The visible hand in economics

The new SAP in Iraq

Posted on: August 27, 2007

A commenter on the ‘Democracy and Growth’ post below said that he didn’t think “…growth was ever a putative justification for the invasion of Iraq”. While that may be the case, it didn’t stop the US from using post-war Iraq as a playground for a few ideologically driven economists. Using a regime that reminds one of the IMF’s widely criticised Structural Adjustment Programs (just Google it if you think I’m being selective in my link choice here), the US has drastically reformed Iraq’s economic policy.

Dismantling the public service, privatising much of the public sector and removing any bias towards Iraqi companies in the granting of contracts has resulted in massive unemployment and poverty in the formerly wealthy nation. Dani Rodrik links a couple of other interesting article in this post.

Admittedly, there is debate over how well the Iraqi economy is doing these days. However, whatever the goals of the invasion, they could have done better in the aftermath than pursue policies that even the IMF is now moving on from. Development economics has come a long way since the inception of SAPs and the reconstruction of Iraq was a great opportunity to show what can be done.

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3 Responses to "The new SAP in Iraq"

Hi James,

I agree entirely. Bush et. al’s reconstruction policy for Iraq appeared to be free market ideology of the sort that even the IMF might blink at combined with a solid dose of profiteering for their friends. That they apparently thought this might work is compelling evidence to me that the neo-cons were frighteningly detached from reality.

Personally, while there are reasonable debates to be had about what the best economic policy for Iraq might be in the mid to long term, in the short term I would have been striving for job creation at all costs. In a post-conflict situation, more important than almost anything else in terms of avoiding a return to war, is avoiding large numbers of unemployed young males. This is equally as true for Solomon Islands at present as it was for Iraq in 2004 I might add.

By the way – I’m really enjoying this blog, and wish I had time to comment more.

cheers

Terence

Same here, kudos on the blog.

I would warn against viewing the measures undertaken purely as an economist. There may have been valid strategic reasons for the changes made. “Dismantling the public service, privatising much of the public sector and removing any bias towards Iraqi companies in the granting of contracts” may have been a policy to restrict the influence of players in the former regime.

Agree, however, that employment should have been a #1 concern.

Jeez, I just had a scarey idea. Imagine if unionism caught on in Iraq?!?

Hi Kimble,

What evidence can you provide me (preferably cross country empirical) that shows that higher rates of trade union membership inevitably cause higher rates of unemployment.

As it happens, there is a trade union movement in Iraq. It tends to be secular in nature and oppsed to the Bathists and fundamentalists. Sadly, this leads to life as a trade unionist in Iraq being rather hazardous.

What have you got against these people again?

Anyhow, I think it was nice to agree with every sentence but one of your comment – a novel change :)

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