2003 September 21 Sunday
US Aid To Iraq Proportionately Much Bigger Than Marshall Plan

Tyler Cowen of Marginal Revolution looks at US aid plans for Iraq and compares Iraq aid with Marshall Plan aid as a percentage of target country GDP.

According to some estimates, we will spend $20 billion on Iraqi infrastructure over the next year, half of Iraqi gdp (don't take Iraqi gdp statistics too seriously!). Andrew Sullivan has been asking how our assistance to Iraq compares to the Marshall Plan of postwar Europe. Here are some answers, drawn from a 1985 piece I wrote "The Marshall Plan: Myths and Realities," click here for an on-line summary, the piece appeared in Doug Bandow's U.S. Aid to the Developing World.

The Marshall Plan did not ever exceed 5 percent of the gross national product of the recipient nations. In the case of Germany, note that we were taking more out of Germany, in the forms of reparations and occupation cost reimbursements (11 to 15 percent of West German gnp), than we were ever putting in. Then throughout the mid-1950s, Bonn repaid half of the aid it had received. Note that German economic recovery followed from liberalization and reforms, which predated Marshall Plan aid.

The important thing to realize about Iraq is that it was not a country which had broadly gone thru a process of industrialization the way Europe had before WWII. Europe had the trained workforces, industrial firms, management know-how, financial expertise, and a recent memory of what civil societies were like. Iraq is much harder to reform even though the percentage of destruction of the economies of European countries was much higher. Also, as Cowen implies, the Marshall Plan has been given more credit for the recovery of Western Europe than it deserves.

It is instructive to read Stanley Kurtz's essays on Iraq, the British Raj and the postwar construction of Japan to appreciate just how much more difficult it will be for the US to succeed in Iraq.

Share |      By Randall Parker at 2003 September 21 01:15 AM  Reconstruction and Reformation


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