Dr. Mazen Al Aboudi, Ph.D. Geology – Expert at Alnajah Center For Training & Development.
Everyone might agree on describing the Iraqi economy as a rentier economy (The first man to use the term rentier economy as a form of financial return is Adam Smith in his book The Wealth of Nations). Iraq depends on oil as the major source of income, which constitutes up to 95% of its total financial revenue. Oil revenues are considered the backbone of all government budgets, and it represents the easiest, fastest and largest income because it does not require complex production mechanisms or marketing management (Karl Marx is the first to use the term rentier economy as a pattern in his book, Das Capital).
Many countries around the world have rentier economies – especially Arab countries. One of the most important economic experiences has taken place in the Netherlands in the middle of the last century with the discovery of gas. This is known as Dutch Disease which is an accredited scientific economic term to describe a case of declining in a productive economy when there is a clear increase in rentier income, resulting in a noticeable increase in unemployment, poverty, and corruption.
The famous American economist Joseph Stiglitz summarizes the symptoms of economic patterns, which depend on the sale of natural resources at the expense of manufacturing industries resulting in large financial returns, lack of job opportunities, and great damage to local industries competing in the international trade markets. These patterns can create a situation of rich homelands and poor citizens. In the case of oil rentier countries like Iraq, the government controls these sources and monopolizes the process of selling and distributing the revenues (which are usually affected by the fluctuations of oil prices in the global market). This opens the door for wide financial dealings that are not transparent and cause major financial losses related to either financial mismanagement or corruption.
Perhaps what distinguishes the Iraqi economic experience after 2003 from the rest is that Iraq as a country is passing through a period of weakness and disintegration, and there is a clear confusion in controlling its regions, as well as a clear failure to face economic and security challenges. Iraq has failed in facing regional and international interventions in its internal political, security and economic affairs for the past two decades, which has put Iraq in the category of the so-called (old age), which is one of the most dangerous stages a country can reach since its foundation, which represents the most important stage of failure that threatens its existence before the country goes through the stage of no-state, in which all the elements and standards required to ensure any human grouping remains in a specific geographical location is absent within the sovereignty recognized by the rest of the world and international organizations.
What complicates matters further in the Iraqi case is that the Iraqi political reality that brought the country to the aging stage is the same reality that does not want to drift away from rentier economic pattern because it provides an appropriate climate for building quick fortunes for specific political groups (individual wealth versus community poverty) at the expense of diminishing activity (commercial, industrial, and agricultural) in a country that needs economic activity, market practice, complex production mechanisms, competition, and employment for skilled manpower. Therefore we find that the Iraqi case (Iraqi Disease) does not resemble the Dutch case – except for what relates to describing the economic pattern – and the Iraqi experience should take its share in political economy studies, as it is a unique representation of the clear relationship between the economic pattern model and the model of the state as an existential political entity to the stage of aging. This has threatened the existence of Iraq as a sovereign country with borders and human groupings that have historical and civilizational elements unless it is corrected through political reforms or radical political change that is capable of transferring the state to another more mature and youthful stage.
When we say the Iraqi Disease is different from the Dutch disease, our evidence is the Netherlands is witnessing great economic prosperity in terms of its ability to recover, achieve a state of economic diversification, and get rid of poverty, unemployment, and corruption. The annual per capita income levels have reached record numbers compared to other European countries. The active political system within transparent and high scientific standards have enabled these regimes to change their economic policies to other directions that are more effective in recording clear rates of growth and influence the achievement of economic development in the long run.
Sources:
– Cavalcanti, Tiago ; Mohaddes, Kamiar & Raissi, Mehdi ( 2011 ) ” Commodity Price Volatility and the Sources of Growth ” , Cambridge Working Papers in Economics.
– يوسف علي عبد وميثم عبد الحميد رمضان، تحليل أثر المرض الهولندي على الطاقة الاستيعابية للاقتصاد العراقي، مجلة العلوم الاقتصادية، العدد 37، المجلد 10، تشرين الثاني 2014.
– ليثيم إيمان و زنقوفي إيمان وأ. بو فلفل سهام، تشخيص أعراض المرض الهولندي على الاقتصاديات الريعية (حالة الجزائر)، 2012، كلية العلوم الاقتصادية والتجارية، جامعة 08 ماي.
