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RE: [casi] Rebuilding Iraq: What will it cost?

> By CNN's Liz George
> Wednesday, December 10, 2003 Posted: 1015 GMT ( 6:15 PM HKT)
> LONDON, England (CNN) -- Analysts have said it could cost
> anything from $84 billion to nearly $500 billion to rebuild
> Iraq, a country battered by two wars in two decades and 12
> years of United Nations sanctions.

Dear list members,

A methodological remark on the above: estimates of the cost of 'rebuilding'
Iraq are meaningless.  Rebuilding implies returning Iraq to some previous
state, which makes no sense in developmental terms.  The analogy that I
often use is lower Manhattan after 11 September: no one is proposing that
the twin towers be rebuilt; the area will continue to develop, that will
entail costs, but there is no terminal state: development does not stop.

A second observation is that many of these 'rebuilding' costs are actually
just prices of shopping lists.  One of the basic lessons of recent economic
history is that incentive structures matter: Soviet-bloc planners largely
failed to harness these as well as capitalist economies did.  Prices of
shopping lists seem to echo the Soviet approach.  My own sense is that the
more important 'costs' are those of getting incentives right: expensive
equipment can be installed throughout Iraq but unless people have the
incentive to maintain it, use it properly, not blow it up or strip it, then
the money spent is a meaningless measure of Iraqi economic development.


Colin Rowat

work | Room 406, Department of Economics | The University of Birmingham |
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(+44/0) 121 414 7377 (fax) |

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