Socialist Woes in Iraq

It seems that the private sector isn’t moving fast enough and in Iraq the government is employing lots of people. This from the International Herald Tribune:

“In its (private sector) absence, the Iraqi government has been sustaining the economy the way it always has: by putting citizens on its payroll. Since 2005, according to federal budgets, the number of government employees has nearly doubled, to 2.3 million from 1.2 million.

Some economic advisers and members of Parliament worried that a raise for government workers could be a nightmare for others when a sudden flood of cash poured into the market. They argued that the raises should be phased in gradually to prevent a spike in inflation, which, at around 14 percent — a sea change from two years ago, when it neared 70 percent — has largely been tamed by a disciplined fiscal policy, robust oil revenues and an influx of low-cost imports.

But Iraqi citizens were desperate for the money. And lawmakers were thinking about elections.”

It sure didn’t take long for Iraqi politicians to figure out how to get re-elected easily. It is almost like human nature. Of course, I am not bashing Iraqi politicians, but this is just something that is innate in democracy. We hand out jobs, you elect us. Any rational self-interested politician/voter would agree. If they didn’t then they would lose. This is somewhat the “limit government paradox.” Those who want limited government will never get elected because limiting the government in turn limits your voters.

Next, on the whole issue of the private sector not performing well enough. This is a relatively quick change from a dictatorship to capitalism. Just like when countries switched from communism/socialism to capitalism. You are going to have a period of reallocation. This comes as a recession and there is no quick fix. The more you pump money into hiring people in the government, the more you crowd out other private investments.

The rest of the article is here.



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One CommentLeave a comment

  1. I thought your post is legendary – I look forward for the next blog post!!

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