Iraq, economics, and common sense

Mark Thoma is one of the few commentators who has drawn attention to the non-sensical economic policy imposed on Iraq by the U.S. administration.

Common sense should have dictated that, after the destruction of its infrastructure and the dismantling of its (brutal but stable) government, Iraq didn't need to become a laboratory for neoliberal economics. It needed jobs and basics like electricity, water and sewage systems, and it needed them quickly.

And in response to a Washington Post article describing the failure of efforts to get Iraqi businesses to sell more to the U.S. market, Thoma writes:

Suppose Bush had engaged in a no holds barred attempt to get [American] firms to cooperate in this venture, used his bully pulpit at every opportunity to tell firms it's their patriotic duty and used all the usual slime machine tricks against those who don't cooperate. If he had gone all out and asked his business buddies to sacrifice for the cause (for once), told them that if young men can give their lives, can't you help as well, could that have made a difference? Or was it always hopeless? I've always thought we tried this much too late, so we'll never know for sure.

Why did we wait? The idea initially was that the free market would work its magic and somehow provide the jobs that were needed, so there was no need to protect former state-run enterprises -- those needed to be replaced in the name of efficiency. I wonder if adherence to that ideology rather than adopting a top-down planned approach that kept formerly state-run enterprises open and running (and opened more if needed) from the start would have changed the subsequent course of events. Forget efficiency, there was plenty of time ahead to worry about that, just put people to work doing something, anything. There was plenty that needed to be done.

Thoma is right of course. And it gives me pleasure to welcome him to the industrial policy sympathizers club...

Comments

[spencer]

Maybe we should ask some of the economists at GMU why their philosophy did not work so well in this critical case study.

[spencer]

Maybe we should ask some of the economists at GMU why their philosophy did not work so well in this critical case study.

[robertdfeinman]

Spencer: I know you are being facetious, but the answer to why GMU takes the positions it does is simple.

The entire department was set up and paid for by libertarian billionaire Charles Koch. Only those that dance to his tune get hired and stay employed.

Here's a link on Koch's activities:
http://www.mediatransparency.org/funderprofile.php?funderID=9

People find it hard to believe that an entire political philosophy could be kept alive by the largess of just a handful of super wealthy people, but its true. This is one of the reasons why wealth inequality is so dangerous to a democracy. It gives undue influence to a small group.

[polishalice]

Even the GMU guys might be sympathetic to the use industrial policy to provide short term stability to Iraq.

No one argues that you can't achieve high employment rates using state-run businesses.

In addition, most would recognize that protectionism has many short term benefits, first and foremost keeping local business in the green and providing societal stability Everyone pays more for goods, but we don't have to deal with people going losing their jobs all at once and waiting for more competitive business to pick up the slack.

The spectrum of freer market types are only interested in the long term consequences: will those protected industries be able to compete as the rest of the world moves on without them. Will state-run jobs run efficiently enough to provide everyone with long term employment.

Industrial policy is likely to be the best short term solution for any country, especially those where stability is more important that wealth accumulation. With all that oil, I'm surprised the Bush Administration didn't look to the governments of other energy rich countries.

[Will Bond]

The comments in this post are disturbingly close to a good Onion (satirical newspaper) article: "U.S. To Give Every Iraqi $3,544.91, Let Free-Market Capitalism Do The Rest".

See the link below:
http://www.theonion.com/content/news/u_s_to_give_every_iraqi_3_544_91

So true...

[derrida derider]

As the saying goes, you can fit an awful lot of Harberger triangles into an Okun gap. Allocative efficency should not have been an immediate priority - getting young ex-soldiers into work should have been.

But then if commonsense had prevailed we wouldn't have gone into Iraq in the first place ...

[Account Deleted]

Industrial policy is likely to be the best short term solution for any country, which I agree with.
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