Iraq's Economic Crisis Is Self-Inflicted

Iraq is in the news again and sadly, it’s not good.

More than 100 Iraqis were killed in violent protests during the first week of October. The latest troubles are neither sectarian nor terrorist-related. They are motivated by popular frustration with government corruption and a stagnant economy.

A Self-Inflicted Tragedy

With demands increasing in Baghdad streets for, in the words of an October 7 Wall Street Journal story  “the removal of the entire political class,” some observers are speculating that civil war could be in the offing. An unemployed protestor named Salam Radif declares,

We want jobs. We want salaries. We want to feel like we are part of this country. We want a decent life so we can feed our families. We’re asking for basic services, not a miracle.

Unemployment among young Iraqis is estimated to be over 30 percent and rising. Iraqi government spending ballooned by 25 percent in the past year while the economy (by the measure of gross domestic product) shrank. Businesses are closing, investment is evaporating, and production is falling.

It’s a tragedy but largely a self-inflicted one. True, the country was ravaged by ISIS for five years but that conflict slowed to a skirmish months ago. The fact remains that Iraq is a socialist basket case—a disaster of big government, central planning, and “leaders” with sticky fingers. Yes, yet another socialist basket case among so many that it’s hard to keep up with their number.

Just look it up. Where? The websites of these four key indicators : The Heritage Foundation’s Index of Economic Freedom; the Fraser Institute’s Economic Freedom of the World Report; the World Bank’s Doing Business Index; and Transparency International’s Corruption Perceptions Index.

Fertile, but Not Free

In the early 18th Century, the French political philosopher Montesquieu famously noted, “Countries are well cultivated, not as they are fertile, but as they are free.” Iraq may be home to the famous “Fertile Crescent” but it’s not free.

The Heritage Foundation’s Index ranks the world’s 180 countries (#1 being the freest and most capitalist, #180 being the least free and the most socialist) but Iraq isn’t one of them. That’s because of the dearth of reliable data. Nonetheless, the Index’s authors report that property rights are “unprotected,” officials engage in “corrupt practices with impunity,” and “misappropriation of public funds” is common.

The Fraser Institute’s Index assigns Iraq a rank of #153. Only 17 countries in the world are less economically free—socialist snakepits like Sudan and Venezuela among them. The size of Iraq’s government vis-à-vis the nation’s economy is right where a socialist (or a Keynesian) might expect a magical stimulus effect. In other words, it’s monstrously big. So where’s the stimulus?

The World Bank’s Index measures the regulatory environment for business in each country. The longer it takes for a new business to file the government-requirement paperwork and jump through bureaucratic hoops to get going, the higher the country’s number in the Index. Iraq is in the absolute doldrums, at #171. Iraqi entrepreneurs are smothered to death by the state.

How much foreign aid is America giving to Iraq? I could look it up but it would be a painful figure to acknowledge. 

Transparency International’s Index is the leading global indicator of public sector corruption. With so many politicians and bureaucrats playing God with other people’s businesses, lives, production and wealth, you might guess that Iraq’s figure would be sky-high. You’d be right. It’s #168.

When will they ever learn? I mean not just Iraqi officials, but every power-concentrating, big government-building socialist the world over? When will they recognize that the formula for economic progress was demonstrated vividly by such models as Hong Kong and post-World War II Germany and New Zealand?

How much foreign aid is America giving to Iraq? I could look it up but it would be a painful figure to acknowledge. Whatever it is, I’d vote to replace it all with a free copy of Frederic Bastiat’s classic book, The Law for every Iraqi willing to read it.

The book provides as clear a prescription for fixing Iraq’s economic problems as any ever written by anybody anywhere. On its final page, Iraqis would read a pretty-good, one-paragraph summation of that prescription:

And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works.