It is a poignant, if imperfect analogy. After its total victory in World War II, Washington helped rebuild Europe and Japan as bulwarks against communism, laying the foundation for prosperous trading blocs. After partial victory in the gulf war, the United States pursued the opposite strategy. It imposed an embargo on Iraq to contain what was left of Saddam Hussein’s regime, effectively strangling one of the Arab world’s largest consumers. The embargo fed the anti-Americanism now consuming the Middle East and became a recruiting tool for Islamic militants, including Osama bin Laden. Just as a robust Asia is hard to envision without a strong Japan, a prosperous Arab world is unlikely without a strong Iraq, on whose rich soil the world’s first civilizations began. “There’s a reason they call it the Fertile Crescent,” says Said Aburish, a Palestinian writer and former consultant to the Iraqi regime. “And eliminating Iraq really did it in.”
The Arab world is in decay, with its populations growing twice as fast as its economies. At this rate, the nations of north Africa, the Middle East and the Persian Gulf will be unable to absorb the legions of young men poised to enter the job market. Unemployment rates hover in the double digits. Governments weakened by corruption and mismanagement are failing to provide basic services, creating a void eagerly exploited by terrorists.
Iraq’s place on George W. Bush’s “axis of evil” obscures the fact that Saddam developed his nation’s economy while other Arab leaders were plundering theirs. Viewed from the slums of south Beirut, Jordan’s desert villages, the dilapidated hamlets of the Upper Nile, Iraq’s economic debility is a more subversive threat to regional stability than its hidden weapons. At a time when the West is considering calls for a new Marshall Plan to rebuild Afghanistan as a bulwark against terror, the far more pivotal Iraqi economy goes ignored. And at a time when the United States is debating the merits of “removing” Saddam along with his weapons of mass destruction, it’s worth noting a potentially priceless fringe benefit: getting rid of Saddam would free the economy he created, but then destroyed.
Saddam was largely responsible for Iraq’s development even before he became president. As vice president in the 1970s, he led a modernization drive in the name of Baath socialism. While other Arab states traded their petrol dollars for palaces, Iraq built roads, schools and factories, and sent engineers and doctors to study in the United States and Europe. Saddam ordered sweeping land reform, a health-care system and minimum-wage laws. He opened male-dominated professions to women. Iraqi Airways boasted some of the world’s best-trained pilots and engineers. Iraq became the Arab world’s first modern economy. As biographer Said Aburish put it, Saddam had given “Marxism a local Arab meaning.”
Until the late 1980s, it was Iraq’s voracious middle class that buoyed the economies of Turkey, Jordan, Saudi Arabia, Syria, Lebanon and even Kuwait. Baghdad imported Syrian textiles and appliances, Egyptian grains, Jordanian construction materials, Lebanese financial services and labor from all over the Arab world. Iraq brought in engineers, bankers, teachers and construction workers, who helped stimulate their own economies by sending home a large share of their wages. In return, Iraq exported oil, water and goods from bicycles to electronics. Iraq was the only major Arab economy diversified enough to weather the collapse of oil prices in the mid-1980s, providing a lift to the region. In the early 1990s, Saddam opened a stock exchange in Baghdad.
By then, his increasingly brutal, megalomaniacal rule was ruining the economy he had built. The war that followed his 1990 attack on Kuwait all but silenced the beating heart of Arab capitalism. Between 1990 and 1999, the aggregate per capita income of Jordan, Syria, Lebanon, Saudi Arabia, Kuwait and Egypt averaged less than 2 percent growth against a population growth of about 4 percent. Joblessness in the Levantine economies is estimated at 20 percent to 30 percent. No country has been hit harder than Jordan, America’s close ally and home to a burgeoning pro-bin Laden constituency. Sanctions on Iraq cost the Hashemite kingdom $1 billion in yearly exports.
With Iraq out of the picture, there was no Arab model for economic modernization in the 1990s. Arab regimes routinely ignore pledges to sell banks, airlines and utilities. Capital markets remain primitive. The largest employer in most Arab countries is the government. Services such as banking and telecommunications remain inefficient. The Arab middle class is abandoning the region to a corrupt elite. Iraq’s exports recovered somewhat after the U.N. raised the amount of oil Baghdad is allowed to sell under a program that allows it to barter goods for petroleum. But that trade is outpaced by the smuggling racket that has thrived under the sanctions regime. Luxury villas have sprouted around Baghdad’s Mansur district, the lair of what ordinary Iraqis call Intiha’ah Al Hasar, the Embargo Cats.
The smuggling boom offers a hint of Iraq’s potential. Its recovery would not cure Arab economic sclerosis. But it would be a first step, one that could only be taken after the overthrow of Saddam. Removing him would make the region less dangerous, but not necessarily for the reasons promoted by White House hard-liners. There is no guarantee that Saddam’s successors would give up his weapons, particularly not without regional arms reductions. The wider war on terror cannot be won without an Arab middle class, which cannot be rebuilt with Iraq choked by sanctions. To overthrow Saddam is to remove the embargo and re-start the engine of Arab growth. And any Middle East policy that does not address the economic decay is doomed to fail.
