By Mohammed Hussein
Iraq and the Kurdistan Region of Iraq, political parties and their leaders use public
funds and economic resources to widen their popular bases and support. They also
use their political and administrative positions in the Federal Government of
Iraq (FGI) and Kurdistan Regional Government (KRG) to increase their wealth
market stakes. In turn, they also use the wealth accumulated in this way to stay
in office. This relation between money and power, known as clientelism, has
worked in an uncontrolled and concerning way in FGI and KRG as well. Analysing this
relationship assists understanding most of the financial, political and
economic issues facing the both governments. This paper is an attempt to
analyse financial and political issues facing the both governments. It also
aims to discuss how this model has come about in different levels of state
Convenience and Money in Erbil and Baghdad
Baghdad and most of the other Shia majority cities have faced a wave of popular
discontent and protests. The protesters are mainly from Shia majority areas that have, for the last 16 years, supported
and voted for the current Iraqi ruling elite. Angry, hungry and unemployed,
they are now demanding to change the entire political regime of Iraq with new
constitution, laws, and new institutions being ushered in. They believe that
the current political system has achieved nothing except for impoverishing ordinary
Iraqi people. It is noteworthy that much of the political literature that has
been published in Iraq since 2003 discusses the current political system as an
elitist model that is propped up through corruption and favouritism. In
particular, it notes that current leaders distribute employment, benefits,
amongst their loyal sectarian supporters, which are in the same protesting
areas. However, given that the ongoing protests, arisen against them in their
back yards, there is a significant problem with this political system and
economic model that governs both FGI and the KRG is a patron-client model. This
model manages natural and financial resources in a manner that forces
individuals to align with political parties and social groups to survive. Each
individual needs a patron to gain access for jobs and public benefits. The
patrons can be political parties, wings and groups within political parties or politically
linked tribes and families.
this system, there is a patron (political leader) that distributes economic
opportunities through salaries, employment, benefits, business and investment
opportunities. This individual can be any political leader that has control
over state institutions. On the other hand, the clients are individuals who
feed off the political leader and benefit from the opportunity he/she provides.
In essence, these individuals sell their support for the opportunities provided
by their respective leaders.
In any normal society and market, productive work is the main source of income
generation, in such a clientelism being loyal to ruling political groups is one
of the key determinants of income. It is basically what determines to which to
which quantiles of income distribution you are standing. If an individual or
family falls out of favour with their patron, they would be at high risk of
poverty as a result of unemployment and missing opportunity.
Iraq and the Kurdistan Region of Iraq, where about 9 million people live under
poverty line (according to the World Bank poverty rate is at 22.5 percent)
there were individuals who were employed full time in three separate state
roles; till implementing the KRG’s biometric state employee registration
system, (1). Currently, there are hundreds of thousands of the so-called “ghost
employees” in Iraq - individuals who are employed by state institutions but do
not physically work. (2)
systems of this kind often develop in third world countries, usually those that
are dependent on the sale of natural resources. Due to the weakness of their
political, economic and legal systems, whoever controls the major political
parties and thereby control state institutions also control the state’s income.
Moreover, they can use the revenue to serve their personal and party interests
with minimal oversight. Ultimately, state resources would be used by these
parties to buy population’s support. (3) Naturally, most leaders and
politicians prefer to use state’s resources and public expenditures to increase
their support bases. In developed countries, political parties are restricted
from doing this because of strong state institutions; however, for the states
in question, this is easy due to institutional weakness.
the patron-client economic system in Iraq and Kurdistan dates back to the
Baathist Era in 1970s, after nationalizing Iraq’s oil sector. An irresponsible
system with poor management of oil-revenue started to use public resources for
buying political supports. During the Nuri al-Maliki government, this system
reached its peak as the state and military were filled with members and
supporters of the Iraqi Dawa Party and their coalition partners. It reached to a
point when in 2015 (when Maliki was forced to resign) the number of state
employees (including military and security forces) reach 6 million, 70 percent
of the countries entire workforce (4).
Kurdistan, while the patron-client model has been with the Kurds from the
beginning, it did not become an issue until 2003, when the KRG gained access to
significant Iraqi oil wealth following the fall of Baathist Regime. However, as
soon as it began receiving its share of the Iraqi budget, the patron-client
model accelerated. The political parties became so wealthy that the ability to
become a patron trickled down to KRI’s power hierarchy. Even members of parties’
leadership councils were able to provide employment and economic opportunities
to their clients.
the region’s private sector is dominated by the ruling parties and governed by
the patron-client model. According to the KRG’s department for statistics,
approximately 50 percent of the region’s total workforce work in the public
sector (45 percent male and 80 percent female). (5) In contrast, the total
national workforce working in the public sector is 15.3 percent in United
States, 12.4 percent in Turkey, and10.6 percent in Germany. (6)
the causal factors of the management of natural resources in this way are
human, economic and institutional underdevelopment in a given state. It is not
right to argue that natural resource wealth in itself is a curse. Much has been
written about the so-called oil curse in the last thirty years. This line of
thinking concentrates on the relationship between oil wealth and human, social,
and democratic underdevelopment. However, it is important to note that the
possession of natural resources in Canada and Norway, for example, has not
become a curse for these nations, when at the same time similar natural
resource wealth in Iraq and Libya, for example, has brought these states to the
brink of collapse. Therefore, the only difference between these two examples is
the economic systems that govern natural resource.
Concerns of the Patron-Client Economic Model
of the research and publications available describe the patron-client economic
model as a cause of bad governance, reason for institutional weakness, obstacle
to economic development, inequality, and restrictions on civil liberties and
freedoms. In some states, such as Iraq and Libya (7) the system has brought
about an oligarchy, wherein a small group have gained control over all power-centres
and resources. Due to internal rivalry and competing interests, these groups
have caused political and security instabilities in their respective nations.
is for this reason that political and economic problems prevalent in both FGI
and KRG. Here, a small group of oligarchs govern, whose interests are often in
conflict with one another and; consequently, they have put governments at risk
of internal conflicts, the breakdown of stability, and economic collapse. If we
take the tensions between Baghdad and Erbil, the war against the Islamic State,
the crackdown on protestors, and the purging of Maliki’s opponents as examples,
this pattern becomes evident.
the patron-client model not only weakens economic and human development, but it
also increases the bulk of corruption and increases security risks at national
levels. (8) As the system only serves the elite and their patronage networks,
those who have been dispossessed are always looking for an opportunity to
change the whole economic and political arrangement in their favour, trying to
re-define their relationship with power in the way they would see them
empowered. Simply put, this creates competition between political elites as
this pattern is often played out between a group of different elites who are
competing for a limited source of wealth. The wealth available is not enough to
serve all their interests, and as a result, competitions between them turn to
conflict and violence.
this type of economic system, violent conflict is an ever-present possibility
to resolve political differences because state institutions are weakened as
they only serve the interests of the ruling elite. Here, election manipulation
is commonplace; the courts and institutions serve the oligarchs. All these
together create a hostile and power-struggle environment in which only the
elite can win. Hence, it is the power and ability of these elites that allows
them to remain on top of the state pyramid and not its support base.
this hostile political environment, any disagreement or competition within the
governing elite or oligarchy raises the possibility of significant political
crisis and economic collapse similar to the chain of crises that hit the KRG in
2014. For example, data from the World Bank reveals that the poverty rate in the
KRI until 2012 was 3 percent; however, in 2014 (when hostilities between
leaders in Baghdad and the Kurdistan reached their peak) this figure increased
to 12.5 percent. (9) If the population of the Kurdistan is 6 million, then
these figures would suggest that the number of people who fell under poverty
line raised from 180,000 in 2012 to 750,000 in 2014. This raise may be
unbelievable to someone who has not lived in the region because it is
unprecedented for a country that not faced natural disasters.
than risks to stability, the creation of unnecessary jobs in public sector is
another consequence of the patron-client economic model. In the KRG, almost 50
percent of the workforce is employed in the state institutions. However, the
region’s leaders look abroad for services they require in education and health.
The KRG has contracted an international accounting firm called Delloite to
manage its oil accounts. Therefore, as the public sector has been unnecessarily
overcrowded, the quality of its services decreased.
risk associated with the patron-client model is increased corruption. This
model makes controlling corruption difficult since it creates a state in which
only oligarchs who accumulated huge wealth can survive. (10) The whole economic
model and that factor that allow it to continue can be seen as a type of corruption,
which has put Iraq on the list of the world’s most corrupt countries.
respect to the Kurdish social map and class divisions, the patron-client
economic model plays an influential role. When the international oil price was
at its peak, the KRG’s income and politics were considered good. The system was
able to support the process of urbanisation and the migration of the agrarian
classes to the cities. This allowed for social mobility, pushing them into the
middle classes. The government was able to do this through the distribution of
state jobs. It is for this reason tribal leaders in the Kurdistan’s agricultural
heartlands were able to continue to wield their influence in the new economy.
In return, the Iraqi and the Kurdish political parties have been able to take
advantage of these tribes by utilising them to increase their respective
influence and support base. Ultimately, this relationship has worked to elevate
the status of some tribal leaders to the region’s business and economic leaders
Weakening State Institutions
patron-client economic model is an outcome of certain political willingness,
but its engine is public funds and fiscal domination. Generally, this system
reduces economic growth, increase corruption, and put employment and business
opportunities in hands of oligarchs. Therefore, the role of state-institutions gets
weakened with the continues power struggle among oligarchs.
term of institutions, in this context, covers all laws, social norms, and
political values organize economic and political activities in a certain state.
When the institutions weakened, the market can not function through normal
means and property rights get weekend. Markets become a stage for political mafias’
competition rather than free-market competitions. This creates an environment
hostile to foreign investment, and employment opportunities remain in the hands
of political leaders and their armed forces. Labour market of armed groups becomes
the first point of call for the territories youth looking for employment
opportunities. Hence, in its first attempt to meet the protestors’ demands, the
outgoing Iraqi Prime Minister Adil Abdul Mahdi promised that he would create
employment opportunities within the Iraqi armed and security
the role of institutions is weakened, economic growth would also slow down,
foreign investments can’t enter the country, private enterprises get weekend
unless they become politically linked company. Here, they all stop from creating
employment for the population due to its inability to compete in the market. That
is why the model leads to bad governance and work to increase corruption, which
conspires to weaken state institutions. (12)
the patron-client model is defended and described as an economic model with
some benefits, in that it does not let corrupt funds and money gained from oil
wealth leave the home country. Furthermore, it is sometimes seen as a mechanism
to redistribute money through the provision of salaries for lower classes.
However, these advantages do not serve all people equally as the patrons cannot
make the whole population their clients. Simply put, if they were able to
satisfy the whole population, then they would not have needed to rely on the
patron-client model to secure support. (13)
many of the jobs been awarded to people in the state sector are low-level jobs
with very low incomes. Plus, they are not productive and efficient. Currently, the
both FGI and the KRG cannot collect bills of its subsidised water and
electricity to public. Put another way; the governments are unable to get
people pay for the subsidised services. This is one of the simplest but
clearest examples of the inherent weakness of the Iraqi and Kurdish state
sectors. According to Fatih Baerol, Head of International Energy Agency, 40
percent of the public electricity in Iraq is wasted the money for the service
is not returned to the Iraqi government. In this, Iraq has broken records, as
in the most underdeveloped regions of Africa, electricity wastage is at 14
percent of total energy provision. (14)
Kurdistan Is More Vulnerable to the Effects of The Patron-Client
Region, as it is weak strategically in front of its neighbours, its
institutional weakness has made it more vulnerable towards all the issues the
same patron-client model created. The region’s market is totally monopolized by
a bunch of politically linked companies. If you look at the companies’ that
billions dollars-worth projects, you immediately see the shadows of leaders who
have stakes in these companies. Even though there is no reliable data on the
net worth of Kurdistan based companies, the shape and look of the market show
us how a few companies, connected to the Kurdish leaders, have monopolised the
market. This is true across the market from the energy and natural resources to
the telecommunications, food, tobacco and medicines.
literature and data on this model show how the such an oligarch system have the
ability to increase productivity in their respective companies compared to those
that luck political support.
the KRG, there are no rules, institutions, and polices to protect the poor
against the greedy monopolistic companies. Moreover, the general rights and benefits,
consumer rights, rights of future generations have not been taken into
consideration in the current market polices of the region.
the key issues of the KRG and the FGI is luck of the role of unions and NGOs.
These organisations can play a significant role in opposing economic inequality
and injustice; however, they are trapped under the influence of the political
elite. Trade unions, elsewhere, have shown that they can play a great role in reducing
the gap between rich and poor. (15)
large portion of the contracts and projects that have been given to politically
linked companies based on the patron-client model organized under the title of investment
and privatization. This process, apart from what its ideological enemies and
supporters saying, might cause immense problems if it is done in a proper way.
Following the collapse of the Saddam Hussein regime in 2003 the Paul Bremer
administration brought privatisation and free market regulations to Iraq. It
wanted to duplicate the model that has been implemented in the Post-Soviet Eastern
European countries in Iraq. However, in Iraq the privatisation caused economic
problems due of a number of structural and historical factors that left Iraq
underprepared for such a shift toward market economy. These factors include;
the weakness and collapse of the Iraqi infrastructure that followed thirty
years of conflict and instability, the weakness of Iraqi companies when it came
to market competition, the poor security and later high unemployment.
in the Kurdistan Region of Iraq the process of privatisation went hand in hand
with a policy of promoting international investment and developing the private
sector, to date it has only increased corruption. In other countries, the
process of privatisation is followed for a set of objectives such as increasing
efficiency, restricting state and political interference in the markets,
increasing the quality local production, acquiring funds for the state by
selling off unutilized public assets. It is clear that the Iraqi and Kurdish privatisation
in no way follows these aims and objectives.
of the polices and regulations that were passed in support of the
privatisation, such as the KRG’s investment law and the Kurdistan oil and gas
law, have been used in favour of the oligarchs and to consolidate the
patron-client model. Many of the investment projects (with respect to scale)
were for housing projects because, in the housing sector, there are great
profits to be made in a short time period with little risk. This was at a time
when Kurdistan would have benefitted from investment in its industrial, and
tourism sectors as growth in these sectors would have seen significant
increases in employment. No one can live in a nice vela or apartment alone,
they also need a job to source income.
investment law, as a result of the patron-client model, created geo-economic
inequality. Sulaimaniyah Province, which is equal in size and population to
Erbil, only received 26.7 percent of investment projects when Erbil received
44.4 percent. (17) These figures make it clear that investment in the region has
been divided unfairly between the provinces. This inequality has been created
by bad policies and poor management. Put simply; it is the result of the
patron-client economic system. It is not just the rules and regulations that
have created this unequal distribution; it is rather those political leaders
that have directed investment based on this model in the past 12 years.
it is important to note that good policy alone is not enough if there is no proper
market and political environment to implement it. Any policy or plan towards
privatisation will only benefit the oligarchs and the elite if it will not
address the needs of poor society and the market.
patron-client economic model, which has for the last forty years been the
dominant economic model in Iraq and the Kurdistan Region of Iraq, has created a
number of political, economic and fiscal problems. These problems range from
corruption and bad governance to reduce efficiency of public sector;
ultimately, it has been widening the gap between the rich and poor in society.
problems have become the cause of significant degradation in the country’s
political, economic and security situation. The size and scale of crises,
created by this model, in Iraq and Kurdistan have increased on a daily basis,
so the quality of political leadership also decreased. If the patron-client
economic model in other contexts only lowers economic growth, here it has empowered
a bunch of oligarchs whose ruling system has generated instability.
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