Paul Bremners Economic reforms of Iraq, any positive aspects?

Great Debates
#1

So Paul Bremner who is a right wing ideologue, and when they implemented free market reforms in Iraq it consisted of;

Order 37, which lowered Iraq’s corporate tax rate from roughly 40 percent to a flat 15 percent.

Order 39, which allowed foreign companies to own 100 percent of Iraqi assets outside of the natural-resource sector

Order 12, amended by Order 54, suspended all tariffs, thus removing the advantage that domestic Iraqi producers had over foreign producers. However, a 5% “reconstruction levy” on all imported goods was later reimposed to help finance Iraqi-initiated reconstruction projects

Were any successes made? The successes not taking into account Iraq was starting from a low economic base.

However, considering the utter disaster that the types of people who implemented these reforms in the former USSR (Jeffrey Sachs) Why wasn’t the bad results of that pure free market experiment heeded?

#2

I’m pretty sure the end of the oil embargo pretty much swamps any effect, good or bad, from any other changes in the economic situation in Iraq. Hydrocarbons are something like 75% of GDP, so the ability to sell them, and at what price, pretty much determines how their economy is going to improve.

#3

Wasn’t there also an order banning public-sector labor unions?

#4

Yup and the right to collective bargaining, I don’t understand with such a glaring failure under their belt, these Austrian school of economics types haven’t been majorly discredited.

#5

Eh, I think laws against collective bargaining are bad economics (and morally wrong). That said, its kind of silly to look at Iraq and say its a “glaring failure” because of a lack of public unions.

For staters because its not really a glaring failure. Iraqs GDP has been growing at a decent clip since 2006.

And secondly, because the economic situation in Iraq is almost entirely dictated by its ability to sell oil on the international market. Its current rate of growth is due to repairing oil infrastructure that’s fallen apart due to neglect during the embargo-era (and presumably, damaged in the invasion/insurgency). Unionisation doesn’t really enter into it one way or another.

#6

No one has said it’s a glaring failure because of a lack of Unions, I’m asking how can people on the right sign this off as a success, when it’s caused massive economic disruption and has significantly ruptured (Further) the state of civil society in Iraq?

They completely trashed Iraqs economy/society in the name of ideology and therefore by their own incompetence, left a legacy of major failure rather than a beacon of success in that particular area of the world. Why couldn’t they have implemented it gradually?

As for the economic growth, Iraq was in a state of chronic depression for nearly 2 decades, any major growth was bound to happen.

#7

So your not saying it caused a “glaring failure”, but you are saying its “caused massive economic disruption and has significantly ruptured the state of civil society in Iraq”? That seems glaring to me.

I don’t think there’s much evidence that Iraq’s considerable problems stem from economic policies. On their face, they seem to be long-standing ethnic and religious problems, and its kind of hard to see how uprisings in Fallujah are caused by a low corporate tax-rate and lowering tariffs. But if you have evidence that says otherwise, I’d certainly be interested to see it. So far you haven’t posted any, or even really made a cognizant argument for that view.

That’s my point. I don’t see how you can hope to draw economic lessons from the policies implemented after the invasion when large increases in economic growth was inevitable. A centrally planned communist state or an ideal free-maket would’ve seen similar growth, as long as the west was willing to invest in their oil infrastructure and buy their oil.

#8

The fact it was a glaring failure is implied, I’m suggesting that its not a glaring failure solely on the basis that they don’t have Unions, although that doesn’t help whatsoever.

Again, firing the majority of the civil service and army which constituted Iraqs national ‘core’ and sense of identity in the name of lowering cooperate tax rates along side a small government ideology is exactly what fueled the fire of ethnic tensions in the first place.

So what was wrong in keeping in place the structures that held Iraq together economically in the first place, rather than firing hundreds of thousands of government employees and privatising hundreds of Iraqi state owned enterprises? Kind of defeats the purpose of preventing an insurgency from starting in the first place.

http://www.iaccidatabase.com/story_picture/544/attachment.pdf

#9

So very specifically: what do you think is a glaring failure, why do you think it is a failure and how do you think one caused the other? I think you need to think out your thesis a little more and spell it out a little more clearly. The OP reads like a circa 2006 reeder rant.

When you say “again”, it implies that you’re repeating an argument that you’ve mentioned earlier. I don’t see anything earlier in the thread about firing the army (which was indeed a terrible idea), and I don’t see any evidence that that firing was related to lowering the corporate tax rate (essentially all of Iraq’s gov’t revenues come from oil, they don’t rely on the corporate income tax to fund the military).

And even if the two things were related, I don’t think you could get much of a general principle from it, one way or another. The problems with disbanding Iraq’s army were pretty specific to Iraq at that time. If the US wanted to lower the corporate income rate and pay for it by shrinking our military, I think that would be a good idea, and probably wouldn’t result in ex-soldiers joining insurgency groups and fighting against the gov’t.

You’ve just posted a 22 page .pdf with no explanation of what we’re supposed to take from it, or what its in support of. How many people reading your post do you think are going to find that helpful?

#10

What I’d say is that there were a lot of state-owned industries which were shut down basically overnight, with no comparable work to replace them. And a lot of Baath party members were essentially shut out of the economy as well.

If the government is paying your salary, you have a pretty strong incentive not to fuck with the government. And if the government is barring you from earning a livelihood, then you’ve got a pretty strong incentive to fuck with the government.

It never ceases to amaze me that free-market champions like Bremner don’t seem to understand one of the foundational assumptions of capitalism: people respond to incentives.*

*ok, I should really say “rational actors seek to maximize utility.”