Just today another deadly car bomb was set off at a marketplace in the suburbs of Baghdad, demonstrating the extremely difficult obstacles affecting the reconstruction of Iraq and its economy. Last week, the Brookings Institution’s Saban Center for Middle East Policy released its latest report on Iraq, A Switch in Time: A New Strategy for America in Iraq. The report, written by renowned Middle East analyst Kenneth Pollack, is billed as “a comprehensive, alternative approach to current U.S. military, political, and economic policies in Iraq.” Everyone should read this excellent report, and I would draw attention to a few of the observations and conclusions contained in the third chapter which deals with the economic aspects of reconstruction.
Pollack laments that, due to the ongoing security problems in Iraq, many NGOs “which have repeatedly proven themselves critical to the rebuilding of a nation’s economy” have been forced to cease operations in Iraq or to scale back dramatically their programs. CIPE continues to operate in Iraq; however, it can give testament to the difficulty and dangers inherent in working there.
“Iraq must have both immediate economic relief and long-term economic reform,” Pollack observes. “If it emphasizes the short-term over the long, at best it will require constant infusions of foreign assistance to sustain even its current level of economic growth…. However, if it emphasizes the long-term reforms without doing enough in the short term, either the economy or popular support for reconstruction might crash – which would preclude getting to the long-term.”
The report criticizes “Washington’s over reliance on massive American firms to handle much of the contracting in Iraq. This makes sense from a bureaucratic perspective, but has been bad for reconstruction.”
Again, it means that resources are not going directly to Iraqis. Indeed, far too much of the funds in each contract stay here in the United States or are directed to subsidiaries of the multinationals in other countries than actually get into Iraq. Whatever graft there might be in Halliburton’s dealings in Iraq would actually be secondary compared to the damage done because so little of the money awarded to Halliburton for a contract actually gets spent in Iraq.
On the issue of corruption, the report states that “graft is endemic throughout the Iraqi government and, like [providing for] security, imposes heavy costs on all business transactions. The incapacity of Iraqi ministries means that vast sums of money are simply wasted, as does the infighting among the different ethnic, sectarian, and even tribal groups within the government, which paralyzes budgeting, regulations, and other aspects of economic policy.” The report references results from last fall’s CIPE/Zogby poll in which many “Iraqis estimated that corruption generally added about 40 percent to the cost of all business transactions.”
Finally, the concluding paragraph of the chapter on the economy suggests how imperative it is that we deal effectively with Iraq’s economic issues and challenges:
According to the Iraqis themselves, economic problems (along with security) are the most important problems they face. Thus, getting the economic piece right will be crucial to the success of reconstruction. Indeed, to some extent, economic progress may be the clearest measure of the success or failure of reconstruction. However, economic progress is wholly reliant on improvements in the security and political situations. Without a safe environment in which goods and people can move around the country, without the rule of law, effective regulatory agencies and practices, and limits on theft and corruption, it is impossible to imagine that Iraq will enjoy any degree of prosperity.
Published Date: February 21, 2006