The Foundations of Thi Qar

State vs. private

“Let’s all go to the yard sale” proclaimed The Economist. “If America’s plans work out, Iraq will be a capitalist’s dream.” That was 12 years ago and the “dream” still feels a painfully long time coming.

In 2003, CPA head Paul Bremer had effective legal control of Iraq, and as such passed a number of laws to dismantle what he called Saddam’s “vicious brand of socialism.” Under Saddam clientelism prevailed and state companies were more for keeping people on the payroll as loyal Baathists, than producing anything that could compete globally, despite a brief attempt to introduce privatization in the late 1980s.

At the time, Iraq had run up massive debts from the Iran-Iraq war. Sanctions, the most crushing trade blockade since the punishment of Weimar Germany, did not help matters. Modest economic growth—from a melted GDP of 15 billion in 1996 to 33 billion as sanctions were revised and eroded, meant that there were an estimated 500,000 employees on the state payroll by 2003.

A pro-business Republican, Bremer saw Iraq as a new frontier for the free market as Hungary or Poland had been after the fall of the Soviet Union. Poland however, had in the region of 3000 state enterprises at the time of the collapse of the Soviet Union, a much more advanced socialist economy than Iraq. Most equipment was still relatively modern and none of these factories had been bombed. In fact, Poland had started a programme of economic liberalization even before 1991. In 2003, Iraq had just 192 factories, many in severe disrepair.