By Dave Anderson:
What happens when the money that that Iraqi government has been spreading around runs out? The New York Times Op-ed page raises this question:
As much as 51 percent of the Iraqi labor force is either unemployed
or underemployed; the number is even higher for young workers...Iraq�s private sector is unable to employ many of the jobles...most private businesses either hide in the underground economy � with
all of the associated inefficiencies � or accept the necessity of
bribing an unending stream of government officials....In 2010, the Iraqi government will hit the wall. A combination of low
oil prices, exhausted cash reserves and the expense of paying for a
bloated government sector will prevent the creation of public sector
jobs. And the private sector, as it continues to struggle with
excessive regulation and corruption, is unlikely to create more than a
fraction of the needed employment. Rapid growth in the number of
unemployed young men will likely follow � and these young men will be
attractive recruits for political insurgents, fundamentalist terrorist
groups and criminal gangs. Increased instability is almost certain.
In February, the UN reported the Iraqi equivlent of U-6 unemployment was roughly 30%, and I noted that this is not a strong stabilizer in a society that is based upon economic rent collection:
Young men without overt and legal jobs or hope but ready access to
weapons are not a stabilizing force for society. These young men will
either enter the gray and black economies or use their weapons in an
attempt to rejigger society more to their liking....Men between the ages of 15-29.... made up 57% of all the unemployed in the country. That was
almost double the government�s statistics of 26% unemployment amongst
young people. Women faced an even tougher situation as only 17% were
involved in the labor market.
The oil markets have returned oil back to the mid-$70s a barrel right now, so there is a bit more breathing room in the Iraqi budget for state sponsored employment now than when oil was selling for less than $50 a barrel. However the cash spigot that made 2008 profitable enough to build up significant cash reserves that have been spent over the past two years is now closed.
What happens in a rent based society when the cash is gone and the bribes and political goodies are restricted to whatever current income can supply?
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