Kurdistan's Economic Divide

A freelance writer, who has spent a lot of time in Erbil, contacted me believing that I have painted an overly optimistic picture of life in Kurdistan. He wrote:

"The city, or for that matter the entire Kurdistan "Region", is ruled by a select political elite who live in luxury. Their contribution to the people of Erbil to date includes: 5 star hotels and Iraq's biggest shopping mall; Luxury housing complexes; 100s of luxury apartments in preparation for the upcoming UN (they are planning to move here soon); new highways and underpasses which we don't need yet; private schools, colleges and universities for the privileged few; Private health care; More government jobs for the selected few (usually their own relatives) than any other previous administration; and vast property empires (they've taken over entire villages and real estate which used to belong to Saddam Hussain's cronies.

What they haven't achieved:

Education for everyone; a power grid which operates for more than a few hours a day ([the elite] live in areas supplied by private generators providing a 24 hour power supply); adequate sanitation (the city's sewers and water supply have not been maintained for decades); anything remotely resembling a health care; enough housing (many people live without running, water or electricity); and streets which are drivable, apart from the fancy underpasses.

What's more:

The average citizen earns less than $300 month. Prices are similar to [those] in the US. The price of gasoline has trebled over the last 4 months. Street kids and beggars are everywhere. Most have migrated into the cities. Farmers grow crops and can't sell their produce because the government sits back and watches most fruit and vegetables being imported from abroad. The people of Kurdistan are not enjoying any form of prosperity. Like the rest of Iraq most are worse off than when the Baathists were in power. We've just had the first uprisings in Sulymania! The police used live ammunition. A number of people were injured. The rest were jailed. Some are still awaiting a hearing."

The writer paints a clear picture of the divide between rich and poor. I don't believe, however, that his picture of Kurdistan is fundamentally different than mine. What I am enthusiastic about is the ripeness of conditions for development, not its progress to date. If everything were moving along smoothly and all sectors of Kurdistan society were benefiting equally from development, then it wouldn't be necessary to introduce Development-in-a-Box™ into the mix. But Development-in-a-Box is required to stimulate the economy in ways that benefit more than the wealthy.

The fact of the matter is that private housing enclaves, luxury apartments, 5-star hotels, and shopping malls wouldn't be under construction if conditions in Kurdistan were not capable of sustaining the kind of development that is needed to create jobs and build the infrastructure (both physical and social) necessary to improve the quality of life for all Kurds. That kind of development does not come from foreign aid, but from foreign direct investment. That kind of development does not come from black markets, but connection to international markets. Peace and prosperity cannot be maintained if the population is uneducated and sick. As India is finding, it cannot be maintained if the physical infrastructure is not in place to support it. Kurdistan sits on the cusp. Whether it moves forward ensuring that all its citizens benefit from development or falls backward into the kind of oligarchy that plagues so much of the developing world, remains to be seen.

Good friend Mark Safranski has added to this discussion with an interesting post on his ZenPundit site [The Virtual State of Kurdistan]. His post includes a great map, wonderful insight, and some excellent links to other sites discussing Kurdistan. I greatly appreciate both Mark and the freelance writer for weighing in.

May 21, 2007 in Connectivity, Critical Infrastructure, Current Affairs, Development and Global Stability | Permalink

Trickle-down is how the world works

POST: Kurdistan's Economic Divide, Enterprise Resilience Management Blog
Good blog by Steve.

People tend to have the most unreal expectations of what initial connectivity can bring to a damaged society (although, let's say the average Kurd, as this guy hints, makes--say--200 a month, which would yield an annual of 2400, which would be stunningly good for a postwar Gap state in recovery), especially on the question of rich v. poor.

Honestly, the first order of any boom is to create some rich people while making sure no one's doing too badly.

Why?

Richer people create economic activity by investing and consuming.

Ask a tradesman sometime. They don't get hired by poor people. They get hired by wealthier ones. You may scoff at such trickle-down notions, but it's actually how the world works.

I myself never seem to make any speaking or consulting fees off "poor" groups or companies, just "rich" ones. Am I supposed to resent that? Or just hope that the ranks of the "rich" ones swell?

Development-in-a-Box is about democratizing access, not equalizing income. It's about making everyone richer, and yeah, it will inevitably be that the poor get richer but that the rich get a lot richer. Unless you want to get in the business of telling foreign cultures what to do with their wealth, that's how it's always going to be. Our job in Kurdistan is not to curtail the growing wealth of the elite, but to expand opportunity.

Globalization will never be about income equalization, but about connectivity equalization. We can't mandate economic outcomes. Can't do it at home. Can't do it in other people's countries.

What we can do is end the disconnectedness while not pretending that we're the world's social worker.

State-Run Iraqi Enterprises Offer Prospect of Stability, Growth
By Tim Kilbride
Special to American Forces Press Service
WASHINGTON, May 21, 2007 – Economic expansion through the revitalization of domestic industrial capacity is a major factor for stability in Iraq, a senior defense official said May 18 during a call with "bloggers" and online journalists.

Iraq's state-run factories once served as the lynchpins of diversified regional economies, said Paul Brinkley, deputy undersecretary of defense for business transformation.
Turning those factories back on not only would provide employment and wages for hundreds of thousands of Iraqis, he said, but also would set off a ripple effect of smaller business generation throughout the areas in which factories are located.
More importantly, Brinkley added, "Economic prosperity is a counter-measure against social unrest and violence."
Pointing to studies of the post-World War II reconstruction of Europe under the Marshall Plan, Brinkley said it was programs to return people to work and prevent economic stagnation that kept the continent from falling back into war.
While Iraq presents different circumstances, he observed, the fundamentals of the problem are the same.
"This is a human population that's suffering economic distress," he said. "And if you alleviate the suffering, I believe the job our forces have and the Iraqi defense forces have gets much easier."
Religious zealots will remain a problem, but that situation is more easily controlled, Brinkley said, if the greater environment in which they operate is normalized.
"If you take away the portion that is simply frustrated and fed up after four years, and seeking any income," he noted, "then I think the job of our forces and the ability to stabilize the country gets much, much easier."
Iraq's industrial legacy includes more than 200 formerly state-run factories, with a skilled work force more than 200,000 strong, Brinkley said.
Because of United Nations sanctions lasting from 1991 to 2003, Brinkley said, Iraq was forced to move beyond a dependence on oil exports and develop an industrial capacity to meet its internal needs. "This country already had a diversified economy," he noted.
"When you look around the country what you find is just a variety of factories making ... essentially anything an economy can consume, with the exception of high-tech goods," he explained.
Brinkley now heads up a team tasked with turning that production capacity into a tool for stability through growth. His Task Force for Business and Stability Operations - Iraq is charged with evaluating Defense Department business processes and systems affecting contracting, logistics, fund distribution and financial management, to ensure alignment to theater commanders' goals for reconstruction and economic development in Iraq.
The program originated with Army Lt. Gen. Peter Chiarelli, former commander of Multinational Corps Iraq. Chiarelli identified a relationship between unemployment and insurgent activity after collecting numerous reports of former Iraqi factory employees being paid to lay roadside bombs. According to Brinkley, the connection is obvious.
"Probably the worst time we ever had in the United States of America was the Great Depression," Brinkley said. "And, the Great Depression was a time of great social unrest. It was violence in areas around the country, and the peak unemployment rate in the United States during the Great Depression, I think, was in 1933, and it peaked at 25 percent.
"The work force in Iraq is experiencing an unemployment rate, an effective unemployment rate, in excess of 50 percent," he continued. "I don't know of any population in the world ... where if you impose 50 percent unemployment there aren't going to be militia roaming the street and people blowing things up. I just accept, and I think most rational people accept, that economic distress creates sympathy for violent activity."
Turning the employment situation around involves a three-pronged strategy to support the restoration of Iraq's commercial engine and create markets for Iraqi goods, Brinkley explained.
First, he said, the U.S. military could become a primary consumer, contracting for goods that "meet the requirements of military planners to support our forces."
The second part, Brinkley said, involves reconnecting "the commercial links that existed throughout Iraq" under the U.N. sanctions. Iraq's import gap from 1991 to 2003 was made up with domestic industry and business-to-business sales within the country, he explained. "It was part of the fabric that held the society together," Brinkley said, and holds the hope of mitigating some of the more overt factional tension that has emerged since 2003.
The final piece for now is to attract foreign investment, Brinkley said. His task force is leading U.S., European and regional business executives on tours of Iraqi factories, encouraging the purchase of Iraqi goods, and negotiating contracts to transfer work into Iraq, he said. In the country's areas of relative stability, he noted, what is "probably the most highly-skilled work force in the Middle East" is capable of manufacturing a wide range of products.
The Iraqi government is funding the factory-turnaround effort, Brinkley said. He added that those factories already selected for rehabilitation are on a "transitional path to privatization, very similar to the model that we've seen very effectively used in the Asia-Pacific region, in countries like China."
Key to the Asia-Pacific model of moving slowly away from state ownership, he said, is privatization in phases: reducing the work force in factories over time; and putting in place profit and loss models.
Iraq is operating in a critical window to successfully restore a diversified, competitive economy, Brinkley cautioned. With pressure on the Iraqi parliament to pass hydrocarbons and revenue-sharing legislation in the near future, he said, the country needs to take active steps now to avoid letting oil become its sole economic driver.
Brinkley described two models typical of oil-rich countries. In the first, he said, foreign companies come into the country, create walled compounds around wells and refineries, and import all of their equipment and labor from abroad. In the second model, energy companies are encouraged through incentives and legislation to consume goods manufactured in the host country and put to use domestic capacity. This latter option is key to successfully managing Iraq's oil resources, Brinkley said.
The compound model, by comparison, "would be a terrible mistake" since profit would accrue with the government but wouldn't necessarily reach the population.
If Iraq manages to revitalize its industrial sector, develop markets and encourage investment in a timely manner, Brinkley predicted, "then this country could become something unique in the Middle East - a diversified economy with a skilled work force, a professional middle class, an educated middle class, that serves as an example to the rest of the region."
He added, "I believe that's what we'll see here, and I hope that's what we see here, but to me this next 6 to 12 months (are) really critical as those decisions are taken and as those first contracts for petroleum development take hold."
(Tim Kilbride is assigned to New Media, American Forces Information Service.)

May 22, 2007
Op-Ed Columnist
America’s Admissions System

By DAVID BROOKS
Harvard is tough to get into. To be admitted to a school like that, students spend years earning good grades, doing community service and working hard to demonstrate their skills. The system has its excesses, but over all it’s good for Harvard and it’s good for the students beginning
their climb to opportunity.

The United States is the Harvard of the world. Millions long to get in. Yet has this country set up an admissions system that encourages hard work, responsibility and competition? No. Under our current immigration system, most people get into the U.S. through criminality, nepotism or luck. The current system does almost nothing to encourage good behavior or maximize the nation’s supply of human capital.

Which is why the immigration deal reached in the Senate last week is, on balance, a good thing. It creates a new set of incentives for immigrants and potential immigrants. It encourages good behavior, in the manner of a demanding (though overly harsh) admissions officer. It rewards the bourgeois virtues that have always been at the heart of this nation’s immigrant success, and goes some way to assure that the people who possess these virtues can become U.S. citizens.

Let’s look at how this bill would improve incentives almost every step of the way.

First, consider the 10 to 12 million illegal immigrants who are already here. They now have an incentive to think only in the short term. They have little reason to invest for the future because their presence here could be taken away.

This bill would encourage them to think in the long term. To stay, they would have to embark on a long, 13-year process. They’d have to obey the law, learn English and save money (to pay the stiff fines). Suddenly, these people would be lifted from an underclass environment — semi-separate from mainstream society — and shifted into a middle-class environment, enmeshed within the normal rules and laws that the rest of us live by. This would be the biggest values-shift since welfare reform.

Second, consider the millions living abroad who dream of coming to the U.S. Currently, they have an incentive to find someone who can smuggle them in, and if they get caught they have an incentive to try and try again.

The Senate bill reduces that incentive for lawlessness. If you think it is light on enforcement, read the thing. It would not only beef up enforcement on the border, but would also create an electronic worker registry. People who overstay their welcome could forfeit their chance of being regularized forever.

Moreover, aspiring immigrants would learn, from an early age, what sort of person the U.S. is looking for. In a break from the current system, this bill awards visas on a merit-based points system that rewards education, English proficiency, agricultural work experience, home ownership and other traits. Potential immigrants would understand that the U.S. is looking for people who can be self-sufficient from the start, and they’d mold themselves to demonstrate that ability.

Third, consider the people who are admitted to the U.S. under the bill’s guest-worker program. By forcing these workers to spend a year away after two years of work here, this section encourages them to think of the U.S. as a place to earn some money before building their long-term futures back home. It encourages these young workers to be as flexible as possible, to go wherever the jobs are, so they can maximize earnings during each two-year window.

Nobody can like all aspects of this compromise bill. It has needless complexities and touchback mechanisms. The guest-worker part threatens to set up a permanent and un-American divide between temporary and skilled workers. But, over all, this bill finally gives this meritocratic nation a meritocratic immigration system.

Personally, I’d like to see it go farther. I’d prefer a system in which potential immigrants were admitted on an audition basis. An engineer from China who ran a neighborhood association would get citizenship. A construction worker from Mexico who was promoted to crew chief would get citizenship. This would be a system that rewarded hard work and perseverance as much as it rewarded I.Q. and advanced degrees. People who qualified could bring their nuclear families with them, since families are the foundries of responsible behavior.

In the meantime, this bill is a step. Despite its ramshackle and unforgiving nature, there’s still a little of the spirit of Ben Franklin flickering inside. There is still enough encouragement for the ambitious young striver, desperate to make good.

News » World news
France says no to mass legalisation of undocumented immigrants
Last updated at 16:53pm on 21st May 2007

http://www.dailymail.co.uk/pages/live/articles/news/worldnews.html?in_article_id=456666&in_page_id=1811&ito=1490

New French president Nicolas Sarkozy's government will be taking a 'pragmatic' line on immigration, it says

New French Immigration Minister Brice Hortefeux
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France's minister of immigration and national identity, a new ministry created by President Nicolas Sarkozy, has ruled out legalizing undocumented immigrants en masse.

The new ministry said today that government policy would be dictated by firmness and pragmatism.

More....
French President Sarkozy names Cabinet
"We have to put aside massive legalization. It doesn't work and it penalizes, even immigrants," Brice Hortefeux said on Europe 1 radio.

Policy, he said, would be guided by "firmness and humanism" with "lots of pragmatism."

He also said he planned to adhere to the policy of deporting illegal immigrants from France. The number of deportees was expected to reach some 25,000 this year, and Hortefeux said he would ensure that figure is reached.

Hortefeux, a longtime confidant of Sarkozy, was among those named to the new government on Friday.

The conservative Sarkozy, elected president May 6, had reached out to the anti-immigration far right to capture votes, notably ruffling some feathers in his own camp with his promise to create a ministry of immigration and national identity.

Hortefeux said he planned to meet shortly with officials from sectors like the building and hotel and restaurant industries, known to rely heavily on immigrants.

Hortefeux also said he would not put into question a long-standing policy of "family grouping," by which immigrants in France can bring their families here.

However, he indicated, as Sarkozy had, that modifications may be made in order to ensure that those who join other family members in France can be integrated.

"It must be carried out in respect for the dignity of those who want to come and (in a way) that favors their integration," he said.

Sarkozy had said he wants to ensure that those who join families in France can speak French and that family members receiving them can support the newcomers