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The Real Challenge for Iraqi Development Oil wealth could be a great help - or hindrance - to Iraq's development

09/01/2003

Iraq is rich in oil but surprisingly poor in human capital. Oil is a mixed blessing at best, a curse at worst. Among countries rich in oil are many that have failed at economic or political development or both: Angola, Nigeria, Venezuela, Saudi Arabia. Human capital, on the other hand, is an unmitigated blessing. It’s been central to the economic transformation of resource-poor countries, including Korea, Taiwan, Hong Kong, and now China, and in the larger sense of what development is fundamentally about, it’s an end in itself. Indeed, you might say that education and health, the most straightforward indicators of human capital at the individual level, are the point of development.

Imagine a future moment (soon we hope) when the security situation in Iraq has settled down, the initial phase of reconstruction has taken hold, and there is a new recognized government. Even then, with today’s immediate problems overcome, Iraqis will face daunting challenges in dealing with their surfeit of oil and their deficit of education. In the early post-combat months, there’s been little thought to these challenges, and no sign of decision-making on them. Yet neglect and indecision now put at risk any real success later in building an open and democratic state.

In fact the two challenges are not independent of each other. A radical approach to managing the oil, that fully insulates Iraq’s fragile new institutions from oil’s corrosive effects, is the only hope for Iraq’s desperately needed education fix as well, and for building an open, skill-based economy.

Access the full article (PDF) from International Economy Magazine