The Iraqi Impasse: Sustaining Economic Reconstruction During War-Time

Abstract

Economic recovery is important for stability and peace in Iraq. The Iraq Study Group proposed financial aid to Iraq of around $5 billion annually, while President Bush has increasingly stressed the importance of job creation in that country. Unfortunately, significant economic progress in Iraq is unlikely unless part of a comprehensive strategy is designed to overcome several forces currently impeding reconstruction and economic recovery: (a) the growth and dynamics of the shadow or informal economy, (b) the deterioration in social capital, and (c) the evolving relationship between tribes, gangs and the insurgency. The dynamic interrelationship between these factors is causing a downward economic spiral. Progress in one or two areas alone will not be capable of generating significant economic gains. All of these factors need to be addressed.