Published on Wednesday, October 1, 2003 by the Miami Herald
Stop Wasting Money
by Jeffrey D. Sachs
America wants the world to pledge billions of dollars to Iraq's reconstruction at a donor's meeting to be held in October in Madrid. The world's answer should be an unequivocal No.
Iraq's long-term reconstruction does not need foreign financial assistance. What it needs is a political settlement, which will be possible only with the withdrawal of America's occupying army. The billions of dollars that the United States seeks should be directed toward true global emergencies such as the fight against AIDS and hunger.
As long as America remains an occupying force in Iraq, political stability there is unlikely, making economic recovery unlikely as well. The attacks against the U.S. occupation have successfully stopped the flow of a large part of Iraq's oil exports. The oil pipeline in the north to Turkey has been repeatedly bombed and functions sporadically if at all. The oil fields in the south do not have enough electricity to operate at capacity because the power grid is also the target of repeated bombings.
Iraq is reportedly pumping one million to two million barrels of oil a day rather than the two million to three million barrels that the country could achieve in peaceful circumstances.
This shortfall in oil earnings, not the lack of foreign assistance, is the real cause of Iraq's financial crisis. Each reduction of one million barrels per day translates into lost revenues of about $30 million at today's world market price of $30 per barrel. If Iraq increased its oil exports by one million barrels a day -- which it could achieve with a cessation of attacks on its infrastructure -- it would have about $10 billion per year in additional revenues to begin reconstruction.
Iraq's oil production could probably rise to about five million barrels per day within three years, or an extra $30 billion to $40 billion per year -- enough not only to restore basic services, but to achieve big improvements in living standards and economic growth in the medium term. Iraq would not need official development assistance at all.
The biggest costs in Iraq are not for reconstruction but for U.S. troops. America will pay an astounding $51 billion per year for 140,000 troops. If the United States withdrew its troops and gave just a fraction of the financial savings to Iraq in 2004, there would be plenty of revenue to run the Iraqi government.
By focusing global attention on an economic crisis that does not really exist, America has diverted public attention from serious crises that do. Consider the battles against AIDS, tuberculosis and malaria. About eight million people will die of these preventable and treatable diseases in 2004.
In 2001, the world created a global fund to fight them. Yet for fiscal year 2004, the Bush administration is committing just $200 million to that fund. For every one of these dollars, the administration is committing $350 to Iraq. These are grotesquely distorted priorities.
It's time for the world to tell America some hard news: Stop wasting so much money on military spending and redirect your efforts toward the world's poor. That's a financial effort that the world can and should join.
Jeffrey D. Sachs is director of the Earth Institute at Columbia University.
© 2003 The Miami Herald