Austerity versus Growth

You must have heard the news media, newspapers articles and commentators talk about differences between the position of the German government of austerity and the French’s position of growth.  I could not find any written document that explains what the French president means by growth.  The confusion arises from using the two words, austerity and growth, at the same time.  It certainly suggests that the French president (and probably President Obama too) are not for austerity, and therefore are for increased spending.  But it does not necessarily and immediately follow that increased government spending causes higher economic growth.

The austerity argument is about reducing government expenditures, which could include reducing the size of the public sector by firing people, reducing and suspending some social programs, reducing the wage bill, salaries, pensions, perks, services and other expenditures.  Clearly, public sector employees do not like this approach, and who can blame them. But, what has this got to do with growth?  The government maybe able to induce a temporary increase in output, but that should not be confused with growth.

It is unclear what the growth program of the French president is. If it is meant to be the opposite of austerity, then all that is required is an increase in government spending.  What French President Hollande actually meant, and this should be explained, is that government expenditures could stimulate demand via spending, which would then get the economy out of recession, but it has nothing to do with economic growth either.

These economic thoughts are widespread, but confusing.  Some top economists also believe that government spending can resolve Europe’s economic problems and that government spending can cause economic growth, but careful empirical analysis by John B. Taylor and Valerie A. Ramey in the Journal of Economic Literature Vol. 49, No. 3, September 2011 shows that there is no credible evidence for this conjecture.  See a very interesting 5-page article by Edmund Phelps, the Nobel laureate, Keynes Vs. Hayek: Stumbling blocks to spending our way to prosperity, produced by Reuters, November 8, 2011.  You will get the message.

An increase in government expenditures, whether the level or the growth rate, cannot always cause real production of goods and services to grow faster. It could increase consumption and that would increase GDP level such that the economy gets out of the slump.  That’s not growth.  There is a significant difference in meaning between an increases in  the level of output and a sustained increase in output.  To affect the growth rate of output government spending must be directed at factors of production, or factors that cause technical progress such as education, R&D etc but that’s not as easy as politicians think and cannot be guaranteed.[1]

Growth of the production of goods and services is the speed at which the economy’s production increases from one year to another, and can only increases if technical progress grows.  It took economists decades of research to understand what that thing is and what might drive it.  Growth economists demonstrate that it is driven by knowledge and new ideas of producing new goods and services—innovations if you will.  These ideas do not come from thin air. They vary from one country to another.  They might depend on productive investments such as investments in human capital, investments in better quality of human capital or investments in research and development. 

No one would have believed in the 1950s that one could ever send a copy of a piece of paper (the modern fax) around the globe in a few seconds. This is knowledge producing a new commodity and creating markets.  Communication technology, which we are observing today like the iPad and smart phones, smart TVs, the internet, medical tools, fabrics and materials etc. are examples of technical progress leading to economic growth. 

Economists went further to suggest that there might be other variables that affect the growth of technical progress, such as geographical location and distance from big markets, the set of laws that regulate the markets and the businesses, the culture where some are savers and others are spenders, government policies, etc.  None of these  testable theoretical propositions include government expenditures.

Governments could invest in science, knowledge, human capita, etc. and these investments might affect the growth of technical progress in the long run.  They might be important in early stages of developments, but I am not sure this is what the French politicians, the news media and some top economists have in mind when they talk about growth policy, presumably, as an alternative to austerity

The major problem Europe needs to deal with is how to reduce unemployment, and this will not be solved by increasing government expenditures or the money supply.  It will not be reduced by inflating the economy.  I checked the IMF world economic outlook data set; the historical French aggregate time series data do not show a negative correlation between GDP growth and unemployment over the period 1980 to-date.  It means that an increase in GDP growth rate is not expected to be associated with a lower unemployment rate. 

Ed Prescott’s[2] explanation, which is confirmed by others such as Shimer and Nickell among others,[3] is that the Europeans are taxed relatively higher than Americans—presumably so that the government can finance social programs and the large public sectors—therefore, people work fewer hours.  Sadly, a lot of people will be unemployed for a long time unless the European governments, especially in France and the Southern European countries, reduce the size of their public sector, reduce taxes on labor and make their labor markets more flexible. But this won’t happen because people elected governments that promised just the opposite.

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[1] Johnson, R., W A Razzak and Steve Stillman, “Has New Zealand Benefited from Its Investments in Research and Development?” Applied Economics, Volume 39, Issue 19, November 2007, 2425-2440, show that 40 years of R&D spending in New Zealand did not result in any spillover.

 [2] Prescott, E., Why Americans work so much more than European? Federal Reserve Bank of Minneapolis Quarterly Review, Vol. 28, No.1, July 2004, 2-13. 

[3] Shimer, R., Convergence in Macroeconomics: The Labor Wedge, American Economic Journal Macroeconomics, Vol. 1 No. 1 (January), 2009, 280-297.

Nickell, S.,Employment and Taxes, CESIFO Working Paper No.1109, 2003 (December).

The euro

All eyes are on the euro. I surveyed two professional groups of economists on LinkedIn. My question was whether they think that the euro would collapse.  The majority of responders (60) said no, and a handful (5) said yes.

In Robert Mundell’s theory of the Optimum Currency Area, a single currency among trading regions maximizes efficiency.  But for regions to form an OCA, they ought to have open capital and goods accounts, asymmetric shocks must be small in size, and labor must move freely across boarders.  Almost all economists agree that the euro is not an Optimum Currency Area.  The euro is a political project.

Nevertheless, many European countries, the so called periphery countries such as Greece, Ireland, Spain, and Portugal, benefited economically from joining the euro.  They were considered risky countries by investors before joining the euro. Investors demanded higher returns on their investments, and therefore high real interest rates.  Those risky countries became equally safe as Germany after joining the club. They borrowed money comfortably and spent a lot more than their incomes.  However, somebody benefited from the debt and the expenditure frenzy.  Not that anyone complained when things were hunky-dory. 

Figure 1 shows the real 10-year bond yield differential between Germany and some of the troubled European countries. Note how the differences were large before the risky countries joined the euro, died out when they joined the euro, and how they have begun to increase recently.  The 10-year bond yield is a complex variable.  It reflects expected inflation and risk among other things. 

Figure 1
(Source ECB)

Figure 2 shows the indebtedness of the periphery nations, and the IMF forecasts up to 2016.

 Figure 2
(Source IMF)

 

The euro was created by politicians and it will survive and die by them. Thus, in the end the people in any member country (including Germany) will decide whether they want to stay in the euro or not.  However, the factors that influence voters are the key.  Elections are almost surely affected by economic conditions.  Incumbent politicians stay in power if the economy is healthy and people have jobs and they depart if the opposite is true.  Clearly, Europeans in general are not happy with the economic conditions.  The French already replaced their government with a socialist one, which has major differences with Germany. The Greeks will, and the rest will too. 

Some French and Greek voters went to the extreme left and right. It is reported that the French legislative body’s majority is socialist, but the extreme right occupies 35 percent. The Greeks will be, highly probably, voting for an anti euro government on Sunday 17 June, 2012. These trends might grow in Europe; and when they do, which is very likely because they are associated with calamitous economic conditions, new governments not fond of the euro will be elected and things will change. Because the exchange rate is persistent and the European labor markets are inflexible, the adjustments will be long and painful.

High Oil Prices: More Bad Than Good

High Oil Prices: More Bad Than Good

High oil prices are not good for everyone. While oil producers and probably some investors would benefit from high oil prices, the world in general would not.

We know that prices of seemingly unrelated commodities are highly correlated.[1]  So expensive food prices are most likely correlated with high oil prices.  And with the current global economic slowdown more people will be hurt.

Lucas Chancel and Thomas Spencer (May, 2012) report that high oil price appears to have played a role in the global financial crisis and the US subprime crisis. It worsened the balance-of-payment leading up to the financial crisis, and reduced aggregate demand via decreasing consumption.[2]  Oil exporting countries have been fueling the global liquidity glut.

Bernanke (June, 2011) said that the depreciation of the US dollar can explain a small part of the rise of oil prices, and the direction of causality runs from commodity prices to the US dollar.  Also see Plantier (2012) on the causes of commodity price hikes. There is no dispute on this matter since we know that the terms of trade shocks and commodity prices explain large parts of the currency.[3][4] 

High oil prices are not good for growth.  Oil is considered a curse for developing countries.  It has a negative impact on economic growth because it alters the incentives and increases rent.  It reduces hours worked and productivity.[5]  And for developed countries it increases the cost of production of goods and services. The sum of all the Arab countries nominal GDP in US dollars in 2012 is 86 percent of Franc's GDP and 16 percent of the US GDP.

But there is another bad wrinkle to high oil prices, the US government believes that high oil prices fuel terrorism.  The Institute for the Analysis of Global Security posted an article (not dated) explaining this causality.[6]  They essentially imply that high oil prices mean high revenues in the oil-producing rentier states and booming economic conditions.  The article adds that "ordinary Muslims contribute to charities in good faith believing their money goes toward good causes while others know full well the terrorist purposes for which their money will be used.  The money is funneled via the hawala system, which is the unofficial method used in many developing countries for transferring money, and "one of the key elements in the financing of global terrorism."  Foreign Policy In Focus published an article on this issue by Nafeez Mosaddeq Ahmed, December 15, 2010, where he cites Wikileaks documents revealing the US state of mind on this issue.[7]

Is the association of oil prices and terrorism born by the data?

Lets look at the available data.  I examine the West Texas price of oil published on the website of the Federal Reserve Bank of St Louis.  The price of oil is too high relative to its average.  For example, the average real price over the period from 1947 to 2011 is 14 USD a barrel.  West Texas sells for more than 100 USD a barrel today (British Petroleum publishes a real oil price series based on a number of prices from 1861 to 2010. The average is 29.44 USD).  Figure 1 demonstrates.

Figure 1

I also examine the Polity IV data set, which reports casualties by terrorism globally.  The data measure the number of non-combatant civilian and political targets who died by bomb attacks by non-state actors.  I sum the casualties across countries and places for each year.  For example, if there are casualties in two places A and B in a particular year I simply add casualties in A to those in B.  I then plotted the oil prices and casualties in a scattered plot in figure 2.

Figure 2

The correlation coefficient over that sample is nearly 0.80, which is really high. And, although the casualties data cover the whole world, high oil prices and casualties jumped after the invasion of Iraq in 2003.  I also found that past observations of oil prices explain terrorism while observations of casualties from terrorism do not explain oil price with the p values of the F statistic 0.09 and 0.41, respectively.[8]  However, this relationship needs more scrutiny because the cross sectional - time series raw data include terrorism casualties which are not related to oil, for example, the Oklahoma bombing and the recent terrorism act in Norway. And it is unclear whether certain oil producing countries do in fact cause terrorism casualties around the world.  Financing terrorism activities could be also be related to some institutional factors such as the type of political system, government, economic institutions, geopolitical factors, etc, non of which is clear from figure 2. 

The world would be less violent, grow faster, and general prices would be much more stable if the price of oil is lower than it is now.  But it is difficult to see how would that happen with China and India, for example, expecting to demand more oil, the US military continuing to be spread around oilfields, Iran continuing its standoff against the West, trouble continuing in Nigeria, and uncertainty and tensions are running high in places like Libya, Iraq and the Gulf. These factors can put an upward pressure on oil prices given limited production and reserves. 

For oil prices to fall the world oil supply has to increase substantially. It is possible if, first, Iraq’s aim to increase production to 12 million barrels a day comes true, but this will take a long time.  Second, the US (the largest consumer of oil by far) becomes energy self-sufficient again via improved technology that would increase production of gas and oil from proven reserves, which were inaccessible in the past.  There are some credible media reports that this will be the case. And, finally, Saudi Arabia follows through with its claims and invests in solar energy.[9]

One risk that will arise from lower oil prices would be more consumption of oil, and that would have adverse environmental effects. While technological progress would help reduce the demand for oil relative to alternative renewable energy, reasonable and well-designed taxes on oil consumption along with policies to induce tighter consumption efficiency, could also moderate the adverse environmental effects. 

It is highly probable that global terrorism and violence would diminish significantly, global growth picks up, and inflation falls if the price of oil falls to its historical average, somewhere around 30 US dollars.

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[1] See Pindyck and Rotemberg, 1991, “The Excess Co-Movement of Commodity Prices,” Economic Journal  1991, Vol. 10, No. 403, 1173-1189.

[2] http://www.voxeu.org/index.php?q=node/7998

[3] http://en.mercopress.com/2011/06/09/bernanke-argues-strong-demand-for-commodities-is-depressing-us-dollar-value

[4] http://www.ici.org/pressroom/news/12_news_commod_ppr

[5] Laabsa and Razzak, 2010, Taxes, Natural Resource Endowment and the Supply of Labor, http://mpra.ub.uni-muenchen.de/21634/.

[6] http://www.iags.org/fuelingterror.html

[7] http://www.fpif.org/articles/oil_or_terrorism_which_motivates_us_policy_more

[8] I used four lags. 

[9] http://www.thenational.ae/business/energy/solar-sector-looks-to-saudi-plan

Have the Arab Countries Benefited from Trade and Foreign Direct Investments

It seems doubtless that foreign Trans-National Companies (TNCs) benefit significantly from their investments in the rest of the world, especially in Asia and Africa.  Various World Investment Reports suggest that the average returns to TNCs in the developing countries are approximately 10 percent.  The flows of FDIs increased substantially in the past 30 years, and are correlated with global trade.  Figure 1 shows that. Also, The WIR (2010) points out that, “Developing and transition economies attracted half of global FDI inflows, and invested one quarter of global FDI outflows.  Arab countries have been encouraged to open their economies, free their goods and capital markets, revise their laws and procedures to attract foreign investments, and rebuild the institutions necessary for that.  Indeed many growth teachers like Jones and Romer, and most of the establishment economists (in the US in particular) believe that trade is “Pareto Optimal”.  That said, very little research in done to show that for the Arab countries or at least I have not seen or read about it in academic journals.

My own research papers on this issue indicate that trade is beneficial to Arab countries.  I found a micro-level (firm level) evidence for self-selection and learning-by-exporting.  In other words, firms which believe that they can export choose to do so and profit from that while others benefit by learning how to trade. The productivity levels of such firms in Morocco and Egypt are relatively higher than those of other firms, which do not trade.[i]   Second, evidence is found that the rates of returns on FDI in five Arab countries, Algeria, Egypt, Jordan, Morocco and Tunisia over the past 30 years are positive, but relatively moderate in magnitude compared with returns in Asia, such as China and Korea.  Figure 2 plots the average rates of returns.[ii]

For example, over the period from 1980 to 2009, a 100 percent increase in the average FDI stock in all five Arab countries, Algeria, Egypt, Jordan, Morocco and Tunisia (from 25 billion dollars to 50 billions) increases average GDP of the five Arab countries from 120 billion to 150 billion dollars, reflecting an average elasticity of  about 0.25 percent.   For Asia, a 100 percent increase in the average FDI stock in all four countries, China, Korea, Malaysia and Thailand from 50 billion dollars to 100 billion dollars increases average GDP for the Asian countries by 80 billion dollars from 400 billions to 480 billions, reflecting an average elasticity of 0.20.  Although the Arab countries GDPs are more responsive to small changes in FDI compared to the Asian countries, the latter have much higher productivity levels.

There is a strong evidence of complementarity between FDI and human capital.  Asia has higher levels and quality of human capital thus attracting more FDIs, and producing more skill-intensive goods compared to the Arab countries. Remember though that I have shown –in earlier blogs – that Korea’s GDP per person was much smaller than all Arab countries in the 1950s. Figure 3 plots the average years of schooling and figure 4 plots the relative quality of human capital approximated by a measure of cognitive skills reported by Trends in Math and Science Study (TIMSS).  

For the Arab countries to attract productive FDIs they must focus on the skills labor force skill’s level. Increasing the level and the quality of human capital is required to attract FDIs.  I conjecture that the Arab countries need a three-pillar strategy for industrialization, labor market reforms and education up-dating.  Tackling each of these issues separately is a bad idea.  Still, however, it will not be guaranteed that they will succeed unless they choose to build modern political and economic institutions.

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[i] W A Razzak, 2009, Self Selection versus Learning-by-Exporting in Four Arab Countries, Applied Business and Economics, Volume 9(3), 97-130.

[ii] W A Razzak and M. Bentour, “Do Developing Countries Benefit from Foreign Direct Investments? An Analysis of Some Arab and Asian Countries,” Review of Middle East Economics and Finance, Vol.9 Issue 3, (Dec.) 2013, 357-388.

هل استفادت الدول العربية من انفتاح التجارة الخارجية والاستثمارات الأجنبية المباشرة؟

تستفيد الشركات العالمية من الاستثمارات الدولية. ويشير تقرير الاستثمارات الدولية إلى أن معدل العائد على الاستثمارات الأمريكية في الدول النامية تصل إلى 10 بالمئة تقريباً. وقد ازدادت تدفقات الاستثمارات الأجنبية المباشرة كثيراً خلال الثلاثين سنة الماضية، وأنها كذلك مرتبطة مع حجم التجارة الدولية (رسم رقم 1). ويشير تقرير الاستثمارات الدولية لسنة 2010 أن الدول النامية، والدول في طور الانتقال، كانت قد جذبت نصف هذه التدفقات الاستثمارية، وكذلك استثمرت ما يقارب الربع من الاستثمارات العالمية. لقد شُجعت الدول العربية على الانفتاح الاقتصادي في أسواق السلع ورأس المال، وتصحيح قوانينها لتتلائم مع الانفتاح الاقتصادي العالمي لجذب المزيد من الاستثمارات، وكذلك لإعادة بناء مؤسساتها. في الحقيقة، كثير من أساتذة النمو الاقتصادي كجونز ورومر والاقتصاديين المؤسسين في الولايات المتحدة يؤمنون بأن التجارة الخارجية الحرة تؤدي إلى توازن اقتصادي أمثل. ولكن البحوث في هذا المجال في الدول العربية محدودة.

فلقد وجدت أدلة على مستوى الاقتصادي الجزئي (على مستوى المنشأة) تؤيد وجود علاقة طرديه بين التجارة الخارجية والإنتاجية في ألاف من المنشآت العربية في مصر والمغرب لأنها قادرة على التصدير. كما أن هناك منشآت ارتفعت إنتاجيتها من خلال تعلمها وعن طريق ممارسة التجارة الخارجية. وأن إنتاجية هذه المنشآت أكبر بكثير من المنشآت التي لا تقوم بتصدير متوجاتها.

وكذلك وجدنا أدلة ميدانية تؤيد وجود علاقة طرديه بين الإنتاجية والاستثمار الأجنبي المباشر في الجزائر ومصر والمغرب والأردن وتونس خلال السنوات الثلاثين الماضية ولكن هذه العوائد أقل نسبياً من تلك التي تجنيها دول آسيا مثل الصين وكوريا الجنوبية.

خلال الفترة 1980 إلى 2009 وجدنا بأن 100 بالمئة زيادة في معدل الاستثمار الأجنبي المباشر في خمسة دول عربية (الجزائر ومصر والأردن والمغرب وتونس) أي من 25 مليار دولار إلى 50 مليار دولار، يؤدي إلى زيادة الناتج القومي الإجمالي لهذه الدول من 120 مليار دولار إلى 150 مليار دولار. أما في آسيا فإن 100 بالمئة زيادة في معدل الاستثمار الأجنبي المباشر للصين وكوريا الجنوبية وماليزيا وتايلاند، من 50 مليار إلى 100 مليار دولار، يؤدي إلى زيادة معدل الناتج القومي الإجمالي لكل هذه الدول من 400 مليار إلى 480 مليار.

هناك أيضاً دليل على وجود تكامل بين الاستثمار الأجنبي المباشر ورأس المال البشري. فلدى آسيا مستوى عال من رأس المال البشري يتمتع بمهارة عالية مرتبطة بمستوى عالي من المهارات الادراكية (نوعية التعليم) الذي يعتبر عامل جاذب للاستثمار الأجنبي المباشر. فآسيا تقوم بإنتاج سلع وخدمات فيها نسبة المهارات عالية. وكما هو موضح في الرسوم البيانية فإن الدول العربية متخلفة عن آسيا في المهارات الإدراكية ونوعية التعليم. لذا فإن أهم الطرق لجذب الاستثمارات الأجنبية المباشرة هو الارتقاء بالتعليم ورفع مهارة القوة العاملة لكي يتحقق مستوى أعلى من الإنتاجية.

يجب أن تصبوا التنمية الاقتصادية الصحيحة إلى استراتيجية تربط التصنيع وسوق العمل و التعليم ولكن قبل ذلك من المهم جداً إعادة النظر بالطبيعة المؤسسية السياسية والاقتصادية التي من خلالها يتم تنفيذ هذه الاستراتيجية.

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[i] W A Razzak, 2009, Self Selection versus Learning-by-Exporting in Four Arab Countries, Applied Business and Economics, Volume 9(3), 97-130.

[ii] W A Razzak and E M Bentour, 2012, Have the Arab Countries Benefited from Foreign Direct Investments?, API Working Paper.

Iraq: Setting the Development Clock Half a Century Back

The vicious war between Iraq and Iran began in September 1980 ended in 1988.  In 1990, Saddam Hussein recklessly invaded neighboring Kuwait.  The US government bombed Iraq to the pre-industrial age twice, first in 1991 to evict Saddam Hussein from Kuwait, and then in 2003, to remove him from power completely and occupy the country.  The American troops are said to be leaving Iraq before the end of 2011 so it is a good time to assess the outcomes. The outcomes of all these conflicts and the subsequent occupation are grave; Iraq is at least fifty years behind in development.

Figure 1 plots the PPP-adjusted real Gross Domestic Product (GDP) per person for Iraq and Iran. The source is the Maddison data set.[1]  Figure 2 plots the same variable taken from a different source, Alan Heston, Robert Summers, and Bettina Aten, Penn World Table Version 7.0, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, May 2011. These are the best estimates available for macroeconomists.

Figure 1.

Figure 2.

The measure of GDP per person is a typical measure for the richness of a country.  A high number is always preferred to a lower one.  GDP measures the total value of all goods and services produced in a country in a year.  Also, GDP should be equal to the sum of total consumption of goods and services, total investments, total government expenditures, exports of all goods and services minus imports of goods and services from abroad.  It is adjusted using Purchasing Power Parity (PPP), which takes into account prices in the US and in the country under study, and the exchange rate against the dollar.  The PPP figures are always larger than the actual unadjusted figures, but they allow one to compare countries. The differences between the Maddison numbers and Penn World table are related to the different ways used to compute the data.

In 1950, Iraq and Iran were still monarchies.  The Iraqis and the Iranians were almost equally rich (or poor) in 1950.  From 1950 to the early 1970s both countries grew richer, perhaps because of the increase in oil production, increase in human capital levels, and rapid industrialization, but Iraq grew faster than Iran in the1960s. When the war between the two countries began in 1980 income in both countries tumbled.  Note that Iraq’s GDP per person continued to fall rather sharply while Iran’s income stabilized around 1990, then resumed its positive growth.  The main shift occurred in 1991, when Iraq embarked on another unfortunate adventure in Kuwait, followed by the crippling UN sanctions and the American invasion in 2003. Iraq’s income per person never recovered. 

Iraq’s income per person in 2008 (figure 1) is in fact lower than its level in 1950, and in figure 2 the 2009 level is less the level in 1970.  Iraq’s GDP per person (PPP) in 1950 was 1,364 dollars; it declined to 1,049 dollars in 2008. In figure 2, Iraq’s GDP per person level was estimated at 5458 dollars in 1970, and declined to 4713.8 dollars in 2009.   Thus the average Iraqi today is poorer than the average Iraqi in 1950 according to both data sets. 

The World Bank reports the dependency ratio, which is the ratio of the number of dependents to working age population.  This statistic gives insight into the number of people of non-working age compared to the overall economy.  A high ratio means that those of working age—and the overall economy—face a greater burden in supporting the unable-to-work population.  This ratio is reported to have increased in Iraq from 82.75 in 1960 to 87.67 in 2010.  In Iran, it declined from 84.07 in 1960 to 39.23 in 2010. 

Barro and Lee (2010) estimate the level of human capital, which is measured by the average years of schooling.[2] Human capital is a key driver of economic growth.  Iran has always had a slightly higher level of human capital than Iraq, though they were almost identical in 1990.  The average years of schooling was 4.75 years in Iran and 4.37 years in Iraq.  By 2010, Barro and Lee estimated that Iran’s average is 8.14 years while Iraq’s is 5.85. Millions of people did not complete their education, more so in Iraq.

Figure 3, 4, and 5 plot the percentage of students in total population, who never completed their school in Iran and Iraq, and in three schooling levels: primary, secondary, and tertiary. Students who do not complete school could have dropped out for a number of reasons: to work or migrate, they were killed or imprisoned, etc. A high number indicates lower level of human capital and, hence probably a slower economic growth rate. The percentage of students who did not complete their schooling increased over time, with more in Iraq than in Iran.

Figure 3.

Figure 4.

The percentage of primary school students who did not complete primary school has been increasing sharply in both Iraq and Iran, with Iraq slightly worse than Iran, up until 2004-2005.  The percentage of those not completing primary school in Iraq in 2010 is estimated to be 12 percent of total population.

In fact, Iran has made some progress at the secondary level, because the percentage of dropouts has fallen over time. It was estimated to be 13.1 percent in Iraq in 2010.

Figure 3 plots the percentage of students in tertiary education who did not complete their studies.  This has a positive trend too.  Iraq, again, is ahead of Iran. 

Figure 5. 

To have an idea about the absolute numbers, Barro and Lee estimate the population (15+) in 2010 for Iraq and Iran to be approximately 20 million and 55 million, respectively.

The destruction of the Iraqi economy measured by its GDP per person—beginning with the Iraq-Iran war in 1980, the collapse of its education system, and the increase of the burden on average citizen—is associated with external conflicts, international sanctions, and foreign occupations, which spanned the period 1980 to date. 

بدأت الحرب العنيفة بين العراق وإيران في عام 1980 وانتهت في عام 1988. وفي عام 1990 قام صدام حسين بغزو الكويت. ثم قامت الولايات المتحدة بتدمير العراق مرتين، الأولى لإخراج صدام حسين من الكويت ثم للإطاحة به كلياً في 2003. أُعلن مؤخراً عن نية الولايات المتحدة بإجلاء جيوشها من العراق هذه السنة لذا نرى أن الوقت مناسباً لتقييم نتائج الصراعات المسلحة التي عصفت بالعراق. إن نتائج هذه الصراعات والاحتلال الأجنبي أدت إلى إرجاع عملية التنمية في العراق خمسين سنة إلى الوراء بأقل تقدير.

إن الرسميين البيانيين رقم (1) ورقم (2) يمثلان الناتج القومي الإجمالي للفرد والمعدّل بأخذ القوة الشرائية بنظر الاعتبار ومن قاعدتين مختلفتين للبيانات. يقيس الناتج القومي الإجمالي القيمة الكلية لإنتاج السلع والخدمات في السنة. ويعتبر هذا المقياس مؤشراً لمدى غنى أو فقر البلد حيث أن القيمة الأكبر تدل على زيادة مستوى الغنى وكونه معدلاً بالقوة الشرائية يمكننا من المقارنة. كما يبدوا واضحاً بأن العراق وإيران شهدوا نمواً سريعاً في الفترة من 1950 إلى 1960، وأن العراق كان أسرع نمواً في الستينات من القرن الماضي خصوصاً وأن تلك الفترة من الزمن شهدت زيادة في إنتاج النفط والتصنيع وعدد السكان. يبدوا واضحاً أيضاً تأثير الحرب التي اندلعت في 1980 على البلدين حيث تدهور الناتج القومي الإجمالي للفرد بشكل سريع. أما بعد الحرب الإيرانية – العراقية فقد شهدت استمرار تدهور الاقتصاد العراقي بسبب حرب الخليج الأولى والثانية ثم الاحتلال الأمريكي، بينما عاد الوضع الاقتصادي الإيراني إلى النمو مجدداً. إن معدل الدخل القومي الإجمالي للفرد في العراق في سنة 2008 في قاعدة البيانات الأولى وفي سنة 2009 في قاعدة البيانات الثانية أقل مما كان عليه في 1950 و 1970.

بالإضافة إلى تدهور الدخل القومي / للفرد في العراق فإن بيانات البنك الدولي الوحيدة المتوفرة عن العراق هي عن معدل الإعالة والذي يعطينا فكرة عن عدد السكان من غير العاملين كالأطفال والكبار والمعاقين...الخ. كلما ارتفعت هذه النسبة في السكان كلما ازداد العبء لإعالتهم من قبل هؤلاء الذين يعملون. إن هذه النسبة ازدادت من 82.75 في 1960 إلى 87.67 في سنة 2010 في العراق، وانخفضت في إيران من 84.07 سنة 1960 إلى 39.23 سنة 2010.

وأخيراً في الرسوم البيانية 3، 4 و 5 نرسم نسبة الطلبة الذين لم ينهوا دراستهم في المراحل الابتدائية والثانوية والجامعية (من ضمنها المعاهد العالية) في العراق وإيران - معدل التسرب.  وكما يبدوا واضحاً بأن نسبة هؤلاء الطلبة الذين لم ينهوا دراستهم قد ازداد خلال الزمن في العراق وبنسبة أكبر من إيران خصوصاً في مراحل الدراسة الثانوية والجامعية إما لأسباب اقتصادية كالبحث عن عمل أو ربما قتلوا أو هجروا.. الخ من مصائب أخرى نتاج الحروب والدمار. في 2010، في المرحلة الابتدائية هناك %12 من السكان لم ينهوا دراستهم، و %13 في المرحلة الثانوية و %59 في المرحلة الجامعية. إن هذا الانخفاض في راس المال البشري عامل مهم في تدهور النمو الاقتصادي في العراق. إ ن  تدهور الناتج القومي الإجمالي / للفرد وزيادة العبء لإعالة الغير قادرين على العمل وانهيار النظام التعليمي وتدهور مستوى رأس المال البشري له علاقة مباشرة بالصراعات الخارجية التي مر بها العراق والحصار الدولي والاحتلال الأجنبي منذ عام 1980.

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[1] http://www.ggdc.net/MADDISON/oriindex.htm

[2] Barro, R. and Jong-Wha Lee, A New Data Set of Educational Attainment in the World, 1950-2010, NBER Working Paper No 15902, April 2010.