Every day, Americans watch their televisions in awe, as U.S. cruise missiles and precision bombs rain down on Baghdad. There is also much destruction going on elsewhere in Iraq. It may seem absurd, therefore, to suggest that the war in Iraq could somehow end up being an economic blessing for the Iraqi people. Yet that is the conclusion of an important new analysis of the war.
Written by three University of Chicago professors -- Steven Davis, Kevin Murphy and Robert Topel -- the study looks more carefully at the costs and benefits of war to Iraq than any previous analysis. It concludes that war is actually a good thing for that nation.
First, the professors look at what the prewar situation in Iraq was. They note that Saddam Hussein has been running the country into the ground for more than 20 years. Per capita gross domestic product was $9,000 (in 2002 dollars) in 1979, the year Saddam Hussein solidified his power. The most recent estimate puts per capita GDP at a little over $1,000.
In short, well before the first bomb fell on Iraq, the country had already suffered a devastating destruction of its economy equivalent to what might result from a major war. In less than a generation, Iraq went from being among the wealthiest countries on earth to among the poorest.
To be sure, United Nations sanctions imposed after the 1991 war contributed to the impoverishment of the Iraqi people. But those sanctions would have been lifted had Saddam Hussein simply been willing to live up to his own promises to disarm, cease efforts to obtain weapons of mass destruction and end his support for international terrorism. He did not do so, therefore sanctions stayed in effect.
Even if sanctions had been lifted, however, Iraq still would be a poor country, owing to the state socialist policies imposed by Saddam Hussein. Virtually the entire economy is controlled by the state, with little room for private business much above the most primitive level. The banking system in Iraq has collapsed, and inflation is estimated at about 100 percent per year. The Iraqi dinar was worth $3 as recently as 1983. Today, $1 will buy 2,700 dinars.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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