Iraq needs a new enlightenment age to achieve economic reform

Iraq needs a new enlightenment age to achieve economic reform

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Shatha Khalil

Translated by : mudhaffar al-kusairi

What motivated me to write this article is despite the tremendous wealth enjoyed by the Arab nation, especially my country, Iraq , of natural, human, scientific and intellectual wealth, but the situation remains tragic, poverty, ignorance, disease, destitution, refugee camps, unemployment… etc and other calamities.

Why those riches and minds haven’t used for the service of the Arab countries first and benefited from them worldwide? There is something wrong…

The Iraqi professor Mohammed Taqa characterized this imbalance accurately and objectively in his last lecture, the imbalance in the “pattern of thinking” the Iraqi man should free from his tendency to partisanship and habits of tradition and dependency of the clan or the head of the party or cleric, there is no autonomy in thinking , how can the country be led by minds prisoner of old ideas and concepts ,the imbalances that exist today , new theories and ways of thinking must be developed , and new treatments for the problems that the country suffers at all levels to build a strong scientific country, there must be intellectual liberation first.
Iraq needs an age of enlightenment that fits our society like old Europe:
Age of Enlightenment refers to the eighteenth century in European philosophy, the emergence of a historical cultural movement called Enlightenment, which defended rationality and its principles as a means of establishing the legal system of morality and knowledge “away from religion”.

The pioneers of this movement considered their mission to lead the world to development and modernization and leave the old religious and cultural traditions and irrational ideas within a period of time they called “the dark ages.”

This movement formed the basis and framework for the French Revolution and then for the American Revolution and liberation movements in Latin America.
The most important philosophers and thinkers of the Enlightenment: Voltaire, Jean-Jacques Rousseau, and David Hume, all attacked the institutions of the existing church and state.

The eighteenth century also saw the rise of experimental philosophical ideas, applied to political economy, science and governments as they were applied in physics, chemistry and biology.

Enlightenment is the human departure from the stage of mental insufficiency and intellectual dependence and attain the age of maturity or adulthood and rely on positive self-scientific thinking.
Mental impairment also defined as “dependence on others and the inability to think personally or behave in life or to make any decision without consulting the guardian of us.” From this perspective his enlightening cry came to say: “Use your minds, mankind! Have the courage to use your minds! Do not be reluctant anymore and do not give up to laziness and fate , moved , energized and engaged in life in a positive and insightful, as warned of blind obedience to leaders or clerics, as happened in the state of Prussia later.

Reason, nature, and spontaneity are consistent in the Enlightenment vision with the belief that nature has endowed every human instinctive ability to understand, making it equal to all others, provided that it is liberated from the corruption of superstition and ignorance, the exclusion of the other, the atonement of the other and the intolerance of those ideas…. Where to go? Only to destruction and collapse and to a dark future.

A man free from blind subordination uses his mind correctly and spontaneously (according to the Enlightenment) and manifests the natural behavior of the so-called “noble savage” in moving forward in building a state where laws, non-tyrannical, are based on natural rights.

Enlightenment is the exit of man from the state of immaturity that he imposed on himself. Immaturity is not possible to use the comprehension abilities of a particular person without the need of guidance from other people… You must know! But you have the courage to use your own understanding.

Enlightenment’s contribution to science:
The British writer and historian Robert Wilde said: “The Renaissance or the Enlightenment and the scientific revolution witnessed a tremendous expansion of our knowledge of the world, as well as in enhancing the accuracy of that knowledge.” Part of that was because of the evolution of what we might call today the scientific methodology,”he said. On the scientific method, the question of Newton’s foundations of the foundations of the methodology known today remains certain, according to the Stanford Encyclopedia of Philosophy.

Thanks to the decline in illiteracy and the low cost of books, the ways in which the publishing of results of scientific experiments have been evolved, as well as the desire of scholars and scientists to discuss and adopt them, Wilde told Life Science: “I want to mention the models of scientists like Saint Gregory and others who came before him. Humans have not tried to understand the world. The successful development of modern science is happening now. ”

Iraq after 2003:
In post-2003 Iraq, everyone dreamed that the homeland would be in their favor, after it was in favor of one individual, but their dream evaporated with the first session of Iraqi officials, during which they recognized the size of their privileges, which took inflation in quantity and quality to become the wealth of the homeland in the pockets and balances of some officials after it became as a snowball that it gets bigger as time goes by.
After the change of the promises made by those who promised them the best, but they saw only more disappointments, there was no change in the features of the country, except they were able to replace images and slogans of the one party, by new images and slogans imported from the Diaspora (overseas countries ) , in addition to remove the name of “Saddam Hussein,” which characterized many government institutions in the country to be replaced by names of political and religious figures who took a wide area of influence and responsibility.

What did they give our country to give them so much of privileges? The answer is, of course, that they have done little. They have led the country to ruin more than before.

The Iraqi economy needs reform:
Iraq entered a new phase after the change of the political system, in June 2003 specifically, as the CPA began to put its project to reform the Iraqi economy in the planned framework, as it issued legislation and laws and took measures affecting many areas, including foreign investment, infrastructure, banking system, Taxes, property, monetary stability…..etc.

But the truth is that Iraqis have harvested only a devastating economy and in the extreme cases of deterioration and suffers from a clear depression in production and the local market exposed to commodity dumping impossible to face locally, as the economy suffers from distortions in the price structure and structural imbalances in the trade balance and the workforce and the deficit in the public budget and debt shackle Its movement towards progress and achieving an economically acceptable rate of economic growth and poor security conditions limit the attractiveness of foreign investments.

There is a need for immediate and serious reform based on the new scientific thinking, but what is important now is not only reform, but the quality and content of this reform, because reform can take place in an informal manner, which threatens the potential for growth and development and entails a high social cost, this is what happens if reform, for example, is achieved through a harsh deflationary policy.

Systematic reform is based on two basic criteria:
1. To help reduce the level of external deficit to the extent that it can be sustained.
2. The external equilibrium must be consistent with achieving acceptable rates of economic growth and price stability.

The crisis of the Iraqi economy emphasizes the importance of initiating economic reforms based on a development strategy aimed at changing the structure of the Iraqi unilateral economy through diversifying the productive structure, achieving a more equitable distribution of income and wealth, caring for low-income social groups and focusing on investing youth wealth.

First: The Concept of Economic Reform
Economic reform means a set of measures taken by the state or economic authorities to reduce or eliminate distortions in the structure or economic performance or to achieve a steady increase in economic growth rates, or it is reform that achieves the best mobilization of resources and economic surplus to direct them to the areas of economic activity most effective and most to achieve the requirements of national and social security, the necessary reform is what creates the mechanisms of motivation and integration and mobilizes the material and moral capabilities of human beings in the process of creation and creativity, reform is the reform of what has been corrupted or become corrupt .
It will be on two levels:
First, macroeconomic: reform here in response to challenges and available opportunities or to adapt to external shocks or in response to the results were not taken into account of the targeted economic measures or to address the imbalance in the balance of payments and the subsequent imbalances such as the imbalance between saving, investment and budget deficit, that is within a comprehensive economic outlook.
Second, the level of microeconomics: It aims to correct the performance of economic units through the implementation of a series of measures aimed at rationalizing performance and achieve the best use of available resources and increase the size of competition and leave the mechanism of setting prices for the forces of supply and demand.

Economic reform aims to provide the basic needs of goods and services to all the people in general and to the poor in particular, and to create jobs that accommodate the continuous increase in the labor force resulting from the increase of the population, and improve the balance of payments, and achieve the balance of revenues with expenditures in the budget of state , and control the inflation and elimination it gradually , this requires more reliance on the market mechanism, encouraging the private sector to finance and manage investments, and liberalizing and managing economic, financial, monetary and administrative policies to make better use of available investments to compensate for depreciation of production capacities, and the addition of new production capacities of the national economy.

Second: The reality of the Iraqi economy and the reasons for reform:
The Iraqi economy was subjected to many shocks and crises, and it was not really strong enough to face these shocks and crises, despite its enormous economic potential, which was not invested in a balanced way to achieve the civilization renaissance and desired economic development.
What distinguishes this economy, it is rentier depends mainly on the extractive sector (oil), and all the development plans that were previously adopted in financing them on public revenues derived from this sector, crude oil exports accounted for at least (94%) of the value of Iraq’s exports during the period 1970-1990, the percentage of capital and intermediate goods from the total imports of Iraq during the mentioned period (74%), and the imported part of the commodity inputs used in the manufacturing sector constituted 53%.

The comprehensive trend of economic policies has lost the bases of efficiency and competitiveness of commodity production within the framework of Iraq’s reciprocal relations, so that the advantages of the market were away from achieving economic benefits for the members of the society. The state was completely dominated over these policies, weakening the role of the private sector, which is illustrated by the decline in the output of manufacturing industry in this sector as a contribution to the gross domestic product from (2.5%) in 1988, to (0.07%) in 1994, although the state, at least in part, goes toward the privatization of some of its state-owned companies in 1987.

It is possible to say that the beginning of the real shocks was the Iran-Iraq war, which completely depleted the material resources of society (not to mention mankind), from a surplus of about 35 billion dollars during the beginning of the war to a heavy debt estimated by the International Monetary Fund at 125 billion dollars in 2004, through the accumulation of the results of wars (the Gulf wars, the first and second, and beyond).

While this war imposed increased spending on military needs, which contributed to 42.5% of the GDP in 1985, the economy was exposed to more than an economic shock, perhaps led by the fluctuation of oil prices and then its foreign exchange revenues due to Volatility in oil revenues, therefore, the state’s tendency towards privatization, as mentioned above, was partly to try to compensate part of the public revenues lost by the fluctuation of oil prices and the need for the necessary funding spending due to war that has exhausted it.

The second Gulf War was also a major factor in the destruction of the economy, especially after the issuance of a large number of international resolutions, the most important of which was resolution (661) of 6 August 1990, which included the imposition of economic sanctions, including the economic blockade that led to the isolation of Iraq and its economy from the outside world, which led to the rise Inflationary pressures with the passage of time and affect the value of exchange rates, and the rise of the exchange rate of the US dollar against the Iraqi dinar from (7.5) dinars per dollar in 1991, to more than (2500) dinars per dollar at the end of 1995.
The 1990s were the main driver of the deterioration of the economy, coupled with economic mismanagement, the state’s drive towards new monetary issuance, the erosion of the value of savings and real wages and the growing number of unemployed.

The last war led by US against Iraq in the first quarter of 2003 has destroyed most of the basic structures. The destruction included all official and unofficial institutions and companies, and what was not destroyed by the war , it has damaged by looting and burning, noting that 158 companies were destroyed out of (192) State company, the rest stopped production and work for various reasons, including security conditions (uncontrolled), power outages and other successive crises.

Ways of economic reform:
The first: Economic reform which is undertaken by the state based on its own resources or relying on a funding source other than the IMF and the World Bank. The reform may be carried out without the need for external financing through the use of financial and monetary policies and some direct control measures to achieve the required objectives. This kind of reform is applied in capitalist and oil-exporting countries.
Second: Economic reform, which is carried out in cooperation with the IMF and the World Bank, in which the economic reform program begins with the so-called letter of intent, which is a detailed letter issued by the Government of the Member State requesting funding from the Fund, and this letter explains the problem of the economic state and then the objectives.

The main reasons for reform can be summarized as follows:
1. Decline in economic growth rates: Economic growth rates have dropped significantly due to low levels of economic activity, and the fact that the Iraqi economy depends mainly on the export of oil, the exclusion of oil will lead to the growth rate becomes significantly negative.
2. Trade imbalance: Oil exports decreased during the period of the economic siege by (97%) and non-oil by (31%) in 1991 compared to 1990. Imports witnessed a significant decrease during the period (1991-1996) and then returned to rise in 2001. The trade balance was in surplus during the period (1988-1990), where it grew by (47.7%) and then turned into a deficit and reached this deficit during the period (1991-1995) to (-11.1%).
3. Imbalance of the General Budget: The Iraqi economy suffers from deficiencies in revenues and an increase in public expenditures.
4. High foreign indebtedness: Due to the increasing military spending, which constituted a large percentage of the gross domestic product, and the circumstances of the economic blockade, Iraq’s external indebtedness amounted to nearly (120) billion dollars.
5. High unemployment rates: the percentage of unemployed in Iraq increased from (4.9%) in 1987 to (16.7%) in 1997 and in 2004 reached (28.1%) and the size of unemployment increases when taking into account the percentage of underemployment (workers in working hours less than the minimum “) to be close to the estimations of the World Bank which reach to about 50%, this is an indication of the significant rise in unemployment rates when compared to the indicators of the 1980s and 1990s.

6. High poverty rate: The percentage of poor people in Iraq has increased significantly in recent years. A report issued by the Iraqi Center for Dialogue and Development at the end of 2005 indicated that about 70% of Iraqis live at subsistence level, which puts Iraqis at the bottom of the list of poor people in the world despite the richness of this country in natural resources and great human potential.

The economic reform process should aim at:
1. Attempt to balance the process of competition between the public and private sectors, and open the way for private sector initiatives, because privatization is an integral part of economic reform programs because it represents a radical change of economic policies in order to participate in mobilizing domestic resources necessary for economic and social development.
2. Alleviate the burden of the state budget as a result of its continued support for projects and companies that have proved economically ineffective, directing public spending towards supporting basic infrastructure and economic facilities of strategic importance, and reducing government subsidies to the basic commodities, as the Iraqi government is obliged under the emergency aid agreement to begin with the abolition of subsidies on oil derivatives at the end of 2005, amounting to $ 1.5 billion, and reduce the provisions of the ration card in the 2006 budget to $ 2.6 billion from $ 4 billion in the 2005 budget.
3. Developing the local financial market and encouraging its movement to ensure the development of productive capacities.
4. Create an appropriate investment climate to support domestic investments and try to encourage and attract foreign investments to activate the national economy.
5. Adopt strict austerity measures, especially in government expenditures, in order to increase public revenues.
6. Financial and banking reform: It is the core of economic reform programs and aims to create sound and competitive financial and banking systems in order to promote macroeconomic stability accelerate the pace of economic growth and enable the economy to adapt to external shocks. Financial and banking reform includes a package of measures, the most important of which are: Liberalize interest rates, liberalize foreign exchange rates, and stay away from directed credit.

Expected effects of the reform:
The experience of economic reform applied in a number of Arab countries indicates that it is pushing the country to a difficult transition period, the degree of its difficulty and duration depends on the ability of the state to choose the appropriate reform policies, the ability of national resources to respond to change, and the confidence of foreign capital in that country with its reform policies. The expected effects of reform on some economic and social indicators can be summarized as follows:
1. Impacts on poverty and income distribution: Reform policies will exacerbate poverty and harm the poor social groups of the population due to:
• Decreased government subsidies for key commodities such as food and energy.
• High commodity prices and inflation as a result of the removal of subsidies and devaluation of the local currency rate.
• Reduce public spending on social aspects such as education, health, housing and public transport.
• Unemployment caused by the deflationary impact.
• Decline in real wages as a result of inflation and the removal of labor guarantees and minimum rate of wages.
• Effect of price liberalization locally.
• The impact of trade liberalization and export orientation.
The reform will also increase income inequality due to:
1. The poor are more affected than the rich by measures to reduce public spending or the deflationary impact.
2. Inflation redistributes income from the poor to the rich.
3. Depriving the poor of education and thus of good income.

2. In the short term, reform will damage economic growth due to:
• Lack of production.
• Increased unemployment.
• Declining living standards.
• Deterioration of social services.

3. Implications for unemployment: The high rate of unemployment during the transitional period is one of the most important problems of reform, and there is no doubt that unemployment already exists and high in Iraq, but the restructuring of the public sector and privatization will create a new tributary of the flow of the unemployed, which requires to be patient in the subject Restructuring the public sector and privatization in light of the weakness of the Iraqi private sector and its inability to absorb the surplus labor force from the public sector.

Tools to counter the social effects of economic reform :
The success of economic reform requires the creation of an institutional environment capable of supporting human development and mechanisms to protect those affected by its negative consequences, which is called the social safety net, which represents an integrated package of institutional support measures not only for the affected groups, but also for those groups who do not benefit from the reform measures, and financial support for the creation of investment and employment opportunities, and the issuance of legislation that protect these groups and encourage their members and help them to take advantage of the expected benefits of reform, the social safety net under the reform programs should be based on a comprehensive methodological foundations as follows :
Addressing the causes of poverty and providing support to specifically serve the affected groups.
• Don’t create a additional administrative structure and a new bureaucracy and focus on the rehabilitation and distribution of surplus labor on new economic activities.

To address the effects of the correction on income and the labor market, a number of researchers present the following measures:
• Encouraging economic growth that is heavily utilized and the efficiency of working factor
• Protection of the poorest.
• Establishing safety nets and providing funding for them locally and internationally.

The work of these networks is distributed from labor-intensive public works projects to nutrition projects targeted to the target groups, or the establishment of salaries for very poor families, to projects to raise human capital, to projects to promote and support small projects, and the proposed elements of the social protection network in Iraq can be detailed as the following:
1. Provide the ration card for the poor and those whose income is below a certain limit.
2. To maintain government support for food stuffs that affect the lives of citizens such as wheat, rice, sugar and oil.
3. Provide cash benefits to the unemployed, the disabled and the elderly.
4. Providing health and educational services to the poor free of charge.
5. Supporting rural development programs to achieve a balance between the countryside and the city through financing the establishment of infrastructure projects, the rehabilitation of agricultural lands and the establishment of industrial and tourist areas.
6. Support employment-related programs, which include the following:
• Funding public action programs to create job opportunities for young people.
• Promotion and financial support for small and medium projects.
• Training and qualifying young people to work in the private sector.

The application of the above mentioned social security measures will reduce the negative effects of the decline in private and public consumption. Therefore, it becomes necessary to take good care of the subject of economic reforms and to assess their economic, social and political consequences accurately and objectively because the general situation in Iraq is still burdened with many burdens and political, security and economic risks. .

Economic Studies Unit
Rawabet Center for Research and Strategic Studies