Monday, June 21, 2004

Taking Stock of Iraq

Someone sent my contractor-friend in Iraq a Washington Post article purporting to explain the situation over there. She sent it back in shreds. Here's a bit.

I found this article primarily worthwhile for what it left out. The passage below being a prime example

The CPA also lacked experienced staff. A few development specialists were recruited from the State Department and nongovernmental organizations. But most CPA hiring was done by the White House and Pentagon personnel offices, with posts going to people with connections to the Bush administration or the Republican Party. The job of reorganizing Baghdad's stock exchange, which has not reopened, was given in September to a 24-year-old who had sought a job at the White House. "It was loyalty over experience," a senior CPA official said

Well, Iraq doesn't have a stock exchange. Hasn't had one-- ever, at least in any sense that Europeans or Americans or those in the Pac Rim would recognize. You don't find much free trade in countries where all the major industries are owned and controlled by the government. The only open Iraqi "stock" market consisted of around 35K worth of funds being traded on local ventures primarily by retired Iraqis with a little money to risk and time to kill on goat ventures. It's not a case of reopening or even reconstructing it. It has never closed, and it has never amounted to anything.

For a stock market of any note to be created in Iraq, it will have to be done from scratch. And where local investment is concerned, not only will the existing major businesses need to become at least partially privatized, but they will also have to become solvent. At the moment they rely primarily on foreign credit and US dollars, making them completely unstable for investment purposes. The best recognizable investment system that could be created at the moment would have to be established on a government bond basis. But this is difficult to do while insurgency is high and employment levels are low.

Iraq is a perfect example of why supply side economics cannot maintain itself in a stabile manner if anything goes wrong. It is a nation chock full of needs, but with no money to pay for them. In theory, it is an investors paradise, with millions of workers available for low wages and the same millions presenting a very attractive market for products. But it has a very worn out infrastructure and lacks the dollars to create a new one and the security to allow it to happen even if those dollars where there. If the people themselves had money, or even major holdings, investment in new businesses would be a breeze, because the demand could be instantly realized, something you can't do under supply side without the infusion of incredible outlays of cash and long delays.

Who has actually failed? Well, all us blood suckers, thousands of contractors working with thousands of Iraqis appear to be rogues. Or at least that's the way we're all presented. The nation is full of privateers and volunteers, cowboys if you prefer, from every nation you can think of. Why are they here? Well, some are here to provide aid. Others are here to rebuild entire regions that they feel are vital to the world historically. But most are here to make money. They've come into country, accessed the situation, and have determined it to be a good place to invest time and money. And that makes sense, because ultimately this country has sufficient wealth underneath the ground to make it into the capitalist society that Saudi Arabia could be, but hasn't quite ever achieved.

Unfortunately, this fact has also been recognized by another breed. That breed sees this country as a gold mine to enrich a few, fuel a radical terrorist stream of Islamic fundamentalism, and provide a stepping stone for bringing down free, non-Islamic nations. They have no recognizable sense of morality, no concern for any lives, religions, ideals or beliefs beyond their own, and no moral restrictions to gaining what they want. Opposing them they have those who have little and basically would just prefer to be left in peace, those who share just enough of their religious background to not see them as completely evil, those who have shown their greatest backbone by producing twisted up articles such as that you have posted, and then those rest of us, civilian and military, who understand the risks and the difficulty associated with building such a place as this under such opposition as we face.

... Frankly, I would have stockpiled this country with US, European and Pac Rim stock brokers, and given every Iraqi $500 to spend. It would have turned Iraq into an economic free-for-all of epic proportions and shaken the entire Middle Eastern Islamic world to the core. Especially OPEC. But nobody in the world does that kind of thing. Not even the members of the UN.