Driving a Dangerous Course:
Obstacles to Iraq's Macroeconomic Health
by Steven Saus, Wright State UniversityDespite the opinions of my wife and children, I do not always like being right. This paper is an excellent case in point.
Second Gulf War, combined with the effects of a decade of general
sanctions, left Iraq’s infrastructure in shambles. Some degree of
reconstruction was – and is still – necessary to allow Iraq to fully
rejoin the world economy. It is not just a matter of justice, or
humanitarian need. As other’s research has shown, economic
stability is strongly correlated with political stability.
A politically stable Iraq – and Middle East – is in the interests of
the United States. Therefore, creating a robust Iraqi economy is
vital to the national security of the United States.
Bush administration has compared the reconstruction of Iraq to the
Marshall Plan. Despite that allusion, the methodology chosen for
reconstruction has ignored several relevant historical examples.
This paper identifies two major obstacles to Iraq’s continued economic
growth: (1) the shift in funding of reconstruction from donations
from the United States and its allies to IMF loans, with the policy
restrictions such loans incur; and (2) the trend of placing highly paid
contractors in supervisory positions instead of Iraqi nationals.
It outlines the specific detrimental effects each of these can have on
the economy of Iraq.
This paper argues that the historical
precedents of the Treaty of Versailles, the effects of IMF policies in
Nicaragua, and the British Raj in India all have great relevance to the
economics of Iraq in 2006, and the problems it faces. The
examination of these examples’ failures leads directly to suggested
methods to avoid the pitfalls of the past.
Since the first words
of this paper were written, there has been a large increase of violence
and political strife in Iraq. The intensity and frequency of the
conflict has grown to the point where many are calling it a civil
war. I have to wonder how much of this violence was preventable,
how much is tied to the problems in Iraq’s economy. I wonder if
it is already too late, if the problems presented here are now playing
out in bloody partisan battles. I hope that my bleak analysis of
Iraq’s economy is completely wrong.
I am very much afraid that I am right.
Read the full paper here as a PDF.
This paper was presented at the 2006 AURCO conference. The slideshow with the text of the presentation is available here.
All text of this work is original, and is copyrighted under a Attribution-NonCommercial-NoDerivs Creative Commons license