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Iraq
Economic policy mistakes hurt Iraq: US official
2007-08-13
Interesting article. It's not as simple as it sounds, but getting some prosperity back into the country would help convince some that feudin' 'n fightin' is a losing game.
BAGHDAD - Years of economic policy mistakes after the fall of Saddam Hussein left unemployed young Iraqis easy targets for recruitment by Al Qaeda and other insurgents, a US Defense Department official said on Sunday. Paul Brinkley, deputy under-secretary of defense for business transformation in Iraq, said IraqÂ’s shattered industrial base had to be revitalised to bring down unemployment levels of about 60 percent and help reconciliation.

He said political, social and economic stability would be much easier if factories, many left idle since the 2003 invasion to topple Saddam, could win even a small fraction of the trade the United States conducts every year with economies like China, India, Indonesia and Thailand. “If we could just get some of that factored into Iraq we’d uplift the lives of every Iraqi and Al Qaeda wouldn’t have any people to recruit,” Brinkley told Reuters in an interview.

Brinkley said early economic planners had made the understandable mistake of assuming that a free market would rapidly emerge to replace what he described as Saddam’s ”kleptocracy”, and create full employment. This mistaken assumption led to a series of decisions which ”sowed the seeds of economic malaise and fuelled insurgent sympathies” after industrial production collapsed and imports flooded in to replace locally made goods.

Brinkley said unemployment and under-employment of the proportions in Iraq would create unrest in any country. In a recent Military Review article he said Iraq’s unrelenting violence “is in no small part a result of economic distress”.

Increased industrial output creating more jobs would help Iraq achieve the reconciliation between the warring Shia majority and the Sunni Arab minority dominant under Saddam that politicians have so far been unable to bring about. “The job of political reconciliation is infinitely simplified when you have people trading with each other,” said Brinkley, who heads a task force, formed in late 2006, which works closely with the U.S military in Iraq.

Current policy needed to reflect pre-2003 conditions, when more than a decade of U.N. sanctions on Iraqi products had the indirect effect of leaving IraqÂ’s Shias, Sunni Arabs and Kurds with no choice but to trade among themselves.

Brinkley’s task force is now assessing factories across Iraq’s industrial base, from textiles to petrochemical industries, engineering and agriculture, to find suitable candidates for micro-financing grants. “These factories used to sell to each other. They couldn’t export, so Sunni, Shia and Kurd traded with each. They haven’t done that for several years,” he said.

Nine factories, from among 65 assessed by BrinkleyÂ’s task force, have already received funds from $50 million designated this year by the US Congress for industrial revitalisation. Brinkley said the $50 million was about $150 million short of what some estimates said would be needed but the US and Iraqi governments would likely be easily persuaded to contribute more if early successes were made.

Iraq’s deputy industry minister, Sami Al-Araji, said his department was working on a plan to have a small number of Iraqi textile products like men’s suits in US department stores by Thanksgiving or Christmas this year. “We thought we’ll start modestly,” Araji told a news conference. “You could call it a public relations campaign.”
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#3  Missed in this discussion is the reciprocal point: Terrorist activity hurts investment. You just have to look at the Kurdish and Shia areas to notice how much more economic activity there is in those areas.

The Sunni (like the Whites in South Africa) could have used their greater wealth and managerial expertise to regain a strong position in Iraq. Instead they tried to terroize their way back into power. Now, not only are they out of power, but they're poor besides.

Al
Posted by: Frozen Al   2007-08-13 12:21  

#2  OK Paul, let me explain the matter to you. As was pointed out by a man of extraordinary perception, people come in three categories: makers, fakers, and takers. Arabs are takers by preference, or fakers by necessity. Nothing anyone can do---short of extermination & re-population, can give Iraq a sound economy.
Posted by: gromgoru   2007-08-13 07:15  

#1  Reasonable as far as it goes. But "unrest" and lethal quasi-military or terrorist activity are far from the same thing. I'd submit that the refusal (not too strong a word) to restore/establish order, and to crush resistance in the readily identifiable places it was centered, was far, far more important than economic malaise.

A young Iraqi will not take $400 to plant an IED if he thinks (1) there's a decent chance he'll be killed, wounded, or captured (2) there's a decent chance his neighborhood, clan, or family will be subject to property/business confiscation, preventive detention, and other harsh penalties (3) he's seen or heard about other communities that were essentially shut down, put on WFP rations, and had their military-age males detained or punitively monitored and restricted.

Establishing order through intimidation and force is very hard, but can be done and done fairly quickly. Undercutting the economic motivation for misbehavior is even harder, and by definition takes much, much longer. So which did we choose? Neither, in most of Anbar and other Sunni areas that were the key to the problem.

Biggest economic policy mistake - not deregulating petroleum and energy immediately. Maintaining artificial prices had the predictable distorting effect on the local economy, but even more important created huge mafias built on oil smuggling (i.e., gave life to existing, and created new, clan and organized criminal networks built on oil smuggling). These criminal networks are a key part of the overall problem with order and rule of law.
Posted by: Verlaine   2007-08-13 01:08  

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