Thursday, April 13, 2006

The Neighbors Are Nervous, and Suddenly Helpful

Strategy Page tells us:

The rising threat of a sectarian civil war appears to be helping to avert one. Saudi Arabia, Kuwait, and some other nations bordering Iraq are increasing measures to curb extremist support in Iraq, and are curbing assistance to groups responsible for actions that are feeding sectarian tensions. Apparently leaders in these countries have decided that an Iraqi civil war along sectarian lines will inevitably spill over onto their soil, as large numbers of refugees flee the fighting, while their own citizens become radicalized in support of co-religionists in Iraq, both events possibly fueling internal disorders. There are a lot of Shia Arabs in places like Saudi Arabia, Syria and Kuwait. Most of these Shia Arabs live near the Saudi and Kuwaiti oil fields. It has always been, at least since the oil was discovered, the policy of both nations, to keep their Shia happy, or at least quiet.



Meanwhile, Iraq is also serving as an experiment on how to create an Arab economy that will flourish. Since World War II, the Arab world has lagged the rest of the planet in economic growth. For example, 300 million Arabs, and all that oil, generate less economic activity than Spain, and its population of 40 million. The main problem has been bad government. Too many dictators, and too much government restrictions on the economy. Too much corruption and waste. Even higher oil prices don't help, as it simply provides more money to be wasted on consumption, rather than business investment.



One of the things that has been changed in Iraq is the way the economy is regulated. Since Saddam was tossed out in 2003, the economy has been governed by Western rules. As a result, GDP per capita doubled by the end of 2005, and the GDP is expected to grow another 49 percent by 2008. All this despite continued attacks by Sunni Arab rebels on oil facilities and other economic targets. It's much easier to start a business in Iraq now, even though there's still a lot of corruption. The big change is that now the corruption is illegal, and there is even progress in prosecuting the government officials who take bribes or try to shake down businessmen. Lebanon is the only other Arab state to run its economy in a Western fashion, and they have thrived. However, Lebanon also interrupted their success story with a fifteen year (1975-90) civil war. Iraqis are well aware of that, and have no illusions about what happens if everyone does not get along. Another thing haunting Iraqis is the most successful economy in the region; Israel. This is also the country most like the economically successful Western states. Iraqis can't really talk about it openly, but the "Israeli Model" is discussed. A real democracy, peace at home, a flourishing economy, a powerful military, and nuclear weapons. Well, no one said it was a perfect model for Iraq.

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