IRAQ: THE ECONOMIC AND GOVERNANCE SIDE OF THE CRISIS
Anthony H. Cordesman
18 Aug 14. There is no question that the Islamic State is the most immediate aspect of the Iraq crisis. It needs to be checked, its gains need to be reversed, and it needs to be driven out of Iraq if possible. But – and it is a critical but – Iraq requires far more. It is going to require fundamental political and economic reforms to achieve any meaningful form of unity and stability and to overcome its sectarian and ethnic divisions.
The last three years have effectively made Iraq a failed state. Prime Minister Maliki did not simply fail by becoming corrupt, authoritarian, and sectarian. He and those around him failed at every level.
Two CSIS reports illustrate the scale of the issues that must now be addressed. One provides an in depth analysis of the economic and governance problems the Maliki regime helped create and is called Iraq in Crisis.
The other is called Hitting Bottom: The Maliki Scorecard in Iraq, and is a summary overview of the judgments international agencies made of Iraqi development and governance towards the end of the Maliki regime.
The Economic Challenges
It is tempting to begin by focusing on their broader failures in creating a system of governance and rule of law that could bring together Iraq’s Arab Shi’ites, Arab Sunnis, Kurds, and minorities. It is important to understand, however, that it will take more than political incentives to heal Iraq.
Iraq’s oil wealth has not been used to create the economic conditions for unity, and is a critical underlying problem in trying to heal its sectarian and ethnic divisions. The Maliki regime strongly favored itself and Arab Shi’ites over Arab Sunnis, and wavered between efforts to bribe the Kurds and force them to put all petroleum development under central government control.
The end result is that record oil revenues did little to raise Iraq’s overall per capita income and meaningful employment levels, and created a deeply discriminatory economy. There are no reliable data on Iraq’s income distribution by sectarian and ethnic faction, or even a meaningful national GINI index, but the scale of Iraq’s problems is illustrated by how its overall per capita income compares to that of other Gulf States. The CIA estimates Iraq’s per capita income at $7,100. To put this number in perspective, Iran is $12,800, Saudi Arabia is $31,300, Kuwait is $42,100, the UAE is $29,900, and Qatar is $102,100.
Maliki and company did not develop a meaningful development program. They did not address the crisis in employment. They did not find effective ways to divide and use the nation’s oil wealth. They did not reform the economy or lift the barriers to stable investment and growth. They did not deal with the massive problems in Iraq’s unproductive state sector and state own enterprises, or its inefficient agricultural sector and use of water.
They did not address education and health reform, and offer Iraq’s youth a meaningful future. They create overambitious and impractical plans for petroleum development, but did not create effective plans for the development and growth of Iraq’s infrastructure.
In fairness, many of these failures followed on U.S. failures to go beyond project and Commander’s Emergency Response Program (CERP) aid and ever develop meaningful overall development plans for Iraq. They are the product of the lack of core competence in dealing with the broader aspect of development that the State Department and USAID have shown in both Afghanistan and Iraq over the last decade, and a focus on immediate security and short term governance issues that lasted through the departure of U.S. forces at the end of 2011.
The Demographic and Humanitarian Challenges
The UN, IMF and World Bank never seriously addressed Iraq’s overall economic problems or its massive demographic pressures from a population that the CIA estimates is extraordinarily young and creates i