to countries whose economies actually work.

Kosovo tells the same story more sharply. Unemployment fell from 57% in 2001 to 10.8% in 2024 — a headline that suggests progress until you check what underwrites it. Remittances constitute roughly 17.3% of GDP. Kosovo’s Central Bank has acknowledged that these flows are “mainly used for personal consumption, not for investment purposes.”

The mechanism is self-reinforcing. Remittances sustain consumption without requiring domestic production to meet it — imports fill the gap, widening the trade deficit. Employers compete for workers against the option of emigrating to higher-wage economies but cannot raise wages because domestic productivity is too low to support them. The most ambitious leave. Those who stay depend on money earned by those who left. The economy functions, after a fashion, but it functions on someone else’s productivity.

A peer-reviewed study in Development and Change applied rentier state theory directly to post-conflict Kosovo, examining the “unintended consequences of massive international presence in Kosovo for the local economy” and finding that external cash flows had crowded out domestic productivity, fostering rent-seeking over enterprise. Two and a half decades after intervention, Kosovo’s economy runs structurally on money earned by people who left. The reconstruction built the grid and the roads. It did not build an economy that generates enough wealth to keep its own population.

The pattern is specific enough to be predictive. Reconstruction succeeds on its own terms — infrastructure gets built, aid phases out, headline indicators improve. Underneath those indicators, the economy stays tethered to external money: first aid, then remittances. Productive capacity remains weak. The young emigrate. The institutional conditions for self-sustaining growth never materialise, because the reconstruction that paved the roads didn’t invest in building them. It built what it was designed to build — physical assets, reportable to donors, auditable by foreign oversight bodies, photographable for progress reports. What it was not designed to build — the institutional substrate that makes physical assets productive — it did not build. The omission was not an oversight. It was the design.

This is not a judgement on Bosnian or Kosovar society. It is the documented outcome of a model that builds hardware without software, counts deliverables without counting capacity, and defines success as completion rather than independence. Bosnia and Kosovo had every advantage Iraq lacked: smaller scope, less violence, proximity to the EU, stronger coordination. The model still produced dependency.

At what point does a pattern this uniform, across this many cases, stop being a run of bad luck and start being the system working as designed?

Every case was told its reconstruction would be the one that worked. Every case got the same product.

The next test is not hypothetical. It is assembling now, and the structural features that determined outcomes in Baghdad, Sarajevo, and Pristina are already visible in it.

The next reconstruction

On February 28, 2026, coordinated US-Israeli strikes hit Iranian nuclear facilities, military installations, and leadership compounds across the country, killing Supreme Leader Khamenei. A temporary ceasefire followed on April 7. Negotiations, conducted through Omani intermediaries, produced a tentative 60-day MOU around May 28 — covering the Strait of Hormuz, nuclear commitments, and sanctions waivers for Iranian oil sales. The MOU was never signed by President Trump. Iran suspended all negotiations on June 1, with Foreign Minister Araghchi declaring that the ceasefire “is unequivocally a ceasefire on all fronts, including in Lebanon. Its violation on one front is a violation of the ceasefire on all fronts.”

The diplomatic framework is unstable. But the reconstruction question doesn’t wait for diplomats. Iran’s nuclear programme has been set back by decades. Military installations lie in rubble. Civilian infrastructure sustained collateral damage across multiple provinces. Somebody will pay to rebuild this. The question is who, under what rules, and for whose benefit.

The reconstruction contestants

Four actors are positioning for Iranian reconstruction. China holds a 25-year, $400 billion strategic cooperation agreement with Iran, signed in 2021, and is widely regarded as the most likely lead — but Chinese trade with Saudi Arabia and the UAE each exceeds $100 billion annually, versus less than $15 billion with Iran, creating tension between reconstruction ambitions and Gulf commercial relationships. Russia benefits from the elevated oil prices regional instability produces but is resource-constrained by the Ukraine war. Gulf states are split: Saudi Arabia favours accommodation with Iran; the UAE has argued that military confrontation can yield "transformative change." A "new Middle Eastern quadrilateral" involving Egypt, Pakistan, Saudi Arabia, and Türkiye is reportedly taking shape, per the International Institute for Strategic Studies. The Trump administration has conditioned any peace framework on the Abraham Accords — requiring Saudi Arabia, Qatar, and Pakistan to normalise relations with Israel — subordinating Iranian reconstruction to a separate American geopolitical project entirely.

Watch the structural features reproduce.

Reconstruction will be financed and executed by external actors. Not a risk — a certainty. Iran’s institutional capacity, weakened by decades of sanctions and now by the destruction of its senior leadership and key facilities, cannot self-finance or self-manage a rebuild at this scale. The question is which external actors. Not whether.

And whichever ones prevail will bring their own commercial interests, their own accountability frameworks, their own definition of what “rebuilt” means. Chinese-led reconstruction follows Chinese procurement systems, employs Chinese firms, and serves Chinese strategic priorities — energy corridors, Belt and Road infrastructure, port facilities. American-conditioned reconstruction follows the procurement logic documented in Iraq. The financing power’s commercial interests shape what gets built. They always have.

Consider the most likely scenario. China’s strategic interests in Iran centre on energy security and Belt and Road connectivity — access to Iranian oil and gas, and a corridor linking China to the Mediterranean through Iranian territory. Chinese reconstruction would prioritise energy infrastructure, port facilities, rail connections, and the large-scale physical projects that China’s state-owned construction firms specialise in delivering. Chinese workers would fill the technical positions. Procurement would run through Chinese commercial channels. The pattern is documented across Chinese infrastructure investment in Africa and Central Asia: impressive physical assets serving Chinese strategic connectivity, generating limited local employment, limited technology transfer, limited institutional development. The buildings go up. The capacity stays with the builder.

An American-conditioned scenario would look different in its particulars and identical in its structure. American reconstruction would prioritise the sectors that serve American strategic interests — nuclear containment, security architecture, regional energy markets — and would run through procurement systems whose logic was documented in Iraq a generation ago.

The projects selected will be those the financing power can report as completed. Visible infrastructure. Countable outputs. The Iranian equivalents of Iraq’s power plants. Not the institutional work Iran actually requires: governance structures for a post-Khamenei political order, commercial legal frameworks capable of attracting investment, regulatory capacity, the social cohesion that decades of authoritarian rule and sanctions and now military devastation have eroded. These are not projects. They will not appear on project lists.

And the Marshall Plan analogy will surface. It may already be in the policy briefs. Someone — an American senator, a European commissioner, a Gulf sovereign wealth fund director — will propose a “Marshall Plan for Iran,” invoking the one case where reconstruction worked to justify a design that reproduces every case where it didn’t. The framing will convert an institutional crisis into a contracting opportunity, obscuring that Iran’s binding constraint is governance capacity, not rubble. The analogy will be accepted because it flatters the actors who stand to profit from it — just as it was accepted for Iraq, for Afghanistan, and for every reconstruction that followed the same design to the same result.

The historical record generates predictions specific enough to test. If Iranian reconstruction follows the documented pattern — and nothing in current positioning suggests a departure — it will prioritise large visible infrastructure over institutional rebuilding; contracts will flow to non-Iranian firms under accountability structures designed in Beijing or Washington, not Tehran; physical assets will rise and deteriorate for want of the maintenance capacity reconstruction never invests in; and the economic activity generated will flow primarily to the reconstructing entities, not the Iranian population. If Bosnia and Kosovo represent the long-term trajectory, the result will be an economy dependent on external financial flows rather than domestic productive capacity.

Iran has one advantage Iraq never did. Its institutional base — the educated population, the bureaucratic capacity, the industrial know-how — survived the strikes in ways Iraq’s institutions did not survive the occupation. If reconstruction were designed to support that base, the prognosis would be genuinely better than Iraq’s. Iran has more of the Marshall Plan preconditions than Iraq ever did.

But institutional capacity is not self-activating. It matters only if the reconstruction design engages it — if contracts require Iranian firms, if project management develops Iranian capacity, if accountability runs to Iranian institutions rather than to the financing power’s audit apparatus. None of the four actors currently positioning for the work has an incentive to design it this way. China wants energy corridors. The US wants nuclear compliance. Russia wants elevated oil prices. The Gulf states want a weakened rival. Each objective can be served by the standard reconstruction model. None requires Iranian institutional recovery.

Reconstruction will be designed to serve whoever is paying for it. That is the finding. That is what the evidence shows across every documented case. And nothing in the positioning of any of the four principal actors suggests an intention to design it differently.

None of this is inevitable. It is the default. And defaults prevail unless someone actively, structurally decides otherwise — not in a policy brief or a speech, but in the contract terms, the procurement rules, the accountability relationships, the project selection criteria. The design choices that actually determine outcomes. The choices that, in every previous case, were set to serve the donor.

Bowen’s verdict — “Not enough was accomplished for the size of the funds expended” — has become the standard epitaph for reconstruction. It appears in every retrospective, every lessons-learned report, every op-ed calling for a smarter approach next time. The sentence contains a buried assumption: that accomplishment was the point.

The reconstruction economy has its own logic, its own beneficiaries, its own metrics. By those metrics — contracts awarded, projects completed, audits passed, money disbursed — the enterprise works exactly as designed. The $60 billion was not a failure for the firms that collected it.

The question for Iran is not whether reconstruction happens. It will. Too much money to be made. The question is whose economy the spending is designed to build. And the best predictor — better than donor intentions, better than committed amounts, better than the next Marshall Plan invocation — is the contract structure. Who gets the work. Who defines what “done” looks like. Who the completed projects answer to.

That information will be knowable before the first contract is signed. It is knowable now, in the positioning already underway. And if the pattern holds — as it held in Iraq, in Bosnia, in Kosovo, in Afghanistan — that information will tell you whether Iran gets a recovery or a renovation.

The historical record is not a warning. It is a diagnostic. The question is whether anyone with authority over the next round of contracts is willing to read it.

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Al-Rahman Mosque in Baghdad, Iraq – Wikipedia

Key Sources and References

Special Inspector General for Iraq Reconstruction, “Learning from Iraq: A Final Report from the Special Inspector General for Iraq Reconstruction,” March 2013. Available at: https://www.globalsecurity.org/military/library/report/2013/sigir-learning-from-iraq.pdf

Special Inspector General for Iraq Reconstruction, Final Quarterly Report to the United States Congress, September 2013. Available at: https://oversight.garden/reports/sigir/Report_-_September_2013

Special Inspector General for Iraq Reconstruction, “Hard Lessons: The Iraq Reconstruction Experience,” 2009. Available at: https://archive.org/details/HardLessonsTheIraqReconstructionExperience

“And The Winner For The Most Iraq War Contracts Is… KBR, With $39.5 Billion In A Decade,” International Business Times, March 2013. Available at: https://www.ibtimes.com/winner-most-iraq-war-contracts-kbr-395-billion-decade-1135905

“Halliburton contracts balloon,” Center for Public Integrity / International Consortium of Investigative Journalists. Available at: https://publicintegrity.org/national-security/halliburton-contracts-balloon/

Bechtel, “USAID Awards Bechtel National Iraq Infrastructure II Contract,” press release. Available at: https://www.bechtel.com/press-releases/usaid-awards-bechtel-national-iraq-infrastructure-ii-contract/

“IRAQ: Bechtel ends Iraq rebuilding after a rough 3 years,” CorpWatch. Available at: https://www.corpwatch.org/article/iraq-bechtel-ends-iraq-rebuilding-after-rough-3-years

Bunnatine Greenhouse testimony before the Senate Democratic Policy Committee, June 27, 2005. Background: “Whistleblower exposes $7 billion no-bid Defense Department contract,” CBS News, June 30, 2019. Available at: https://www.cbsnews.com/news/halliburton-whistleblower-on-exposing-7-billion-no-bid-defense-contract-2019-06-30/

Douglass North, Institutions, Institutional Change and Economic Performance, Cambridge University Press, 1990.

Daron Acemoglu and James Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Crown, 2012.

Coalition Provisional Authority Order Number 1, “De-Ba’athification of Iraqi Society,” May 16, 2003; Coalition Provisional Authority Order Number 2, “Dissolution of Entities,” May 23, 2003.

Graham T. Allison, endorsement of Benn Steil, The Marshall Plan: Dawn of the Cold War, Simon & Schuster, 2018.

Benn Steil, “Why It Is So Hard to Repeat the Marshall Plan,” German Marshall Fund, June 6, 2022. Available at: https://www.gmfus.org/news/why-it-so-hard-repeat-marshall-plan

J. Bradford DeLong and Barry Eichengreen, “The Marshall Plan: History’s Most Successful Structural Adjustment Program,” NBER Working Paper No. 3899, November 1991. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=226738

“Looking at Germany, Japan, Iraq: A tale of three occupations,” Harvard Gazette, March 2004. Available at: https://news.harvard.edu/gazette/story/2004/03/harvard-gazette-looking-at-germany-japan-iraq-a-tale-of-three-occupations/

Special Inspector General for Afghanistan Reconstruction, Final Report, December 2025. Available at: https://www.sigar.mil/Portals/147/Files/Reports/sigar-final-report.pdf

World Bank, “A Journey from Post-Conflict Reconstruction to Sustainable Development: Bosnia and Herzegovina,” July 2024. Available at: https://thedocs.worldbank.org/en/doc/d93115fde0df25367306f4e6feb9b333-0410012024/original/BiH-publication-A-Journey-170724.pdf

World Bank, “Personal remittances, received (% of GDP) — Bosnia and Herzegovina,” 2023 data. Available at: https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=BA

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