Economic Growth without Oil
The most interesting fact about the current Iraqi economy is that it is not petroleum based. Many war critics often criticized that oil production in Iraq is still below pre-war level; and they are correct. This means that Iraqi economic growth has little to do with oil. In fact a CNN Business article dated August 23rd, 2002 titles: “Iraq economy shrinking, despite oil.” The economy shrank despite higher oil production in 2002 but grew despite lower oil production in 2005.
I have argued before that raw material based economy – particularly petroleum based economy is unhealthy.
…oil [is] a curse because it creates a dysfunctional relationship between the people and the government. It further remove incentives for entrepreneurship, a key factor to economic progress. A future Iraqi government with a large oil revenue does not need to listen to her people since the money do not come directly from the people. There is no need for accountability. State revenue can be squandered on any frivolous project because oil revenue is readily available. Furthermore a large part of the economy, labor and capital, will revolve around the state-owned petroleum industry deprive Iraq of economic diversification.
The Iraqi people will find out that it is possible to experience wealth and prosperity without depending on the volatile oil market. It will allow them to diversify their economy by investing in many different industries. There are still many problems. Unemployment remains high – 30 percent. The banking industry, essential to investment, is nonexistent. But if the economy of Iraq grew despite numerous obstacle; one can only imagine the future when those obstacles are removed.