To defeat the Iraqi insurgency, there are few tasks more vital than improving the country’s struggling economy.Prior to Iraq’s December parliamentary elections, FP sat down with Ali Allawi, Iraq’s finance minister, to talk about reconstruction, corruption, and the U.S. presence in Iraq. FOREIGN POLICY: What do you think of the U.S. approach to Iraq’s economy following the fall of Saddam? Ali Allawi: There was work done on the economy in seminars and discussion groups organized by the State Department. These reports did not filter into the policymaking apparatus. If there was a policy theme, it was a kind of crude version of the Washington Consensus€that all Iraq needed was quick and surgical action, shock therapy. And there was a group, then led by M. Peter McPherson, the former president of Michigan State University, that tried to introduce radical economic reforms in the first few weeks. But it ended chaotically, because the economy wasn’t the top priority of the political administration. In the banking sector, there was an attempt to offset basically all the government deposits against government liabilities. [U.S. officials] also wanted to sell off the state-owned enterprises, expecting that they would then be reorganized under the […]

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