July 2, 2012 11:36AM

Iraq’s Oil‐​Fueled State Socialism

Over the weekend, the New York Times reported on rising consumerism in Iraq, as evidenced by the popularity of American‐​style shopping malls. I was more intrigued by the tales of cronyism and a wholly dysfunctional state. Here are a few tidbits:

economists and other experts…say the emerging consumer culture masks fundamental flaws in an economy that, like those of other energy‐​rich countries like Saudi Arabia and Qatar, stifles productive enterprise by relying almost solely on oil profits and the millions of government salaries those profits finance as part of the country’s vast patronage system.

“Basically, Iraq is trying to build a consumer society, not on state capitalism like in China, but on socialism,” said Marie‐​Hélène Bricknell, the World Bank’s representative in Iraq.


experts worry [the expected boom in government revenues] will finance more of what Iraq already has: corruption and a huge government work force.

Most of the major industries remain in the hands of the state, and the greatest ambition of many Iraqis is to secure a government job. According to statistics from the Iraqi Ministry of Planning, almost a third of the labor force works for the government. That is more than five million people, and the number is rising, as political parties that run government ministries use paychecks to expand their constituencies.


Because government salaries are much higher than those in the private sector, independent businesses operate at a disadvantage because, among other disincentives, would‐​be entrepreneurs cannot afford to hire the most skilled workers. The World Bank ranks Iraq 153rd out of 183 countries on the ease of doing business.

“Building a consumer society on top of nothing is like building a bubble that will burst in the future,” Ms. Bricknell said. With the shopping malls, she said, “you are putting a veneer over a rotting core, basically.”

File these sorts of stories away for the next time that you encounter (maybe at a 4th of July celebration?) patriotic, red‐​blooded, so‐​called conservatives bragging about their commitment to limited government and the free market, and who then declare that the Iraq war was a great victory for such principles.