San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

The Economy and Economic History of Iraq

The Very Ancient History

The Sumerians

The Akkadians, the Guti and the Amorites

The Hittites, the Assyrians and the Chaldeans

The Iranian Archaemenids and the
Conquest by Alexander of Macedonia

The Arab Conquest

The Great Schism in Islam

The Abassids

The Turk and Mongol Conquests

The Overthrow of the Monarchy and
the Creation of the Republic of Iraq

The Baath Party's Coup D'Etat

The Rise of Saddam Hussain

Money and Monetary Policy
During the Hussain Regime

The Unecessary Destruction of the
Economy After the 2003 Invasion

The Inevitable Partition of Iraq

The Very Ancient History

The region that is now included in the somewhat artificial nation-state of Iraq has had a very important role in world history. The most important of the world's agricultural revolutions took place in the mountains to the north of the Tigris-Euphrates Rivers Valley somewhere around 6000 BCE. The techniques of this grain agriculture were not immediately adaptable to the river valleys with their severe flooding but eventually tribal groups came to occupy those valleys.

The Sumerians

The most important early settlers of the lower Tigris and Euphrates River Valleys were the Sumerians. The Sumerians came into the marshy lands near the mouths of the Tigris and Euphrates with a fully developed culture that was quite distinct from the cultures of other societies in the regions. The Sumerian cultures were dominated by priesthoods that ruled in the name of a god or goddess. The resources of the society were owned by the temple of the god or goddess and the common people worked for and received sustenance from the temple. The ruling priesthood organized the building and operation of the irrigation system that was the key to the prosperity of the Sumerian city-states. It was quite the analog of the twentiety century socialist states with the priesthood with their religion playing the role of the ideological party engaged in central planning.

The origin of the Sumerians is not completely established but their literature mentions the land of Dilmun which apparently was the island of Bahrain and the adjacent territories. A trading port existed at the north end of Bahrain based upon fresh water springs found there. As is the case with all trading societies Bahrain was a hotbed of cultural and technological development. It would have been a natural source of colonization expeditions to the marshlands near the mouths of the Tigris and Euphrates Rivers. The relationship of Dilmun and Sumeria to the civilization of the Indus River Valley is not certain, but it is clear that the civilization of the Indus River Valley evolved in that location, in contrast to the Sumerian immigrant civilization.

The tribal groups in the area were ruled by warband leaders rather than priest as in the case of the Sumerian city-states. Kings stemming from a military class did not rule until much later in Sumerian history. Initially the Sumerian city-states were isolated and there was plenty of land for everyone. When the city-states grew spatially they began to impinge upon each other. The territorial disputes led to military confrontations and the need for a warrior class. Eventually, as is usually the case, the protector class became the ruling class.

In addition to the inter-Sumerian conflicts there were invasions by nomadic tribes who were covetous of the wealth of the Sumerian city-states. The invaders came from two general sources, Semites from the southwest and Indo-Europeans from the northeast.

The Sumerians were one of the most important innovators of all time. They invented a script for recordkeeping and this was expanded to create a literature as well as recording scientific knowledge. Significant bits of astronomy and mathematics were created by the Sumerians. Some such as the division of the circle into 360 degrees and the day into 24 hours have lasted to this day.

The Akkadians, the Guti and the Amorites

The empire of the Akkadians was created by Sargon I of Akkad. The people of Akkad were Semites and their major strength was in military organization. With a conscripted army Sargon conquered territory as far away as Egypt and Ethiopia. He also conquered the rest of Mesopotamia including Sumeria. But the empire Sargon I put together fell two centuries later to the nomadic tribe of the Guti from what is now Iran. Freed from the rule of Akkad the Sumerians rose up and under the leadership of the city of Ur ultimately defeated the Gutis. The freedom of the Sumerians did not last. They were conquered by the Amorites, a Semitic people from the west who established their capital at Babylon. The Amorites, or Babylonians are they are often labeled, secured a empire that encompassed the Tigris-Euphrates Valley. The most notable ruler was Hammurabi who created a code of laws for governing the empire from Babylon.

The Hittites, the Assyrians and the Chaldeans

The Hittites were a people whose core area was in eastern Anatolia. The were notable for their mastery of iron. They were thought to have the very best weapons. The Hittites assembled an empire which spanned the land area from the eastern Mediterranean to the Persian Gulf. They conquered and destroyed the city of Babylon and with it the power of the Amorites.

The Hittites for a time controlled the area of norther Mesopotamia occupied by the Semitic people known as the Assyrians. When Hittites power faded the Assyrians from their base in the north valley spread their rule south to the Persian Gulf and west to the Mediterranean Sea. They built a new city on the Tigris called Nineveh and tried to destroy Babylon.

Babylon was revived when revolts brought down the Assyrian Empire. The Chaldeans replaced the Assyrians as the dominant power in Mesopotamia and the eastern Mediterranean lands. The Chaldeans resurrected Babylon and when the Chaldean king, Nebuchadnezzar, conquered Judah he tried to destroy Jerusalem by sending its inhabitants into captivity in Babylon. Some of the most glorious days of Babylon were achieved during the rule of the Chaldeans.

The Iranian Achaemenids and the
Conquest by Alexander of Macedonia

The Arab Conquest

Iraq was the land of the good black earth and a major prize of the Middle East so it was not very long after the armies of Islam moved out of western Arabia that they came to the Tigris-Euphrates Valley. In addition to the great bonanza of fertile land irrigated by a system of canals there were fabled cities. There had been Babylon in the past but in the seventh century the major city was Ctesiphon the capital city of the Persian Sasanid dynasty.

The chronic warfare between the Sasanids of the Persian Empire and the Eastern Roman Empire of Byzantium left the region weakened. There were also Arab tribes in the area which were always ready to conquer the civilization of the valley. By the early seventh century most of the Bedouin Arab tribes in the region were Christians. This was before Islam.

When the Arab armies controlled from Medina arrived in Iraq about 634 AD there was already great resentment by the local Arab tribes against the Sasanid Persian Empire. It did not take much to convert some of those tribes to Islam and ally them for the invasion of the Persian Empire. In the first battle the Muslim army failed to defeat the Sasanids but were able to retreat back into the desert to regroup and rearm. A new commander, Said ibn Abi Waqqas, emerged and in 636 led the Muslim army to victory over a larger Sasanid army at the Battle of Qadisiyya. In that battle the Sasanid commander was killed. After this victory the Muslim army went north to the Sasanid capital of Ctesiphon to capture and loot it. With the Sasanid army broken the Muslim army moved to the north to capture Mosul and the surrounding region.

The Caliph Umma Abu Bakr in Medina tried to maintain an isolation of the Muslim army in Iraq from the local population. He had established garrison towns, called amsar for his soldiers and their families. These were on the edge of the desert to ensure free contact with Medina. This was the origin of Basra and Kufa.

The administrative centers of the Caliphate were Basra, Kufa and Mosul. For the administration of the local areas the Caliph relied upon the Persian bureaucracy that was already there and experienced. The land and property of the Sasanid nobility were confiscated distributed to the army, the Caliph or made Muslim community property. The land was taxed.

The non-Arab converts to Islam were not equal to the Arabs. The had to affiliate themselves with one of the Arab tribes and were thus clients of their selected tribe and known by that name mawali. The people of the book, the Jews and Christians, were not forced to convert to become Muslims but they had to pay a special tax.

The Great Schism in Islam

Although most people think that Shi'ism arose in Iran that is not the case. Shi'ism arose in Iraq over the issue of the succession of the political and religious leadership of the Islamic world. Umma Abu Bakr had been universally accepted as caliph. He was assassinated in 644 by a Christian Persian slave. At this stage Islam had been by and large a movement of Arabs viewing themselves as the chosen people of Allah. This was not the dogma of Islam but nevertheless an important element of the social perception. There was along with the veneration of the person of Mohammad a perception that his blood line was somehow sacred. Again this was not part of the dogma of Islam but nevertheless an important social perception.

The council of elders, the ulema, chose Uthman ibn Affan as the new caliph. Uthman belong to the powerful Meccan clan, the Banu Ummayya, who had most strongly opposed Mohammad and drove him out of Mecca. At this time the Arabs were still highly tribal and the sins of any members of a group fell upon all members of the group. So the past opposition of the Banu Umayya clan to Mohammad clung to all members of the clan even after the clan had converted and became pious Muslims. Uthman, as was the usual practice, chose members of his clan for high positions in his caliphate. So Uthman's caliphate was burdened not only by the charge of favoring relatives but also of putting into power people associated with a past but not forgotten opposition to Mohammad in Mecca. For example, Uthman gave his half-brother the governorship of the territory in Iraq controlled from Kufa. That half brother in his days before conversion to Islam had once spit upon Mohammad in Mecca. This was an offence that could not be easily forgotten by the pious. When that half brother proved to be a poor governor the people doubly blamed Uthman. Finally in 656 Uthman was assassinated by soldiers from Egypt.

With the general resentment against Uthman the matter of the choice of a new caliph was the subject of extreme public concern. The Ulema (council of religious scholars) chose Ali ibn Abi Talib. Ali was the husband of Mohammad's daughter Fatima and also a cousin of Mohammad. This appointment was not accepted by powerful figures in the family of Mohammad. In particular the favorite wife of Mohammad, Ayshe, opposed it and she was supported by two of Mohammad's closest friends. When Ali did not immediately kill those associated with the assassination of Uthman. Ayshe and her allies went to the military outpost of Basra in Iraq to raise their rebellion. Ali sought to suppress the rebellion with soldiers from the other military outpost in Iraq, Kufa. The armies of Ali and Ayshe met in the Battle of the Camel. The battle was given that name because Ayshe herself rode a camel into battle to urge on her soldiers. Despite Ayshe's efforts Ali's force were victorious.

Ali was then confronted with another rebellion led by the governor of Damascus, Mu'awiya ibn Abi Sufyan. These rebels became known as the Kharijis, the secessionists. In 657 Ali forces fought the forces of the Kharijis but to stave off defeat the Kharijis called by arbitration of the issues by religious judges. Ali piously accepted that call for arbitration. The arbitration was to take years. In 661 Ali, while in Kufa, was assassinated. The governor of Damascus, Mu'awiya, was declared caliph. Mu'awiya was a member of the Banu Umayya clan so the caliphate had returned to the clan of Uthman. Mu'awiya granted a generous pension to the sons of Ali, Hasan and Hussein, in return for their acceptance of him as caliph. This situation prevailed until it was time to choose a new caliph. In 680 when Mu'awiya's son Yazid was designated caliph Hussein decided to rebel. After receiving indications of support from Kufa Hussein set out in April with a small band of relatives for that city. The Umayyad governor of Iraq sent four thousand soldiers to arrest Hussein. In October those Umayyad soldiers trapped Hussein's band near the Euphrates River. Hussein refused to surrender even against the overwhelming odds and he and his supporters were all killed. Hussein's head was sent to Yazid in Damascus.

The schism then was between the supporters of Ali and Hussein who felt that the caliphate should be held by descendants of Mohammad and those supporting the Banu Umuyya clan who felt that genetic ties to Mohammad were not essential. According to the Ummuyyads the caliph did not even have to be an Arab. The choice of caliph was entirely up to the Ulema at the time of succession. This was the origin of the division between Shi'ism (Ali's supporters) and Sunni'ism (Umuyyad supporters) and this schism took place in Iraq. As time went on such things as the religious veneration of Ali and Hussein by the Shi'ites was considered heresy by the Sunni's. Likewise the veneration of saints and their tombs struck Sunni's as idolatry. The schism became very deep.

(To be continued.)

The Abbasid Caliphs

The rule of Iraq by the Umayyid caliphs in Damascus produced political resentment. The Shi'ites maintained their belief that the only legitimate caliphs were those such as Ali and Hussein who had a tie to the blood line of Mohammad. In the eighth century the Abassid family developed a following based upon their claim that they were descended from one of Mohammad's uncles. They took a more puritanical stance to Islam than the Umayyid rulers in Damascus. In Islam puritanism is usually a political as well as a religious statement. Being more puritanical than the ruling authorities removes the moral authority of those rulers. The Abbasids also wanted to eliminate any distinction between Arab and non-Arab Muslims. This had great appeal in Iran. The supporters of the Abbasids massed together an army which defeated the army of the Umayyid caliph in 750 in a battle in northern Iraq. The head of the Abbasid clan, Abu al-Abbas. was declared caliph in Kufa, a principal city of Iraq. The Abbasids then ruthlessly destroyed the Ummayyid clan, young and old. Only a few escaped to found an Umayyid caliphate in Spain. The Abassids moved the location of the capital from Damascus to Kufa.

Soon after the assumption of power by the Abbasids they founded the city of Baghdad and made it their capital. Within a century and a half Baghdad had grown to be one of the largest and most powerful cities in the world. It was simultaneously an administrative center, a trade center, a manufacturing center and a cultural center as well as being a religious center.

The Abbasids turned against the Shi'ites who had supported their assumption of leadership of the Islamic world.

The Abbasid caliphs supported the arts and produced a golden age of Islamic culture. Baghdad was recognized as the leading city of human civilization of the time. This golden age culminated in the rule by Harun al-Rashid. After Harun al-Rashid's death things devolved into civil wars and disintegration of the empire. This arose in part because al-Rashid divided his empire between his two sons. This resulted in a war between the sons and a year-long siege of Baghdad. One son won but during that siege the power and prestige of Baghdad declined. The far-flung empire of Islam fell apart which cut off tax revenues that supported the economy and power of Baghdad. The rebellions raised the cost of ruling and simultaneously reduced the resources for suppressing those rebellions. The scarcity of resources forced the diversion of resources away from such matters as the maintainance of the irrigation system and thus created a decline in agricultural production and a further decline in tax revenues.

The Abbasid caliphs began to rely upon Turkic nomads for the military. Those Turkic troops began to gain power within the political structure of the caliphate. One Abbasid caliph at the end of the ninth century tried to escape the influence of the Turkic mercenary troops by moving the capital from Baghdad to the city of Samarra to the north of Baghdad. This was a disasterous project because it was costly to build the necessary structures of a new capital such as palaces and mosques and the caliphate was short of funds. And ultimately it did not work and the capital was moved back to Baghdad.

In the tenth century the Abbasid caliph created a post of administrator of the caliphate called the amir. This post went to the commander of the military forces of the caliphate. Soon the effective ruler of the caliphate was the amir, leaving the caliph only with religious significance.

The Shi'ites continued to hold that the true leader of Islam had to be of the blood line of Mohammad and this meant a descendant of Ali and Fatima. Those leaders were called imams. In 941 the twelfth imam disappeared without naming a successor. The Shi'ites in Iraq held that the twelfth imam did not die but would return as al Madhi, the divinely guided one. Shi'ites believing this became known as twelvers. There were other Shi'ite sects not adhering to this doctrine. Leaders of one of these non-Twelver Shi'ite sects gained control of Egypt where they were known as the Fatimids.

In the middle tenth century (945) the post of amir fell to the leader of the Buwayhid clan of Iran who were Shi-ites. For the non-Shi'ite Muslims the Shi'ites were heretics.

By 980 the Buwayhids had conquered Mosul and consolidated their rule. They carried out extensive repair and improvements of the canal and irrigation system. Furthermore they funded the arts and Shi'ite centers of learning. Generally the early decades of Buwayhid rule were a period of the cultural flourishing of Iraq. However by the end of the tenth century conditions were deteriorating.

The Mongol-Turk Conquests

In the thirteenth century Temujin, the Great Leader (Genghis Khan), put together an alliance of Mongol and Turkish tribes which was based upon their alliance to him rather than blood ties. This was a transition from tribalistic structures to feudalistic structure. This alliance using superior organization and technology coupled with absolute ruthlessness conquered the greatest land empire in history. Iraq was part of that conquest.

Turkish tribes had been moving into the Middle East from their homeland in north central Asia in the two centuries before the rise of Genghis Khan.

As noted previously, in the twelfth century the Abbasid caliphate in Baghdad made use of the Turkish tribes which had migrated into northern Iraq as mercenaries. Those Turkish mercenaries had grown powerful and threatened to gain control of Iraq until the Iranian mercenaries, the Buwayhids, came into control of the amirship of the caliphate.

In the mid-eleventh century the Seljuk Turks under the leadership of Tughril captured Baghdad. By this time the Turkish tribes had been converted to Islam of the Sunni variety. The Abbassid caliph saw the defeat of the Shi'ite Buwayhid amir by the Sunni Seljuks as the regaining of Sunni control in the caliphate. The leader of the Seljuks was granted the title of sultan and was the secular ruler. The caliph remained only a religious figure.

The Seljuk had to contend with the rival power of the Shi'ite Fatimid caliphate of Cairo who controlled Damascus and its surrounding region. The Fatimid forces captured Baghdad from the Seljuks but lost it again after about only a year.

(To be continued.)

The Collapse of the Ottoman Empire

The Creation of the Nation-State of Iraq and the Period of the British Mandate

Iraq Under the Hashimite Monarchy

The Overthrow of the Monarchy and the Creation of the Republic of Iraq

King Faisal II, who was widely perceived as the heir to a monarchy imposed upon Iraq by the British, was overthrown and executed as a result of a small error in judgment. Faisal II ordered an Iraqi brigade to go to Jordan to support the fellow Hashimite regime of King Hussein against possible rebellion. The Iragi brigade under the command of Colonel Add as Salaam Arif once armed and provided with ammunition for possible combat in Jordan marched to Baghdad and captured the King Faisal II and his family. Faisal and members of his family were summarily executed. The commander of the Iraqi brigade, Abd al Karim Qasim assumed command of the government and declared Iraq a republic.

The Baath Party's Coup D'Etat

The Baath Party

Officially the ideology of the Baath Party is Pan-Arabic Socialism but in practice it is a feudalistic organization with a goal of tribalistic industrialism. The official ideology takes the position that the Baath Party in power in any Arabic nation should consider that nation merely a region of the Arab Nation to be created. Thus the Baath Party in any one country give as much attention to the merging of separate Arab nations into the Arab Nation as it does to local problems. When Baath Parties in Iraq, Syria and Egypt gained political power there was some efforts made toward unifying these countries. In 1958 Egypt and Syria formed the United Arab Republic but Syria withdrew in 1961 so really nothing came of the attempt at unification. Later there was a good deal of antagonism between the Baath Parties of Iraq and Syria and in the Iraq-Iran War of 1980-88 the Syrian Baath Party supported Iran to the chagrin of the Iraq Baath Party.

The pan-Arabic Baath Party was formed in the early 1940's by two Syrian students, but it was not until 1952 under the leadership of Fuad Rikabi that it began to grow and achieve some political status. It had to compete with communist party organizations for the allegiance of Arabs with socialist sympathies. The Baath Party participated in political actions during the 1950's under the leadership of Ali Salih as Saadi but was not a major contender for power until after the overthrow of the monarchy by Qasim in 1958. The Baath Party attemped an assassination of Qasim in 1959 which failed but in 1963 succeeded.

With the overthrow of Qasim in 1963 the Baath Party became one of the major elements in the National Council of Revolutionary Command (NCRC) government of Iraq but it was not able to prevent the military officers from assuming full power in the NCRC later in 1963. The president of the NCRC was the same officer who overthrew King Faisal II in 1958, Abd as Salaam Arif.

The military leader Arif made some gestures toward uniting Iraq with Egypt and appointed Nasser supporters to high posts in his government. But again nothing came of the attempt at Arab unification. However in the process of attempting unification with Egypt the military leaders adopted the program of Egyptian President Abdul Nasser for the nationalization of major businesses such as banks, insurance companies, steel producers, cement producers and construction companies.

In 1965 Arif gave up on the unification of Iraq with Egypt and dismissed the Nasserites he had appointed, one of whom attempted Arif's assassination. The assassination attempt failed but Arif was killed in a helicopter crash in 1966. The brother of Abd as Salaam Arif, Abd ar Rahman Arif replaced him as head of government. Rahman Arif had much less of a hold on the reins of power than his brother and several disturbances further weakened his control.

Politics in Iraq consists largely of forming alliances within and between clans and interest groups. Once formed these alliances require careful balancing of the distribution of the gains of the alliance. The alliance that siezed power was led by

When an alliance such as the one above achieves victory there is an immediate transition from cooperation to competition to survive and prevail over the alliance partners. Hasan al-Bakr had the major keys to power and was triumphant within the alliance. He was

With all of those keys to power in his portfolio it is little wonder that Hasan al-Bakr emerged and survived as the dominant leader. Hardan al-Takriti and Ammash both lost their positions of power within the Regime. Hardan al-Takriti left Iraq in exile and was assassinated in Kuwait in 1971. Ammash was only demoted to an ambassadorial post in the Soviet Union.

The Rise of Saddam Hussain

Hasan al-Bakr was president from 1968 to 1979. He was only deposed from leadership from within his group. He raised his younger relative Saddam Husain to power as the head or controller of the key secret police groups: 1. the security force for the Baathist Party, 2. the security force for the presidency, 3. state security force. Al-Bakr's family relationship to Husain is somewhat uncertain; some sources say he was Husain's uncle, others that he was his cousin. The cautious sources say merely that he was a relative.

Hasan al-Bakr's regime utilizing the forces under Saddam Husain's command began to liquidate the opposition and potential opposition. The communists were a special target but one that required special care. The Iraq regime was dependent upon the Soviet Union for such things as weapons and wanted to avoid antagonizing the Soviets by too harse and blatant persecution of the communists. The Regime would have preferred to co-opt the Iraqi Communist Party (ICP) and bring it into a coalition with the Baathish Party. In addition, the Regime was not certain of how much power the Communists had within Iraq. It was the prudent strategy not to test that strength if possible. But, despite efforts to bring the ICP into a coalition, the Regime ended up virtually wiping it out.

In most cases the purges and persecutions were not based upon ideologies but merely on affiliations with rival power groups. The Regime was particularly worried about networks with the armed forces. In the consolidation of power Hasan al-Bakr and Saddam Husain came to rely upon a tribal grouping called al-Bu Nasir of the Takrit area. The dependence upon this faction continued throughout the Saddam Husain Era.

The economic policies of the Regime were relatively mild compared to the socialist rhetoric it professed. The economic policies implemented were:

The subsidies were increased and taxes reduced when oil revenues ballooned in the 1970s.

There were some token socialist ventures such as collective farms to placate the dedicated leftists within the regime but there was not a wholesate effort to create a Soviet-style socialist economy. The Regime did however nationalize the Iraqi Petroleum Company in 1972.

The Regime solicited closer ties with the Soviet Union, in part, to arrange purchase of Iraqi petroleum by the Soviet Union to offset any possible boycott of Iraqi oil as a result of the nationalization of the Iraqi Petroleum Company. Members of the Iraqi Communist Party were brought into the Regime organization.

Hasan al-Baker signed a accord with the head of the Iraqi Communist Party in 1973 and for a time the ICP was made legal. But when the ICP began independent organizing efforts in trade unions, peasant organization, youth groups and universities the Baathists began to counter it and by 1974 it withdrew from its public organizing activities.

In June of 1973 the head of Iraqi state security forces attempted a coup d'etat apparently intending to liquidate the Regime leaders but it failed. This incident points up how unstable the seemingly solidly entrenched totalitarian regimes can be.

Bob Woodward in his book, State of Denial, tells of an incident that shows the operating policies of Saddam Husain. Hussain talked with King Fahd of Saudi Arabia at an Arab Summit meetin in 1979. It was just after the November 1979 takeover of the Grand Mosque in Mecca by about five hundred religious militants who objected to policies of the Saudi government. Fahd asserted that when the militants were arrested the leaders would be executed and the rest put in jail. Hussain said that without question all of the militants should be killed. He then went on to say,

Every man in this group who has a brother or father--kill them! If they have a cousin who you think is man enough to go for revenge, kill him.… [T]hat's the only way you can sleep at night.

Clearly killing all the relatives does not limit the group of men with a motive for revenege; it only expands it. However, the killing would convince everyone that in attempting to harm Hussain they not only condemn themselves to death but also all of their male relatives.

(To be continued.)

Money and Monetary Policy During the Hussain Regime

In Iraq in the latter days of the Hussain regime there were two different currencies in circulation. Outside of the Kurdish area of the north there was currency showing Saddam Hussain's picture and known as the Saddam dinar. In the Kurdish area the currency did not show Hussain's picture and this currency was known as the Swiss dinar, possibly because it seemed as sound as the Swiss franc. The reason for the stability of prices and the value of the dinar in the Kurdish area was that no additional printings occurred after the Gulf War.

In contrast the Hussain regime printing dinars freely and the level of prices rose to the point the value of the Saddam dinar fell to about one percent of its original value. Thus in 2002 it took 2,000 Saddam dinars to purchase an American dollar, but it took only 10 Swiss dinars in the Kurdish area to purchase one dollar. One Swiss dinar was worth 200 Saddam dinars.

In addition to printing too much paper currency under the Saddam regime the monetary authorities mismanaged the currency by printing only two types of bills; the 10,000 dinar bill worth about $5 and the 250 dinar bill worth about 12 cents. That is all, nothing in between.

The Unecessary Destruction of the Economy After the 2003 Invasion

The problems of Iraq fundamentally stem from its being a country that should never have been created. Three incompatible ethnic groups were put into a country and left with the ultimatum, Dominate or be dominated! As bad as the situation was of Sunni domination of the Shi'ite and Kurdish segments of the country it was not as bad as the chaos created by Donald Rumsfeld's bungled management of the occupation of Iraq after the toppling of the Suddam Hussain.

Donald Rumsfeld is a man of notable abilities but he sqandered those abilities in a misguided attempt to micromanage the Department of Defense and Iraq. Unfortunately for the Iraqi people Rumsfeld's focus on micromanagement led to his failure ot macromanage; i.e., to make sure the most basic elements were taken care of. There were colossal blunders of the most elementary nature.

Who was responsible for such blunders? The blame rests ultimately on Donald Rumsfeld, a man who became a Tasmanian devil of a bureaucrat. In case the allusion is obscure, the Tasmanian devil is a small hyperactive creature with a vicious disposition. Rumsfeld never gave approval to his subordinates and often criticized them viciously in public. Because the Tasmanian devil scurries about on the ground it is not likely to have a proper overview of its situation.

Rumsfeld did make an excellent selection of Jay Garner as the man to lead the program to build a new government for Iraq. Jay Garner was retired three-star general who was given responsibility to provide humanitarian aid to the Kurdish area of northern Iraq during the Gulf War in 1991. Garner got the public water systems operating properly and led a force of twenty thousand troops which drove Saddam Hussain forces out of the Kurdish area and allowed the Kurds to set up an autonomous zone. Garner completed his assignment in a matter of months.

Garner was an excellent selection to head the Office of Reconstruction and Humanitarian Assitance (ORHA) and Garner in turn made excellent selections of the people to assist him, but Rumsfeld did not give Garner the support he needed. For example, Garner hired two knowledgable policy experts from the Department of State, Tom Warrick and Meghan O'Sullivan. Warrick had written a study called Future of Iraq, which ironically had not been distributed to people like Garner who would be responsible for the future of Iraq. But after Garner had made Warrick and O'Sullivan members of his team Rumsfeld told him that he had to remove them from his team. The Vice President's office demanded their removal for reasons of dubious validity. Cheney supported a role for Ahmed Chalabi in the post-invasion government of Iraq. Chalabi was a man of questionable value who had created a paper organization claiming to be the Iraqi government in exile. Most people had little respect or confidence for Chalabi but Dick Cheney found him creditable. Warrick had expressed his disdain for Chalabi and therefore Cheney and those in his cabal did not want Warrick to have an influence in the formation of a new Iraqi government. Cheney more generally felt those who worked with the Department of State, as Warrick and O'Sullivan had, were able to make the hard decisions that Cheney thought were necessary. Cheney referred to the Department of State as the Department of Nice.

Rumsfeld thus picked the right leader for the program to create the future government of Iraq but did not give him the support he needed and did not protect him from interference with his operation by powerful figures such as Dick Cheney and Paul Wolfowitz. Furthermore Rumsfeld did not take heed of Garner's advice concerning policy for Iraq. Garner informed Rumsfeld of the colossal mistakes of disbanding the army, the deep de-Baathification and the elimination of the top leadership group. However Garner told Rumsfeld that those mistakes were not irreversible, that they could be corrected. Rumsfeld asserted that for political reasons there could not be any admission of past mistakes or their reversal. At that time Garner was right; the mistakes could have been corrected.

Now the colossal blunders have continued too and there is no going back to the social state that existed prior to the invasion. The issue now is Sunni autonomy in Baghdad and the other areas of the central region. The Kurdish region is effectively partitioned already and is doing quite well. Sunni Muslims will not accept Shi'ite domination in Baghdad and the other areas of the central Iraq. They need an autonomy comparable to what the Kurds enjoy. From the Sunni perspective Shia'ism is an abominable heresy. They will never accept political domination by the Shi'ites.

The Inevitable Partition of Iraq

The creation of Iraq was a colossal mistake. Putting disparate ethnic-religious groups in the same political entity always leaves each group with the choice of dominate or be dominated. Kurds and Arabs should never have been put into the same polity. Sunni Moslems and Shi'ite Moslems should never have been put into the same polity. From the viewpoint of the Sunni's the Shi'ite version of Islam is heresy verging on idolatry. The world's experience, for example in Yugoslavia, is that time does not meld disparate cultural and/or religious groups into one culture.

The first step toward partition is to move the capital of Iraq from Baghdad to Basra. The Shi'ites should give up any hope of controlling Baghdad. The second step is to divide up the revenue from Iraqi petroleum on a per capita basis and among the population of Iraq at the time of partition. The money should be sent directly to the people and let the governments raise the funds they need by taxing the people. This is in contrast to letting the governments have oil revenue directly which leads to the disappearance of the financial resources. Only after the first two steps are taken should the actual political partition take place creating a Kurdistan in the north, a Sunni state in the middle centered on Baghdad and a Shi'ite state in the south having Basra as its capital.

There will be major need for resettlement, but once Sunni's are assured to not having to live under Shi'ite domination the incentives for terrorism by Sunni's against the Shi'ites in the Baghdad area will be greatly reduced. The Kurds are already benefiting from the de facto partition of the northern provinces.

Perhaps there should be a zeroeth step to the solution of the problems of the Sunni and Shi'ite Iraqis. That would be a televised apology by President George Bush for not having an adequate plan for the governance of Iraq after the invasion and for the major mistakes of: 1. Not providing police protection for people and property in those early days 2. Disbanding the Iraqi army 3. the deep de-Baathification. If he has the courage to recognize and accept the obvious fact that Sunni moslems will never accept rule of their territory by a Shi'ite majority therefore that the creation of an autonomous Sunni region is a necessity for domestic peace then he can salvage the situation in Iraq.

(To be continued.)

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