The Iraqi Economy
According to Iraqi refugee Rami, of whom when I interviewed him had been in Iraq 9 months prior said
“When I go to apply for a job in Iraq now, they can tell by my name if I am Sunni or Shiite. If you are Sunni you go to the Sunni ministers within the government and apply for a job with them, if you are Shiite you go to the Shiite within the government”.
Adding fuel to the Shia awakening was the flow of religious merchandise. In order to gain more Shia support, paraphernalia and medical supplies crossed the borders and images of Iran’s Ayatollahs were swiped onto Iraq’s billboards. There was also building influence from the Sunni-majority governments of Turkey, Jordan, and Saudi Arabia.
In March 2003, there were efforts to decrease central government control of the economy. Yet at the time of the invasion, Iraq was characterized by large state control over industries, sanctions by the international community, and widespread looting of facilities. However, on May 22,2003 the UN Security Council lifted civilian sanctions with the passing of resolution 1483.
Thousands of government workers lost their jobs because the US military’s release of Iraqis connected to Saddam’s Baath regime. US rather than Iraqi companies were used for reconstruction which led to corruption and made it difficult to construct local capacity. By September 2004, only 6% of the reconstruction money approved by the US congress had been used.
In April 2004, the US finally reversed its policy of not allowing individuals connected with Saddam’s Baath party to maintain positions of responsibility, though the US had previously affected 400,000 positions, depleting the area of its skilled workers and further angering the Sunni Baathis.
According to Sunni Iraqi Refugee Khalid, corruption was rampant after 2003.
He told me, “Before you worked hard to earn a certificate in a certain field, now you can just buy one on the street.”
Not only did psychological barriers form between the people of Iraq, but also physical walls. For example, the U.S.-built wall around the Sunni majority district of Baghdad, Adhamiya (pictured below), hindered those within the district from traveling freely for supplies and necessities to run businesses.
Adhamiya in particular was one of the greatest pockets of resistance in Iraq, one of the main reasons the US built the wall surrounding the district and allowing Iraqi police, which inevitably became Shia militiamen, to staff the checkpoint into the district.
According to Abdullah, an Iraqi man currently living in Baghdad,
“People are making more money [after the US invasion].”
However inflation is also on the rise, making many things more expensive.
The US government set high goals for Iraq in their ideas to create a free market based economy for the country.John B. Taylor, Undersecretary of the Treasury for International Affairs, said Iraq could be helped through the US into becoming a “well functioning market economy that is growing, creating jobs, and promising for the future”. Challenges of economic reconstruction included transforming from a centralized to a market economy, and having to rebuild an economy that had been crippling for decades before the US invasion.
The CPA economic reform deal was overly ambitious in the sense that it wanted to create capital and labor markets through “shock therapy” a post-soviet type of economic reform. According to Naomi Klein’s New York Times Bestseller, The Shock Doctrine:
“First came the war…next came the radical economic shock therapy, imposed, while the country was still in flames–mass privitization, complete free trade, a 15% flat tax, a dramatically downsized government. Iraq’s interim trade minister, Ali Abdul-Amir Allaqi, said at the time that his countrymen were ‘sick and tired of being the subjects of experiments'”
Key to a transition to a market-controlled economy was the creation of an independent central bank, which was no longer under control of a single president as it had been under Saddam Hussein.
As of January 2006, unemployment/underemployment accounts for 50% of the Iraqi labor force, and although women account for 52% of Iraq’s population, in 2005 they were only 23% of the work force. The unemployment for young Iraqi men is 33.4%, and for young men who have secondary education, 37.2%.