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Monograph

Wednesday, March 16, 2005

Corruption

High levels of corruption are almost always indicative of low economic growth. The Iraqi economy is currently flat on it's back thanks to invasion and insurgency, but as the post WWII Japanese economy shows with a sufficiently large infusion of capital that can be overcome. Simply put if you have an economy with lots of labour but little capital you can get a lot of growth quickly by levelling the mix off. These events are usually trumpeted as economic miracles - they're not, they're exactly what you'd expect in this situation.

However Iraq's chance to go through this process (which would only undo some of the damage done) may be endangered by high levels of corruption. Capital just won't go to places where it won't enjoy a return - and if system wide corruption takes hold in Iraq there'll be precious little reason to invest at all.

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