A decade after the American-led invasion, Iraq’s fate remains uncertain. With the American forces gone, the project of rebuilding the country, creating a functioning democratic system, and fostering economic development has become the stated aims of the country’s rulers.
With relative stability achieved in recent years, there has been some interest of late in the prospect of an Iraqi rehabilitation grounded on the partially untapped potential of its economy. There are encouraging signs. Iraq ranked seventh in the Economist’s fastest-growing economies forecast for 2013, with a predicted growth-rate of 8.2% of GDP. Now that Iraq’s ability to export its oil has recovered somewhat, oil revenues are rising steadily. Iraq’s crude oil production is the second highest in OPEC.
However, given all of Iraq’s troubles, those lofty goals often seem to be as far fetched and divorced from the everyday realities of life in Iraq as they did during the days of American occupation. The political problems facing the country are as large as ever.
The debate over which comes first—economic or political stability—need not detain us here, but the fact is that control of Iraq’s natural resources is and will continue to be a political issue, and Iraq’s politics are all too often an ugly blend of sectarianism, violence and corruption. If the oil revenues are to benefit the people of Iraq, these will have to be used in such a way that avoids worsening these three problems.
Many of the same issues plague the wider economy. The latest report from The World Bank on the cost of running a small- or medium-sized business puts Iraq close to the bottom in many categories, indicating how difficult it is for ordinary Iraqis to make a living. This is deeply troubling: with the private sector in such a dire state, and so many obstacles to improvement, it will take huge efforts by the government to create the right conditions for a flourishing economy.
Iraq, funded by its oil wealth, has the potential to create a better future for its people, but the political divisions within the country continue to stunt growth. In any society, such a flow of money would be a temptation for the politically powerful and well-connected to use oil revenues to feather their own nests. The danger persists that this wealth will be used as a ready-made supply of cash to fund the domination of one faction or sect over another.
It will be the willingness to make political compromises—take, for example, the on-going tensions between the Iraqi central government and the Kurdistan Regional Government—and put national interests first that will determine the course of Iraq’s future development, not money. While there is plenty of one available, it looks like the other might be in very short supply.