The headline had a dramatic tone — “Economy Hurting Iraq More Than Violence” — but it is probably right in a simplistic way. The underlying story illustrates the immensity of the “nation-building” task the United States faces in Iraq, an immensity that U.S. officials obviously did not appreciate going into the war.
The gist of the Inter Press Service article was that high unemployment, stagnant output and low incomes posed greater problems for most Iraqi households than fighting between insurgents and coalition forces or between different factions in Iraqi society.
The authors went on to blame the U.S. Provisional Authority for inept economic decision-making and the Bush administration for failing to pump enough money into the country to spur economic recovery. Regardless of whether one agrees with that assessment, the state of Iraq’s economy clearly is an important challenge for U.S. policy-makers.
People experienced in the problems of poor countries know that economic woes almost always trump political violence in importance. People from wealthy countries tend to note dramatic events — ethnic strife in Rwanda or Sri Lanka, famine in Ethiopia or Mali. But the day-in-day-out grinding down of people by inadequate health care and bad nutrition causes much more human suffering in poor countries than civil war and natural disasters.
If Iraq’s economy is stagnant, the resulting human cost might well outweigh that of highly publicized fighting.
U.S. decision-makers clearly underestimated their task. The apparent sophistication of the Iraqi economy and the once-high living standards of many Iraqi households may have blinded them to the scope of the problem.
As weapons inspections revealed, Iraq could construct and operate complex chemical and engineering works to fabricate rockets and other armaments. Its construction firms could build large airfields, munitions bunkers and other military complexes.
Moreover, history clearly showed that urban Iraqis had enjoyed some of the highest levels of consumption in the region — at least until their country attacked Iran in 1980.
The apparent technological mastery and affluence were not, however, the product of a sound, diversified economy. They resulted from enormous oil wealth relative to the population. Some was used effectively: Iraq had some of the best education and health care of any Arab country. But much was wasted on armaments or flowed into the foreign bank accounts of Saddam Hussein, his family and his cronies.
As U.S. Deputy Defense Secretary Paul Wolfowitz’s assertion that Iraq could “pay for its own reconstruction” demonstrated, the administration thought that Iraq’s oil industry could rapidly recover as an engine of economic growth.
That did not prove true. Twenty-five years of mismanagement and disinvestment by Saddam’s regime coupled with bombing in the 1991 gulf war left the oil sector in a shambles.
Moreover, the extensive layout of a petroleum industry in a thinly populated country like Iraq makes it an easy target for sabotage by insurgent forces. Heroic efforts have gone into rehabilitating the country’s decrepit oil facilities during the past 16 months, but they remain subject to repeated attacks on pipelines and loading facilities.
The larger question is how to foment broad-based economic growth in an economy weighed down by a legacy of corrupt cronyism and Baathist central planning. There are good examples of countries that adopted policies that led to dramatic growth, South Korea and Taiwan being among the best. But there are no historical examples of one country making another country grow.
Neoconservatives in the administration, of course, pointed to the post-World War II reconstruction of Germany and Japan under Western occupation governments. Both these nations, however, had been functioning industrial quasi-market economies before losing the war. Their physical infrastructure was devastated, but their citizens still knew how to run complex modern industries.
Iraq never has had broad-based growth or prosperity that did not stem from bountiful oil. The current challenge is orders of magnitude more difficult than that faced by Gens. Douglas MacArthur and Lucius Clay.
U.S. citizens tend to remember the appropriation of nearly $90 billion for Iraqi reconstruction in mid-2003. Few understand that only a small fraction of that sum has actually been spent in the country so far.
U.S. military commanders down to brigade level controlled a few million dollars to finance small community reconstruction projects in their areas of operation. Historians well may conclude that if these sums had been a hundred times larger, the United States would have encountered greater success. But it is an uphill fight now.
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.