Governance and Conflict Risk: The View from Iraq

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A 2017 review of hundreds of studies on stable, peaceful governance points to where we have gone wrong in trying to foster development. What lessons does it hold for Iraq?

This is the first in a series of articles looking at the factors that lead to stability and the reduction of conflict risk, inspired by the excellent book Governance for Peace by Conor Seyle, David Cortright, and Kristen Wall (2017, Cambridge University Press.)

Their superb collaboration covers over 800 political science studies and a range of other data, reviewing what the authors identify as the main factors that lead to peace (or lack of it). This includes levels of democracy, women’s rights, civil society, the development of free markets, institutional development, education, human rights, political inclusivity and state participation in the economy, among other factors. The book is a must-read for anyone interested in state fragility and development.

Iraq is mentioned briefly at several points, but it is interesting to consider Iraq in the context of all the author’s findings, starting with their chapter, Markets, Development and Peace. Many are familiar with the quote, “when goods don’t cross borders, soldiers will,” (attributed to French economist Claude-Frédéric Bastiat, but possibly taken from the work of Otto T. Mallery.) Starting with an historic view from Adam Smith and Kant, the authors expand upon this and it’s opposite situation, the absence of trade and globalisation as a predictor of conflict. Indeed, for much of the 1980s and 90s Iraq was essentially cut-off from increasingly globalised free market activity, a situation that weighed heavily on its internal stability after 2003.

Putting aside the age old problem of disentangling correlation from causation–something the authors do well by looking at so many studies, there is much to find that is applicable to Iraq.

This includes punitive barriers to trade such as complex bureaucracy, patronage networks and corruption, which has stifled genuine entrepreneurship. This has elevated the role of public sector jobs, which cannot be created at a rate that will reduce unemployment. Combined with primary resource dependence and inefficient state participation in the economy, levels of unemployment in Iraq have exploded, while many economically statist aspects of the former regime remain in place.

While unemployment may not be the main cause for young men to join armed groups (beyond ideology, see this new research on the role of elites) there can be little doubt that inflexible economic arrangements in Iraq have contributed to dysfunctional governance, heightening violence. The prospect of a job has been a major driver for young men joining armed groups, from insurgents between 2003-2011 to ISIS (who have preyed upon under-employed farmers). More recently, there has been a difficult effort to consolidate governmental control of politically aligned paramilitary groups, who have the strong appeal of employment.

Arguably, the authors’ review of literature cuts against the narrative of sectarian mis-governance. We may deduce that a major problem is a lack of opportunity for all young Iraqis, although the book does examine the other side of the argument–a lack of inclusive governance, which will be examined later. The strength of this book is that it takes a holistic view of state fragility, a highly relevant approach for understanding a complex country like Iraq.

On trade, the book references major studies that link economic growth with a reduced risk of armed conflict and conversely, references an array of literature which correlates low per capita income with conflict. Perhaps inevitably, Paul Collier is highly cited (see the multi-authored Breaking the Conflict Trap) concluding that the failure of economic development is a “root cause” of conflict.

While a number of studies have looked at the role of bilateral trade for building links between nations and raising the cost of conflict, the authors look at studies showing how greater free trade reduces the risk of internal conflict. A notable citation here is Barbieri and Reuveny’s essay, Economic Globalisation and Civil War, which outlines how states that do more international trade are less likely to experience civil war.

The authors deftly summarise the dangers of crushing private sector development, in a way that matches Iraq’s experience of the Baathist command economy and the struggle to reform after 2003:

“Many of the post colonial regimes that came to power in Africa and Asia after World War II adopted state socialist practices and nationalised economic resources. They did so in the name of justice and equality, claiming that resources belong to the people and should be used for social benefit. The results were mostly disappointing as revenues from nationalised companies flowed into the pockets of authoritarian leaders and their domestic and foreign patrons, while people in resource rich regions were neglected and impoverished.”

Arguably, Iraq did not always have this experience. There are fondly remembered periods of promising industrial and agricultural growth in the 1950s and 70s when resource revenues were poured into development. Of course, this rapidly gave way to byzantine government bureaucracy, crumbling state owned factories run by Baath-party loyalists and later (after 2003) political party loyalists, draining the country of funds for services. Now we see the push to depoliticise ministries through the drive for a “technocratic cabinet,” but this effort must battle entrenched rentierism, which is well described by the authors.

The above quote on nationalisation does well to capture how historically entrenched these problems are. Privatisation efforts have stalled, including the short-lived Baathist “administrative revolution” of the late 1980s, or the stop-start efforts post 2003 that were poorly implemented or abandoned. Despite calls for a strong private sector in Iraq’s constitution, much of the legacy of the former economic model remains.

This was enshrined by Legal System Reform Law No. 35, 1977, which states that legislation must support the government aim of the “destruction of feudal, tribal and capitalist values which hinder the march of Revolution towards building up the socialist society.” Likewise, the 1983 Law of Transportation, which remained on the books for some years after 2003, claims “the socialist sector leads and guides the carriage activity.” In practice, these laws easily led to inefficient, corrupt monopolies.

Today, socialist rhetoric has largely disappeared with regime change, but private sector development has struggled to fill the void. During Iraq’s war against ISIS., FDI hit a trough of just $3.5 billion, despite large areas of the country being far from the fighting.

Iraq therefore, is still battling to turn the strategic aim of reforming the business environment into concrete reality. If the studies cited by the authors are correct, this bodes ill for Iraq’s risk of renewed conflict, particularly when we consider Iraq’s young population structure.

Iraqi government ministries will have to coordinate far more effectively on improving some of the metrics in the World Bank Ease of Doing Business reports. That will involve political parties voluntarily surrendering a portion of their power. By doing so, they would increase what the authors refer to as “Market Freedom,” based on the Fraser Institute’s definition of economic openness. This is a wide ranging measure, but it generally relates to the ability of private citizens to establish businesses and invest without undue government interference, also looking at the environment for this to take place, including property rights and the rule of law. The Fraser Institute note how economic freedom is,

“distinct from both crony socialism and crony capitalism. Its markets are open to all, not just the rich and powerful. Jobs and contracts go to those with the best abilities, not just the connected. Entrepreneurs are free to start their own businesses without facing unnecessary hurdles and corruption. An impartial rule of law and simple regulations that allow business activity to flourish and create jobs and prosperity are vital to economic freedom. A large body of empirical research has found that economic freedom is key to increasing prosperity, particularly among the emerging nations.”

The critical point here, and one undergirded by many of the studies in the book, is that the greater economic freedom there is the less likely a state will suffer internal conflict.

Prosperous individuals create jobs, competition brings down costs for ordinary Iraqis, a tax base is created, governance is forced to become more responsible, revenue streams are diversified, insulating the country from commodity price shocks while links between communities that trade with each other are fostered. Eventually, meritocracy displaces patronage. At the national level, Iraq has made tremendous progress working on trade ties with its neighbors, but the difficulty of doing business within Iraq seriously diminishes this progress.

However, the authors do not argue for ripping away regulation and rapid privatisation, an accusation levelled at the post 2003 Coalition Provisional Authority in Iraq. In fact, they conclude the chapter cautioning that rapid liberalisation in fragile contexts can be dangerously disruptive. They cite a U.N. study on the Asian development miracle, noting the importance of public policy decisions, particularly with regard to trade policy and education, that helped fuel rapid poverty reduction and greater peace in the region. See IEI’s paper by Evan Toma for more detail on this subject.

Here of course, many issues overlap, as the authors write, “development, democracy and peace go together. This is the classic Kantian liberal peace theory, which is confirmed in contemporary empirical research.”

In this respect, Iraq needs to work on the governance structures that will facilitate freer trade and the institutional capacity to support rule of law and legal guarantees for economic freedom. Although not discussed in the book, it is clear from the research cited that Iraq’s democracy, albeit flawed, is an important start, but as the authors make clear, democracy will be vulnerable to dangerous challenges without freer trade.

Editor, Iraq Energy Institute | + posts

Robert Tollast, is a freelance political risk analyst focused on Iraq who is the editor at the Iraq Energy Institute. His previously worked for the Iraq Advisory Group, CEIS (France) and the Brecon Group.

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