Wednesday, February 24, 2021

Review Iraq’s Burdens, Oil, Sanctions, and Underdevelopment

Alnasrawi, Abbas, Iraq’s Burdens, Oil, Sanctions, and Underdevelopment, Westport London: Greenwood Press, 2002


Iraq’s Burdens, Oil, Sanctions, and Underdevelopment by Abbas Alnasrawi is a very good academic book about the impact of oil and the 1990s United Nations sanctions upon Iraq. It’s a very short read but it packs some real insights into how Iraq developed. The one drawback is that the author repeats himself quite often. His thesis was that in the 1950s the Iraqi government had the opportunity to use its vast oil wealth to really grow its economy. Instead it became dependent upon oil which led to the total demise of the nation when wars and sanctions cut off this most important industry.

 

Alnasrawi begins by laying out how petroleum became Iraq’s most valued resource. In 1925 Baghdad signed an oil concession with a consortium made up of British Petroleum, Exxon, Mobil, Shell, and Compaignie Francais des Petroles. In 1934 it began exporting but it wasn’t until the 1950s that it really took off. The government signed a better deal with the foreign companies and eventually nationalized the industry. Iraq also benefited from OPEC asserting its power over prices in the 1970s. Oil as a percent of GPD went from 3% in 1950 to 16% in 1960 to 50% in 1974, while revenues grew from $19 million in 1950 to $300 million in 1960 to $8.2 billion in 1975 to $26.3 billion by 1980. The author did a wealth of research and there are charts and more explaining this boom for the country. He points out that in the process Iraq went from being reliant upon the oil conglomerate which acted as part of an international oligopoly to controlling the business after the 1970s. This offered the nation a unique opportunity because most developing countries lack the money to grow their economies but petroleum seemed to solve that dilemma.

 

That leads to the next major part of the book which was how every Iraqi government failed at development. In the 1950s under the monarchy a Development Board was created which was to get all of the country’s petroleum revenues and use it in a national plan to work on agriculture, industry, infrastructure, etc. Farming was the largest employer and business in the country. It was dominated by large landowners who also happened to control the government. The workers were like serfs and mired in poverty. The huge amount of money Baghdad was receiving could have started the resolution to this problem by modernizing agriculture, increasing the wealth of the peasants who would then create a market for manufacturing thus diversifying the economy. This was the goal of every government that followed up to the Baath Party and Saddam Hussein. What happened instead was that the authorities backed projects that helped the landlords and neglected agriculture and industry. Even under General Qasim who attempted land reform the needed investment in the business was not made. The neglect led the nation to go from a food exporter to a food importer. Consumer goods were also bought from abroad since industry was never supported. This was all paid for via oil wealth. The 1970s under the Baath was considered a golden age when wages grew, a large middle class emerged, schools and universities flourished, etc. Alnasrawi reveals this was a mirage fueled by the huge growth of petroleum profits from OPEC and the oil embargo after the 1973 Arab-Israeli War. Baghdad was simply importing more and expanding the labor force via government jobs using oil money which could not be sustained because as soon as the industry went into a decline which always happens this deck of cards would collapse. What happened was even worse as Saddam went to war with Iran in 1980, then invaded Kuwait and faced the toughest embargo in history. That last topic is the focus of the last third of the book. For Iraq which had become the most oil dependent country in the world these calamities were impossible to overcome. Many others have written about how Iraq suffers from the oil curse, but this is the most detailed history that I’ve read. It’s also the first that exposes that the 1970s were not the boom times as most believe. These are invaluable insights into Iraqi history.

 

The one drawback of Iraq’s Burdens is that it was not organized better. The result is Alnasrawi constantly repeats himself. For instance at the end of each chapter he gives several pages of review. Then the same examples keep on coming up again and again halfway through the book. This really stands out because Iraq’s Burdens only has around 160 pages of text. Thankfully this is not a major distraction as the writing is both informative and straight forward.

 

Iraq’s Burdens is an outstanding history of the political economy of Iraq. It meticulously goes over how oil developed and then became a burden instead of a benefit. It’s lessons are still applicable today as the country is still just as dependent upon oil as it was over 50 years ago. The irony is that the new ruling class that took power after 2003 have learned nothing and have repeated the exact same mistakes as all the governments since the country’s founding in the 1920s by using oil wealth to fund everything without diversifying the economy. Thus when oil goes up Baghdad vastly increases spending and then when it goes bust so does Iraq only to repeat itself during the next cycle. The new ruling class are just like the old in that they are only interested in benefiting themselves instead of society and the public they are supposed to serve. Abbas Alnasrawi explains how that all came about.

 

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