Coalition economic policies in Iraq: motivations and outcomes

Abstract

Explanations of the current violence and instability in Iraq range from stubborn ethnic rivalries to insufficient troop levels. While not contesting these hypotheses, this essay nonetheless posits an alternative position: inappropriate economic policies. The Coalition Provisional Authority's abrupt liberalisation of prices and markets aimed to improve efficiency in the allocation of resources and to expand output, yet resultant joblessness has promoted insecurity, which, in turn, has reduced Iraq's already low capacity to absorb investments, essential for transition. Moreover, Coalition measures have reinforced public anxiety about the arbitrary nature of markets, underlining the historically uncertain character of property rights and ironically fuelling resistance to future reform. People-centred approaches, structured around a guaranteed public employment scheme, offer an alternate economic path.

Notes

1 See Jeffrey Sachs, ‘What is to be done?’, The Economist, 13 January 1990, pp 19 – 24.

2 See, for example, Keith Griffin & Azizur Khan, ‘Lessons for Russia and Eastern Europe from the Chinese Experience’, in Keith Griffin (ed), Studies in Globalization and Economic Transitions, New York: St. Martin's Press, 1996, pp 150 – 191.

3 See John Marangos, Alternative Economic Models of Transition, Burlington, VT: Ashgate, 2004, ch 4.

4 Griffin & Khan, ‘Lessons for Russia and Eastern Europe’.

5 Haris Gazdar & Athar Hussain, ‘Crisis and response: a study of the impact of economic sanctions in Iraq’, in Kamil A Mahdi (ed), Iraq's Economic Predicament, Reading: Ithaca Press, 2002, p 36.

6 Calculated from Organization of Petroleum Exporting Countries (opec), Annual Statistical Bulletin 1998, Vienna: opec, 1999, pp 4 – 7, 24.

7 Calculated from the UN Economic and Social Commission for Western Asia (unescwa), Statistical Abstract of the escwa Region, New York: unescwa, 1997, p 214; and unescwa, Statistical Abstract of the escwa Region, New York: unescwa, 2001, p 153.

8 Gazdar & Hussain, ‘Crisis and response’, p 39.

9 Congressional Research Service, Iraq's Economy: Past, Present, Future, Report for Congress, 3 June 2003, pp 25 – 26, at http://www.export.gov/iraq/pdf/crs_iraq_economy.pdf, accessed 8 October 2005.

10 Bassam Yousif, ‘Development and Political Violence in Iraq, 1950 – 1990’, PhD dissertation, University of California, Riverside, CA, 2001, ch 3.

11 International Crisis Group (icg), Reconstructing Iraq, icg Middle East Report No 30, 2 September 2004, Amman/Baghdad/Brussels: icg, p 6.

12 Christopher Foote, William Block, Keith Crane & Simon Gray, ‘Economic policy and prospects in Iraq’, Journal of Economic Perspectives, 18 (3), 2004, p 55.

13 icg, Reconstructing Iraq, p 1.

14 For exchange rate statistics since October 2003, see Brookings Institution, ‘Iraq Index: tracking variables of reconstruction & security in post-Saddam Iraq’, at http://www.brookings.edu/fp/saban/iraq/index.pdf, accessed 8 October 2005.

15 Foote et al, ‘Economic policy and prospects in Iraq’, p 64.

16 Ibid, p 66.

17 icg, Reconstructing Iraq, p 5.

18 Unemployment data for these provinces are unavailable, but since their combined population is only 15% of the total, the unemployment data for the entire country are unlikely to be changed significantly by the addition of the missing data.

19 Iraqi American Chamber of Commerce and Industry (iacci), ‘Conditions and expectations for private enterprise in Iraq’, p 4, at http://www.cipe.org/pdf/iraq_survey_final.pdf, accessed 8 October 2005.

20 Ian Little, Tibor Scitovsky & Maurice Scott, Industry and Trade in some Developing Countries: A Comparative Study, Oxford: Oxford University Press, 1970.

21 Quoted in icg, Reconstructing Iraq, pp 17 – 18.

22 Ibid.

23 John Howley, The Iraq Jobs Crisis, Education for Peace in Iraq Center, Issue Brief No 1, June 2004, p 2, at http://www.transafricaforum.org/documents/EPIClaborreport.pdf, accessed 8 October 2005.

24 Ibid, p 3.

25 United Press International (upi), ‘Iraq unemployment drops despite violence’, 4 December 2004, at http://washingtontimes.com/upi-breaking/20041204-061822-5610r.htm, accessed 8 October 2005.

26 Brookings Institution, ‘Iraq Index’.

27 icg, Reconstructing Iraq, p 1.

28 Brookings Institution, ‘Iraq Index’.

29 Quoted in Foote et al, ‘Economic policy and prospects in Iraq’, p 58.

30 Ibid, p 55.

31 Ibid.

32 Brookings Institution, ‘Iraq Index’.

33 Karl Vick, ‘Children pay cost of Iraq's chaos’, Washington Post, 21 November 2004, at http://www.washingtonpost.com/wp-dyn/articles/A809-2004Nov20.html?sub=AR, accessed 8 October 2005.

34 Les Roberts, Riyadh Lafta, Richard Garfield, Jamal Khudairi & Gilbert Burnham, ‘Mortality before and after the 2003 invasion of Iraq: cluster sample survey’, Lancet, 364, 20 November 2004, pp 1857 – 1864, suggest that the war resulted in 100 000 civilian deaths.

35 See Steven Komarow, ‘US chipping away at al-Qaeda leadership, but attacks climbing’, USA Today, 2 October 2005, at http://www.usatoday.com/news/world/iraq/2005-10-02-iraq-leaders_x.htm, accessed 23 October 2005.

36 ‘When deadly force bumps into hearts and minds’, The Economist, 1 January 2005, pp 30 – 32.

37 Naomi Klein, ‘Baghdad year zero’, Harper's, September 2004, pp 43 – 53.

38 Jonathan Weisman, ‘US plans to divert Iraq money’, Washington Post, 15 September 2004, at http://www.washingtonpost.com/wp-dyn/articles/A21489-2004Sep14.html, accessed 8 October 2005.

39 icg, Reconstructing Iraq, p 2.

40 US Department of State, ‘Iraq weekly status report’, 28 September 2005, p 23, at http://www.state.gov/documents/organization/54230.pdf, accessed 8 October 2005.

41 Ibid.

42 Calculated from ibid.

43 See Center for Strategic and International Studies (csis), Progress or peril? Measuring Iraq's reconstruction, December 2004, p 3, at http://www.csis.org/isp/pcr/iraq_funds.pdf, accessed 23 October 2005. For an exploration of the role of corruption in Iraq's reconstruction, see Philippe Le Billon, ‘Corruption, reconstruction and oil governance in Iraq’, Third World Quarterly, 26 (4/5), 2005, pp 685 – 703.

44 Ibid, p 696.

45 icg, Reconstructing Iraq, p 2.

46 Calculated from imf, Iraq: Statistical Appendix, Report No 05/295, Washington DC, August 2005, pp 8, 11, at http://www.imf.org/external/pubs/ft/scr/2005/cr05295.pdf, accessed 5 October 2005.

47 icg, Reconstructing Iraq, p 2.

48 Foote et al, ‘Economic policy and prospects in Iraq’.

49 Klein, ‘Baghdad year zero’, p 49.

50 Griffin & Khan, ‘Lessons for Russia and Eastern Europe’.

51 Joseph Stiglitz, ‘Iraq's next shock will be shock therapy’, Project Syndicate, February 2004, at http://www.project-syndicate.org/commentaries/commentary_text.php4?id=1476&lang=1&m=contributor, accessed 15 October 2005.

52 See Jeffrey Sachs, ‘Consolidating capitalism’, Foreign Policy, 98, 1995, pp 50 – 64.

53 Marangos, Alternative Economic Models of Transition, p 106.

54 Brookings Institution, ‘Iraq Index’.

55 Tareq Y Ismael & Jacqueline S Ismael, ‘Whither Iraq: beyond Saddam, sanctions and occupation’, Third World Quarterly, 26 (4/5), 2005, p 624.

56 Sultan Barakat, Margaret Chard & Richard Jones, ‘Attributing value: evaluating success or failure in post-war reconstruction’, Third World Quarterly, 26 (4/5), 2005, p 835.

57 Foote et al, ‘Economic policy and prospects in Iraq’.

58 Ibid, p 68.

59 See Kiren Aziz Chaudhry, ‘Consuming interests: market failure and the social foundations of Iraqi etatisme’, in Kamil A Mahdi (ed), Iraq's Economic Predicament, Reading: Ithaca Press, 2002, pp 233 – 265.

60 Ibid, pp 236 – 241. For estimates of inflation and declining real earnings in this period, see Hanna Batatu, The Old Social Classes and Revolutionary Movements of Iraq, Princeton, NJ: Princeton University Press, 1978, pp 471, 474.

61 Peter Sluglett, Britain in Iraq 1914 – 1932, London: Ithaca Press, 1976, p 231.

62 Phoebe Marr, ‘Comment on Isam al-Khafaji, “The myth of Iraqi exceptionalism”’, Middle East Policy, 7 (4), 2000, p 90.

63 George Packer, ‘The next Iraqi war?’, The New Yorker, 4 October 2004, pp 64 – 79.

64 imf, Iraq Staff Report for the Article IV Consultation, 8 July 2005, p 30, at http://www.export.gov/iraq/pdf/imf_report_0805.pdf, accessed 5 October 2005.

65 Foote et al, ‘Economic policy and prospects in Iraq’, p 50.

66 See Keith Griffin & Terry McKinley, Implementing a Human Development Strategy, New York: St Martin's Press, 1994.

67 US military commanders used funds under the Emergency Response Program, designed for humanitarian relief and reconstruction, to pay for precisely such activities. However, because only $140 million was allocated, the impact of the programme was insignificant. See icg, Reconstructing Iraq, p 18.

68 Oil output has yet to regain its pre-war, 1999 – 2001, level. See Congressional Research Service, Iraq Oil: Reserves, Production and Potential Revenues, 13 April 2005, pp 1 – 2, at http://www.fas.org/sgp/crs/mideast/RS21626.pdf, accessed 6 October 2005.