What is MacroWeb?

There are several social and political institutions that need to be in place in order for a country or region to grow well.  Sound legal systems, thick financial markets, sound currency and banking are among the most important factors.  As we attempt to rebuild Iraq from the ashes of war we are faced with the daunting task of creating these institutions from scratch. 

One key element that the U.S. will have to address is the establishment of a sound currency.  Right now there are three currencies in circulation in Iraq, the Saddam dinar, the "Swiss" dinar and the dollar (the Saddam dinar was the official current currency of the Hussein regime, the "Swiss" dinar is the pre-Kuwaiti invasion currency that is imaginatively called the "Swiss" dinar because of the fixed number of bills in circulation and its consequent stable value).  The name of the official currency to be put into use isn't nearly as important as the confidence that Iraqi's have in it.  The reason the dollar is so important in Iraq right now is because people know that it won't depreciate too rapidly any time soon.  Another important consideration for the new Iraqi currency is that it has to be difficult to counterfeit and that the amount of currency in circulation is controlled.  Iraq has a history of just printing more money when it has a financial need or to support the lavish lifestyles of political leaders and Saddam Hussein loyalists.  Printing more currency leads to high inflation and lack of confidence.  The most important part of the U.S. plan will have to be instructing the Iraqi treasury how to control its monetary supply.

The other key institution that the U.S. must address is the rule of law.  Already the U.S. military is involved with training and working with Iraqi police in order to protect private property.  This is essential because in order for investors to want to invest capital and property into Iraqi markets they have to feel confident that their investments will be protected.   A constitution or a clear set of laws must be drawn up and the Iraqi government must be given authority and power to act in order to enforce laws.  The U.S. government already has plans to draw up a constitution for Iraq and is in the process of recruiting police officers and political experts to instruct and oversee the implementation of the rule of law in Iraq.

Perhaps the most difficult part of creating new institutions in Iraq will be the ability of the U.S. officials to "sell" these implementations to the Iraqi people.  There is a fine line that this current administration will need to walk in order to achieve the optimal balance of U.S. leadership and Iraqi participation.