Jack Kemp

I have just returned from a trip to the Arabian Gulf region (Abu Dhabi and Dubai), where our friends express a real sense of urgency that we establish rudimentary free markets and representative democracy in Iraq and turn over authority to the Iraqi people as soon as possible. To that end, I believe Congress should stop nit-picking the administration's funding proposal and authorize it without further delay.

The Bush administration must be doing something right in Iraq as evidenced by the hysterical reporting in the New York Times about the economic reforms there. Times reporter Jeff Madrick characterizes the reforms as extreme, radical "shock therapy." Opening the country to foreign investment and trade, restricting corporate and individual tax rates to 15 percent and tariffs to 5 percent as the Iraqi Coalition Provisional Authority has done is not shock therapy. Shock therapy is what the International Monetary Fund and Ivy League Keynesian economists administered in post-Soviet Russia when essentially we burned down the old economic structure with an ersatz "voucherized" scheme of "privatization," ruble devaluation, inflation and tax increases before a new structure was in place. What's going on in Iraq is reconstructive surgery on an economy and political system that already has been completely razed by war and dictatorship.

Madrick criticizes the Bush administration for adopting "radical laws" without a democratic Iraqi government to discuss or approve them, yet he advocates immediate U.S. imposition of failed and discredited policies that he characterizes as "mainstream," such as high "protective" tariffs and high rates of taxation necessary to support "adequate social programs." "Free markets," he says, "just will not be enough."

To the contrary, the Iraqi CPA makes its most serious mistakes when it abandons the market in favor of central planning. Madrick is correct that the CPA's scheme to create an international banking cartel in Iraq and reopen an Iraqi state-owned bank is a blunder of the first order. The CPA is also making a calamitous mistake by reviving a centralized, state-owned oil industry and sending it off to OPEC to fix world oil prices. And the CPA is risking the entire Iraqi enterprise by insisting that a constitution be adopted before it will allow a representative sovereign government to be established.


Jack Kemp

Jack Kemp is Founder and Chairman of Kemp Partners and a contributing columnist to Townhall.com.
 
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