It’s the Iraqi Economy, Stupid!

by | May 2, 2003

For years, we have heard about Saddam’s brutal suppression of political freedoms in Iraq where free elections, free speech, and a free press were non-existent. But we have heard little about the absence in Iraq of economic freedom and opportunity. As leader of the leftist Baath Socialist Party, Saddam ravaged Iraq with his expropriation of […]

For years, we have heard about Saddam’s brutal suppression of political freedoms in Iraq where free elections, free speech, and a free press were non-existent. But we have heard little about the absence in Iraq of economic freedom and opportunity. As leader of the leftist Baath Socialist Party, Saddam ravaged Iraq with his expropriation of major industries, his disregard for property rights, and his eradication of private enterprise. Simply put, Saddam’s Soviet-style socialism enabled him to consolidate his power, impoverish his people, suspend political freedoms, and pose a threat to world security.

So America acted. Thanks to the courage and leadership of President Bush, one of the most brutal socialist dictators in modern history has finally been removed from power. The Iraqi people are safer for it, America is safer for it, and the community of freedom-loving nations is safer for it.

Now, our attention has turned to the reconstruction of Iraq, with the goal of building a free, prosperous, and friendly nation. The Bush Administration’s reconstruction policy appears to be based almost exclusively on the introduction of political reforms in Iraq. Indeed, at the first U.S.-sponsored meeting of various Iraqi factions, only a few basic principles for rebuilding Iraq were adopted–all of which centered on political reforms to democratize the country. The Administration’s argument is that free elections, free speech, and a free press in a pluralistic Iraq are the means to a prosperous, stable, and friendly Iraq.

Yet this argument is dangerously flawed.

What has been conspicuously missing from the reconstruction debate is the dire need for economic reforms in Iraq that would (for the first time in many decades) create the conditions for a market economy based on protected property rights and economic liberty. History has shown time and again that only a strong rule of law that guarantees these basic economic conditions allows democracy to work and prosperity to flourish. Absent these conditions, democracy invariably fails to guard against either tyranny or third-world poverty.

Iraq is no exception.

1933 Germany is a cruel reminder of what democracy–without basic economic freedoms guaranteed by due process and the rule of law–can lead to. That year, a democratic Germany held free and open elections for the office of Chancellor. As leader of the largest democratically elected party in Parliament (the Nationalist Socialist Party), Adolph Hitler became Chancellor and formed his government. The rest is history. With weak protections for basic economic freedoms and property rights existing even before his rise to power, Hitler was able to arbitrarily confiscate the property and livelihood of Germans, effectively nationalize major industries, and consolidate his power. The democratic Germany of 1933 produced a totalitarian regime that instigated a bloody world war and impoverished an entire nation.

Similarly, India is a modern example of how democracy without capitalism fails to ensure the prosperity and stability of a nation. With a population exceeding one billion, India is the largest democracy in the world. The Indians enjoy broad political freedoms. They freely elect their own leaders, have freedom of speech and religion, and have a free press. But, as the result of socialist policies, Indians enjoy few economic freedoms. Property rights are inconsistently protected, excessive regulations undermine private enterprise, and the government controls almost all aspects of economic life. Despite its strong democratic institutions and political freedoms, India is a third-world country subject to the social and political instability that widespread poverty wreaks–thanks to a lack of economic freedom and guaranteed property rights.

Do we want the Iraqi people–strangers to the rule of law, property rights, and economic liberty–to go down the same road as democratic Germany in 1933 or democratic India today? Absent real economic reform in Iraq, what will stop another democratically elected regime from enriching itself with the property and livelihood of the Iraqi people, consolidating its power, and again becoming a threat to world peace and security?

Absolutely nothing.

Thus, while democratic reform in Iraq is important, only true economic reform premised on the virtues of capitalism will ensure that its people enjoy the fruits of freedom, prosperity, and stability. Without it, democracy will only lead Iraq back down the same old road to tyranny, poverty, and desperation–ingredients for the making of another tyrannical regime that will threaten the peace and security of the world.

If the Bush Administration fails to pursue economic reforms before democratizing Iraq, it will have lost a golden opportunity to effect real change in the region. It will also have allowed the blood and sweat of our brave military men and women to have been shed in vain.

Paul J. Beard II is a staff attorney at the Pacific Legal Foundation, where he litigates cases in favor of individual rights, including the right to do business free of unreasonable government regulation.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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