Tuesday, February 17, 2009

Capitalism and Iraq

One of the biggest missions of the United States in Iraq right now is reconstruction. We aren't just rebuilding Iraq from the damage caused by the violence of the last few years or of the initial invasion to topple Saddam Hussein. Too many people have forgotten, or willfully ignore, the violent past of Saddam Hussein and his conscious choice to ignore his people and deprive them of basic needs. In the early 1980s Iraq was a modern nation with many of the amenities that citizens (males) enjoy in Saudi Arabia and other Arab countries. In the 1980s Saddam plunged his country into an eight year war with the Islamic Republic of Iran that more closely resembled World War I then war in the modern age.

Following his invasion of Kuwait in 1990, Iraq began to face increasing economic sanctions. Saddam chose to use what money he did have, and the graft from the Oil for Food Scandal, to lavish upon his ruling class and his many palaces. He also used it for his WMD program, though at some point, that program was largely dismantled. The end result, is that prior to 2003, the Iraqi public had faced nearly two decades of conscious neglect from their leadership. That is the real damage that we are working to undo.

One of the key tools in this fight for reconstruction is the Provincial Reconstruction Team (PRT). The PRT is an arm of the Department of State and is made up of economists, engineers, lawyers, and other professionals who seek to mentor Iraqi leaders, improve essential services, and build a responsive LOCAL government that can provide for the needs of the population. They are a valuable ally, though since they are civilians (and State department types), they can be frustrating. However, they offer a lot and good units recognize that and seek to leverage the PRT and ePRT (embedded PRT) to work with the local Nahia (township) and Qada (County) governments.

The PRT is very focused on growing private enterprise in Iraq. They recognize that private enterprise (read: capitalism) is the economic force that has done more to alleviate poverty, increase access to services, and improve quality of life than anything else in history. It is somewhat ironic that at a time that we appear to be turning away from it, the rest of the world is recognizing its importance. As the head of the PRT said about accountability and ensuring successful private enterprise, "If you are a business and you cannot make your payment, you aren't a business, that's welfare". Never a truer word was spoken, but somewhat ironic given that fact that neither our banks, nor our own government can apparently see that. We have higher expectations of the Iraqis, lol. But it is true.

One weapon is building an effective banking system. Capital is what drives economic improvement and the growth of private enterprise. Banking is what gave rise to "modern" western civilization. Too often we think that if we throw money at the problem, we should be able to reap economic success and growth. One idea we are looking at is the concept championed by the Nobel Prize Winning Economist, Dr. Muhammad Yunis, who wrote "Banking for the Poor". Dr. Yunis does not think that poverty is solved by handouts (read welfare). Rather he proposed micro-loans as a means of promoting private enterprise and economic growth. We build banking cooperatives, where individuals are responsible to one another, and pay back the bank on their own, plus the fee, and in the process create capital. Take 5 people and give them $1000. Over the course of the year they pay back to their credit union. After a year that credit union has $5000 plus whatever interest or fee was charged. In an Islamic country one has to use a fee, because interest itself is contrary to Shari'a law (interestingly enough, Shari'a banking has seemed to weather the storm so far, according to the BBC at least). Our credit union now has $1000 (assuming it was $200 per loan fee) to loan back out. Our original recipients of the loans now compose the Board of Directors of the credit union. We have created Capital through private enterprise and accountability. That is far more effective than grants. Micro-grants have a place too, but Micro-loans can help build up an economic system.

It's an interesting situation, but the PRT has a lot to offer and a great deal of benefit to the Iraqi People, even if we are looking at a bunch of academics.

On a completely unrelated note, this is a link for a posting at the Huffington Post that I consider a must-read on reconstruction in Iraq (a surprising source I know). Thanks to the Opinionated Catholic for point it out.

1 comment:

James H said...

Great post. I ahve been curious how this was going

I have linked plue added an article that intrigued me a few years back that is related to what you are talking about

Soldier builds entrepreneurial incubator during tour in Iraq