Researcher Shatha Khalil *
Translated by : mudhaffar al-kusairi
To understand the reality of the Iraqi economy and economic development, you must understand the nature and origin of the Iraqi economy to know the reality and the future that awaits it.
If we refer to the legislations that were issued after the year 2003 that formed the basis on which the systems were built to build what is known as the state, which the occupant relied in its building on laws that he issued and enacted himself, such as the State Administration Law and the Financial Management Law, and ignoring the legacy of the Iraqi state for eight decades, this created disparities between groups of society, marginalized groups, no equality, and religious, sectarian and ethnic tendencies were raised , and the concept of the homeland was absent, and was replaced by components, which indicated a failure in all areas, that appeared clearly after the withdrawal of the American army in 2011.
This was reflected in the distribution of wealth between individuals, components, and governorates, and the criterion of wealth distribution was ethnic and sectarian, which directly and indirectly affected the structure and performance of the Iraqi economy.
Total dependence on revenues of selling oil creates a dependency culture and does not push the state and people toward fruitful, competitive economic production. And when this phenomenon is combined with a government that seizes the proceeds of oil resources to enhance its tyranny and increase the wealth of its leaders, the results are devastating.
To know what is rent? Who is the rentier state? What are the disadvantages of its economy. The first person to use this term – the rent- as a form of financial revenue is (Adam Smith) in writing (The Wealth of Nations), but the first one to use it as an economic pattern is (Karl Marx) in writing (capital), and that the meaning of the word rent is development and prosperity.
As for the term rentier state, it can be defined: It is the state that relies almost entirely on one source to meet its government spending, and this source is represented by oil, and the oil state with rentier economy is heavily dependent on oil, thus its economy is based on two levels:
– The internal level: It is the state’s control of oil resources and specifying ways to spend its revenues.
– The external level: is dependence on oil and its revenues.
A country that obtains a large part of its income from external sources, whether it is from natural, agricultural, or extractive resources in the form of rentals, the state has control over it and its distribution. Controversy has arisen over the term rentier state, especially after the emergence of the term post-rentier state, but there is consensus that the rentier state is the country that relies on oil revenue to meet its government expenditures.
As for the state after the rentier, it is the country that relies on the proceeds of its exports of raw materials in order to meet its government spending. In fact, we can divide rentals into three categories:
* The first: natural rent, which is represented by the natural resources available to the state, such as oil and other mineral resources.
* The second: strategic rent. This type is represented by the state’s location in terms of ports and the extent of its control over trade routes or its enjoyment of a geo-political advantage, such as supervision over the waterways.
* Third: Transferable rent, which is represented by the state receiving aid and grants in addition to other forms of support.
Iraq and the rentier country: – Iraq possesses many resources that have not been optimally exploited and totally dependent on one resource represented by oil and the neglect of the other sectors that if they were taken care of it and implemented their projects, Iraq would become one of the richest countries in the world. The feature of the Iraqi economy today and for a long time, especially after 2003, is that it is a rentier economy with distinction and the Iraqi state’s dependence on oil revenues only , puts it in a very difficult position, because the federal budget is calculated mainly on oil and at a rate of 95% and it does not depend on other sectors and the basic features of the Iraqi economy being a rentier economy are :
– All state revenues come from oil revenues.
– Oil is the main source of the local economy.
– The recipient of the rentier oil revenues and has the control over it is the government.
— Population activity focuses on the consumption and redistribution of oil rents without seeking to produce it.
As Iraq possesses many resources that enable it to advance the economic reality and get it out of the circle of unilateral rentier economy to a productive, developed and diversified economy, by activating the role of other economic sectors such as agriculture and industry in addition to the service and tourism sector.
Iraq has very large components for religious tourism, if a number of development and strategic plans were put in place to invest, the Iraqi economy would be transferred qualitatively and substantially, but at the same time there are a number of obstacles that prevent the transition of the Iraqi economy from the rentier economy to the productive economy. The most prominent of these reasons are the following: –
. The deteriorating security situation.
• Political confusion and failure to unify political positions by the ruling elites.
• The method used to implement government contracts and the nature of the direction of these contracts.
Among the most notable disadvantages observed in the rentier economy in Iraq are the following:
• (1) Control of one group of the society over the centers of wealth and has direct control over its distribution.
• (2) Poor distribution of national income, despite the wealth of the state, but not all members of society benefit from it.
• (3) The Iraqi society is a consumer society and importer of everything despite the possibility of reducing this import by activating the agricultural, industrial and service sectors within the country, and thus transforming the economy from rent to a more diversified and integrated economy.
• (4) The political and economic dependence of the state towards the major powers.
• (5) One of the major disadvantages of the rentier state is its dependence on one resource, which is oil. If it is reduced or depleted – its depletion – it will negatively affect all areas of life. Finally, we can put a number of points through which the Iraqi economy can be promoted and shifted towards a productive economy, as follows: –
• Pay attention to the educational sector because it represents the cornerstone of any societal renaissance and through it the cadres are launched to make any political, economic or social changes.
. There must be a change.
This change cannot happen overnight. A wide class of unproductive employees has emerged, some of whom are just a small screw in the mighty corruption machine. This class will not accept change and reform voluntarily and obediently, and will not recognize the reality of its parasite and will not easily give up its illegal privileges.
In the army, the number of holders of high ranks has grown without merit and in a manner that is not in line with the size and capabilities of the army. The number of generals in the Iraqi army is ten times the number in the American army! As for their professional level, it is a very different issue. And say the same in the police and other government departments, both federal and local, many of their certificates are forged or issued by trivial institutions.
And do not forget about tens of thousands , and hundreds of thousands of people who are not present “non-existent staff” and deputies who receive pensions for their work in Parliament for one session, in addition to the beneficiaries of the Rafha law and the law of true political prisoners and counterfeiters.
All of this was only to establish enough loyalties to a degree that allowed the great looting of parties and their leaders from major projects, real and fake. In short, it is a systematic looting process of state resources, which should be used to serve all people and improve their lives.
How do we get out of this pathological anomaly that cannot be sustained? How do we turn to good governance so that the state departments are limited to the minimum number of employees and associates who are qualified to carry out its work? This will certainly require a significant reduction in the number of employees and associates and the filling of gaps in organized corruption.
There are two types of employees in the state with very low productivity who live on their resources in a parasite, and another class deprived of government jobs dream of obtaining them, at a time when universities are no longer concerned with raising the scientific level, as much as they are interested in issuing certificates that are like work permits in the state, the holders are not suitable for any fruitful productive work.
If there is a tremor in the oil market, its price drops, or its exports are hindered for any reason, the entire country is at risk of collapse.
The situation that we must come to is the case of good governance, which does not protect organized plunder but rather protect the rights of all, especially the weak and the deprived. The steps necessary to achieve this that should be considered may include the following:-
-Using modern technology to complete the unified identity project, which uses the biological markers of each individual, so he (or her) has a single, fixed number that is used in all the individual’s dealings with the state. This will help eliminate the phenomenon of multiple government salaries per person and the phenomenon of “non-existent staff.”
-Reconsidering the entire government apparatus and abolishing institutions and departments, which add nothing but classes of useless , expensive and possibly harmful bureaucracy. For example, if we strengthen the Office of Financial Supervision and provide it with efficient and honest elements, we will not need the departments of inspectors general, the Integrity Commission, or the recently established Supreme Council for Combating Corruption.
The introduction of computerization on a large scale in the work of state departments with systems established by specialists, allowing reviewing all steps in every government transaction with its timing and the person who allowed or stopped it, and facilitating the inspection of the proper course of work, to be an important tool in reducing administrative corruption.
-Establishing the Public Service Council and ensuring that qualified administrators , proved to be efficient and not politicized , even if we bring them from outside the country in the early stages. Appointment to all state departments shall be made through this Council exclusively and in actual competition.
– Filteration the civil and military departments of the state, under the supervision and management of the Public Service Council, to the minimum level capable of performing its tasks and restricted with the qualified staff according to specific criteria to verify experience.
-Abandoning the principle of life-long employment, so who works in the state is like the one who works in the private sector, and he has to be productive and he is not promoted functionally except in a competitive manner (competition creates creativity).
If it is found that he is redundant or not efficient in his work, his services can be terminated after simplified and fair procedures, and he can be referred to the register of those laid off from work and treated like them until he finds another job. The procedures governing all of this shall be under the supervision of the Public Service Council, which should be immunized from favoritism, extortion and abuse.
-Strengthening the social security system, so that it includes all unemployed citizens without exception, and creating training centers to prepare technicians and administrators who the private sector needs.
These changes mean a revolution in concepts and mentalities and a shift from a parasitic dependent culture to a productive competitive culture, with the exception of those unable to work. But all reforms will not be possible without establishing security and creating an environment conducive to the private sector and national and external investment to create increased job opportunities, especially for young people.
Experiences in successful societies:
China, for example, where all the workforce was working exclusively in the country in 1965. There was no work outside the government. In 1997, after years of economic openness brought about by Deng Shaopeng, workers in the private sector accounted for about 10 percent of the workforce and produced 50 percent of the national product. After twenty years, in 2017, the percentage of workers in the private sector reached about 44 percent of the total workforce (340 million out of a total of 776 million). All this happened in a country ruled by the Communist Party and still supporting the public sector for ideological and security reasons.
In other rentier countries like Saudi Arabia and other Gulf countries, with their differences, there are programs to reduce government employment and expand the role of the private sector, which can be studied and benefited from what can be benefited from.
The wealth provided by the reforms, the filtration of the government apparatus, and the control of financial and administrative corruption, can be used in building and developing infrastructure such as roads, bridges, transportation, communications, and raising the level of education and health services. It will make a change in the level of life of the country and its outcome will be great. Without it, we will undoubtedly remain on the path of a sloping that its end will be catastrophic.
Economic Studies Unit
Rawabet Center for Research and Strategic Studies