Economic Reform in Iraq: From Russia with Caution

As the debate intensifies over appropriate economic policies for Iraq, calls to avoid past mistakes often refer to apparently negative experiences in eastern Europe and particularly Russia. Such warnings are based on a caricature of harsh ‘shock therapy’ programmes imposed by ideologically driven advisers financed by western governments. These caused long recessions while making no provision for social safety nets or the institution building necessary for a successful market economy. Russia’s economic experience since the collapse of central planning in 1991 holds some important lessons for today’s policy-makers in Iraq.

The World Today Updated 21 October 2020 Published 1 December 2003 3 minute READ

Brigitte Granville

As with all concrete and complex case stories, the economic challenges facing Russia and Iraq are comparable only to a limited extent. The two countries’ respective economic legacies – Soviet-style central planning and oil-based authoritarianism reinforced by a twelve-year international embargo – are too specific to allow general comparison. However, there are enough common features to justify some analysis. Two stand out:

Total collapse

Both countries set out on the reform road after absolute collapse of the Soviet and Saddam Hussein regimes. Although the causes differed – implosion in the Russian case as opposed to the invasion of Iraq – there were two similarities in relation to economic reform. In both cases, it was collapse that made reform possible while also making it more hazardous and painful.

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