In late March I was sitting in a café in the center of Dili, capital of East Timor. All around me, foreign aid workers, government civil servants, and a few businesspeople sipped espressos and snacked on sweet Portuguese cakes, a legacy of Timor's former colonial master. Across the table, Eduardo Massa, head of Dili's major travel company, explained his hopes for turning Timor into a high-end ecotourism destination, like a smaller version of Bali or Thailand. "I've bought up land so we can build up hotels for the future," Massa told me.

From the café, I headed to the Dili waterfront, where I met the local representative of one of the major donor agencies in Timor--most of which had claimed the tiny, young state as a clear reconstruction success story. The Timorese leaders "are very aware of the pitfalls, and they've been good in seeking help--Timor has a bit of a desire to do things differently," she said.

Within two months, Eduardo's vision--and his entire nation--had collapsed into an orgy of communal violence. Mobs of militias rampaged through downtown Dili, burning much of the city to the ground and engaging in street battles that have left at least 30 people dead, some 100,000 people scurrying to temporary camps, and a food crisis emerging. The idea of Timor as a success story has vanished as well, providing a lesson for other potential future United Nations operations.

But in reality, Timor, the world's newest nation, was never the U.N. triumph it appeared to be. After 1999, when tiny Timor voted to separate from Indonesia, which had taken over the territory when Portugal left in 1975, militias linked to the Indonesian army leveled East Timor, leaving much of the country in ruins. The United Nations stepped in, taking a mandate in Timor until 2002, the first time in history the United Nations had completely run a nation. After Timor officially gained its independence in 2002, the United Nations maintained a sizable presence in the country, along with a hydra of other major non-governmental organizations.

By the end of 2005, the United Nations and other agencies were showering themselves with praise for their work in Timor. Timor seemed relatively stable, and it appeared to have developed a vibrant civil society and a nascent democracy. One of the former U.N. negotiators involved in Timor's transition published a memoir showing how the United Nations had overcome major odds and helped Timor onto the path of success. When World Bank President Paul Wolfowitz visited Timor this April, he lavished plaudits on the country for its "functioning economy and vibrant democracy." In last year's U.N. progress report on Timor, delivered to Secretary General Kofi Annan, the organization announced, "The overall situation [in Timor] ... remained calm and stable."

But this praise concealed serious problems--problems the United Nations seemed to ignore or even make worse. Despite Wolfowitz's praise, in reality the Timorese government had done little to promote broader economic growth, and has shown worrying signs of high-level corruption--trends some staff in Wolfowitz's own organization had warned about.

Indeed, today Timor is the poorest nation in Asia, with unemployment rates topping 50 percent. Though the United Nations' presence initially created thousands of jobs for locals and pumped money into the economy, the organization did little to help ensure that these Timorese would be able to find work after the blue helmets left. When the United Nations began to draw down some of its operations in 2002, many Timorese immediately lost their source of employment, and the U.N.-created economic bubble collapsed, with Timor's economy actually shrinking.

It's not hard to find those unemployed. Everywhere I went on the tiny island, I saw crowds of idle young men gambling over cockfights, brawling, or begging for small change in the streets; famine has affected parts of the island, despite its lush climate and rich rice fields. Some of these unemployed hailed from the ranks of former Timorese guerilla fighters, and now make up the militia groups terrorizing Dili. Meanwhile, foreign aid workers cruise Timor in late-model 4x4s, shopping at supermarkets stocked with imported Australian cheese and Victoria Bitter beer--one reason, perhaps, why previous bursts of violence in Timor have led to the targeting of foreigners.

And despite the veneer of democracy, Timor's political leaders have consolidated power around themselves. The former prime minister, Mari Alkatiri, who ruled Timor after independence in 2002, punished dissenters in his political party and helped pass new laws criminalizing dissent, striking fear into average Timorese. Politicians gained the allegiance of Timor's police and security forces, adding to internal strife. Yet the United Nations said nothing, even though, as Australia's Age newspaper recently reported, it had "multiple warnings of the looming internal security crisis."

During recent protests in Dili, some demonstrators even accused Alkatiri of creating a hit squad to rub out other political leaders. It is an accusation he denies, and though the protests forced him to step down from his position, Alkatiri then gave a fiery speech that may have been an attempt to rally his supporters to more violence.

The young country has no semblance of a working judicial system to combat the excesses of politicians like Alkatiri. As one report on the U.N. reconstruction noted, the United Nations "adopted a piecemeal approach to establishing a justice system"--so much so that, one foreign aid worker in Timor remembered, the Timorese judges administering trials in Dili actually wound up doing very little. "It was a very Western process dragged into the country," she said.

All these problems contributed to the recent anger and violence. Yet, satisfied with its effort, the United Nations and other foreign forces began to draw down the intervention in Timor too quickly, before the country had stabilized. "The United Nations defined Timor as a great success--but they measured October 1999 [when the Indonesian-linked militias leveled the island] as ground zero. They should be measuring from before that," said Charlie Scheiner, co-founder of the East Timor Action Network, a leading Timor monitoring group. This month, in fact, the top U.N. official in Timor finally admitted that "the Security Council was too optimistic" about Timor and the blue helmets had left too soon.

Now, multinational forces have arrived back in Timor, in an attempt to restore order once again, with Australian peacekeepers descending on Dili. Maybe this time they won't be so quick to congratulate themselves.

Joshua Kurlantzick is the New Republic's special correspondent.

This article originally appeared on The New Republic Online, and is available here.