Bill Jamiseon on the Iraqi Economy

If I were to ask you, "Just how badly is the Iraqi economy doing?" you'd rightly condemn the inherent bias in my question.

Similarly if Bill Jamiseon of the Scotsman asks us , "How will Iraq�s economy be run after June 30? And does it stand a fighting chance?" we know we're in for a rough ride.

After recounting the nominal change in central government control, the attacks on, and the defense and rebuilding of Iraq's oil industry, the enactment of the central bank law, the attempt ease the foreign debt burden racked up by Saddam, the massive amount of private and government funds creating new jobs rebuilding after more than a decade of infrastructure neglect, and noting that the Economist predicts that GDP will grow 60% this year and 25% the next, he still insists that the road to recovery is "invisible to many".

If he wants a few micro level anecdotes--from Iraqis and visible to Iraqis--, he should read Omar, who questions his media's insistence that unemployment is rife, and talks about the amazing increase in real total compensation for some.

We are told by Mr. Jamiseon:

Even assuming that the formidable security and political problems can be overcome, rebuilding Iraq�s economy will not be easy.
Question: Why should the basic rules of Iraqi economic expansion, progress, and prosperity be any different than those that apply to the US, India, Chile, or Afghanistan? Remember, Mr. Jamiseon already controlled for security and political problems affecting the economy, and he still thinks there's a huge problem that needs to be understood and solved by someone. Does this imply that specific cultural factors or economic rules make ordinary Iraqis less likely to succeed economically?

I can't say that living under a brutal fascist dictatorship leaves entrepreneurial energies intact--as such a government winds up torturing, maiming, wearing down, killing, or exiling the best and brightest--but it sure seems like a good assumption that the vast mass of Iraqis want themselves to succeed economically, and don't have extraordinary cultural barriers.

How about the rules of economic order? The day is fast approaching when Iraq will be a relatively free country politically and economically. This political-economic order is precisely what a lot of Americans now mean by the term "democracy". The rules of the economic order are favorable in a democratic Iraq, although not all the requirements for economic expansion are in place.

Adam Smith once wrote:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things
. Under the CPA, Iraq has had easy taxes and tolerable justice, but little peace; it looks like this 2/3 solution will continue under the new government. And to that extent, I agree that Iraq's economy will have difficulties.

But I for one do not want to have the CPA or any other organization be in charge of "rebuilding" the Iraqi economy, when political leaders should be doing their best to secure a long-term peace (which might mean short-term urban warfare).

An economy is best run when command and control of resources is in the hands of a diverse group of people with specific knowledge of effective consumer demand and low-cost supply conditions. This is true regardless of whether an economy is being "rebuilt" or "built from scratch". Having a previously existing infrastructure presents more challenges and options, but it is not a categorically different kind of economic development.

We are also told:

The picture painted in the Iraq investor road show section of the CPA website is almost laughable in its optimism, with headings such as "Iraq�s economy should recover quickly" and "Iraq�s economy has already started to rebound".
Unless Mr. Jamiseon is accusing the CPA of blatantly lying, and has sources to back up his pessimism, wouldn't you think the CPA members--being in Iraq and dealing with Iraqis all day long--would actually know better?

Besides, are incomes in Iraq visibly higher today than under Saddam? Yes, they are. I won't refer to anecdotes and pictures showing refurbishing and construction. Instead I refer you to question 24 of this poll of Iraqis conducted by the Pan Arab Research Center--"Has there been an increase or a decrease in the family income compared to that of before the war?". The results: 5% of Iraqis have had their income increase a lot, and 36% somewhat, while 43% say it's the same and 12% say it has decreased somewhat and 4% say it has decreased a lot.

Looks to me like the Iraqi economy has already improved. Hope dawned a long time ago...

UPDATE: Here aresome results of an Oxford Research International of Oxford poll of 2700 Iraqis conducted in March.

Under "Ratings of Specific Living Conditions", we find out that 40%+ of people think schools, household basics, crime protection, medical care, clean water, security, electricity, and jobs (39%) have improved since before the war, while less than ~20% think they've gotten worse (25% for jobs and 26% for security). In every category, we find that ~70%+ of people expect all of these to improve over the next year.

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This page contains a single entry by Kevin published on June 2, 2004 12:12 PM.

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