Free Market Principles Must Be Basis of Iraqi Recovery

By L. Paul Bremer, III | Hampton Roads International Security Quarterly, July 15, 2003 | Go to article overview

Free Market Principles Must Be Basis of Iraqi Recovery


L. Paul Bremer, III, Hampton Roads International Security Quarterly


Baghdad -- Much has been written since the war about the political liberation of Iraq, one of the remarkable events in the history of human freedom. Never before in warfare have so many been freed with so few casualties, in so short a period of time, with so little damage done to the country and its people. The removal of Saddam Hussein also offers Iraqis hope for a better economic future. For a free Iraq to thrive, its economy must be transformed.

Tomorrow, I will lead a delegation of Iraqi business and financial leaders to a special meeting of the World Economic Forum in Amman, Jordan, where we will discuss the economic aspects of the Coalition's overall strategy. Iraq faces unique problems, but we have the experience of formerly socialist countries, as well as analysis of successful capitalist ones, to inform our perspective. While the ultimate future of Iraq's economy will be determined by the Iraqis themselves, economic growth will depend on the birth of a vibrant private sector. And this will require the wholesale reallocation of resources and people from state control to private enterprise, the promotion of foreign trade, and the mobilization of domestic and foreign capital.

In the near term, any economic plan for Iraq must address the consequences of the conflict that liberated it. The first prerequisite to growth is the establishment of law and order. Looters and saboteurs have destroyed offices, stores, factories, and government buildings. Deliberate attacks on oil facilities and electricity lines continue to undermine our efforts and hurt the Iraqi people. Fortunately, we have made the streets of Baghdad safer, and Coalition forces are working to root out the last remaining vestiges of the former regime.

The formation of a political system reflecting the goals and viewpoints of all Iraqis is the second prerequisite. Here too, the Coalition has made progress. With the crucial assistance of a number of forward-looking Iraqi citizens, we are on track to realize the president's vision of a free Iraq led by a democratically elected, representative government.

Against that backdrop, my primary focus now is working with Iraqis to put their country on the right economic path. The immediate situation is daunting, but it could have been much worse. Humanitarian crisis was avoided. Early operations by Coalition forces protected Iraq's oil infrastructure, and production has already resumed. Iraq should export more than $5 billion worth of oil in the second half of this year.

Still much work remains. To address the population's immediate liquidity needs, we have placed more than $400 million of purchasing power in the hands of the Iraqi people through the rapid payment of public-sector salaries, pensions, and emergency payments. Baghdad's streets are now alive with traders and merchants selling goods that were unobtainable only a few months ago. The Coalition has committed billions of dollars to further spur economic growth by funding infrastructure and development projects around the country.

But simply rebuilding government buildings or repairing damaged pipelines will not bring about sustainable growth. That growth will require a transformation from three decades of economic mismanagement and neglect and a Stalinist industrial structure. Most production in Iraq was undertaken not by private firms seeking to meet the demands of the market, but by state-owned enterprises overseen by government officials, with Saddam himself at the top. …

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