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 Iraq.
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% per year. The Iraqi dinar was worth $3 as recently as 1983. Today, $1 will buy 2,700 dinars.
It is not known exactly how big the Iraqi government is, but estimates are that a third of the entire labor force is engaged in intelligence, police, security, military, or paramilitary service — 1.3 million people altogether out of a total labor force of just 4.4 million. Moreover, much of what the Iraqi government spends goes just for the personal gratification of Saddam Hussein and provides no benefit to the people. According to Kenneth Pollack of the Brookings Institution, Saddam Hussein has built 50 new palaces for himself since 1991 — many incredibly opulent, with gold faucets and such — costing $2.5 billion per year in a country with total GDP of just $60 billion, almost all of that accounted for by oil.
This being the case, the University of Chicago study estimates that more Iraqi civilians would die if the prewar situation had remained in place. They estimate that at least 200,000 Iraqis would have died on top of the 500,000 that have already died at the hands of Saddam Hussein. Moreover, they estimate that maintaining the prewar policy of “containment” would have cost the U.S. some $380 billion — far more than the war is likely to require.
This suggests that the war is a win-win situation for both the U.S. and Iraq. It is far cheaper to deal with Saddam Hussein now than allow the problem to fester for many more years. We will pay less out of pocket and the Iraqi people will suffer fewer deaths and less privation at the hands of Saddam Hussein. Once free to work and produce free of government control, Iraq could once again become one of the wealthiest nations on earth and its people could have a standard of living equivalent to those in Saudi Arabia or Kuwait.
But first, Saddam Hussein and his Baath Party henchmen must go. This is the essential precondition for both peace and prosperity in Iraq. Since they won’t go voluntarily, there is no other course except to expel them from power by force.
Some say that Iraq is unsuited for either democracy or capitalism. They note that there is really no Arab or Muslim country that can really be said to have both. But the same was said of Japan at the end of World War II. Yet that country — whose prewar history is not altogether different from Iraq’s — became a bastion of both democracy and capitalism.
The lack of role models in the Middle East should not discourage those who think its soil is inhospitable to freedom of either the political or economic variety. A similar argument was made about Latin America not too many years ago. But once counties like Chile and Mexico paved the way, others soon followed. Iraq could do the same for the Arab world.