chapter  10
18 Pages

Reconstruction and peacebuilding under extreme adversity: the problem of pervasive corruption in Iraq

ByROBERT LOONEY

There are two major obstacles to Iraq’s economic recovery: the lingering violence and ongoing sectarian strife. Combating these problems has been further complicated by the large numbers of unemployed, easily available weaponry, a quickly widening gap between the rich and poor, and a largely impotent government. Pervasive violence and a deteriorating economy have created a vicious circle that has further undermined the government’s ability to tackle the economy’s four basic problems: the security of the oil supply; high levels of unemployment; deficiencies in infrastructure; and the government’s failure to introduce much-needed economic reforms. In turn, these four problems have contributed to the development of a large underground economy reinforced by pervasive corruption at all levels of government. The reduction in violence in recent years has led to changes in the underground economy is evolving. However, because the shadow economy’s size is largely controlled by the level of corruption, it is the composition rather than the absolute size that has changed. In conflict countries, similar types of vicious circles are often set in motion through a process whereby negative developments are reinforced over time. These cycles will often continue in the same direction until an exogenous factor intervenes and stops or reverses the cycle. Research suggests that this is what is happening to the Iraqi economy in the postSaddam period (Looney 2004, 2006a, 2006b). Any efforts to reconstruct and restore a functioning Iraqi economy will be constrained by the government’s ability to set in motion a virtuous circle of economic expansion and improved security. In turn, this means constructing a strategy that positively addresses a number of interrelated factors including: (a) the growth and dynamics of the shadow or informal economy; (b) the

deterioration in social capital, and in particular the near absence of trust between the different regions, religious groups, tribes and even local neighbourhoods; and (c) the evolving relationship between tribes, gangs and the insurgency. As Deputy Prime Minister Barham Salih suggests (in the above epigraph), corruption is the common element that ties these diverse forces together, and the dynamic that drives the vicious circle of violence and economic stagnation that Iraq has experienced. Unfortunately, international media attention on corruption in Iraq has tended to focus exclusively on high-profile cases of fraud, waste and abuse by US contracting authorities and private foreign firms (GAO 2007), or the fallout from the Oil-for-Food programme of the 1990s. Without denying the importance of these forms of corruption, the analysis that follows is more focused on the future, in particular on the rampant and growing domestic Iraqi corruption that is draining the country’s public finances, choking reconstruction efforts and undermining the fragile support for the new Iraqi state (Oxford Analytica 2007: 1). As the following sections illustrate, the ongoing violence, lack of trust, and conflict, together with unique factors such as oil revenues and the presence of a serious criminal element, have combined to create an environment in which the extent and effects of corruption are even more pronounced than that observed by Mark Philp in his chapter (p. 33) in ‘normal’ post-conflict settings:

In post-conflict societies [corruption’s] impact is potentially still more serious, since it can undercut the emergence of stable expectations and the processes by which they are legitimated; it can maintain or further exacerbate situations in which outcomes lack legitimacy, making it difficult for any serious form of authority to emerge; it can lead to the squandering of aid and external political will; and it can make the weak weaker, the poor poorer, and the vulnerable still less secure.