The scene was the presidential palace in Baghdad, July 7, 1983. A campaign to solicit gold and money donations from ordinary citizens to support the Iraqi war effort had just begun. A furious Saddam Hussein was receiving a group of Iraqi contractors to convince them to increase their donations. He scolded them relentlessly, telling them the story of the literally barefoot man who had become a millionaire under “the revolution.” The 1968 Baath coup, it seems, had turned the man into a big contractor. Said Saddam:

You know that there was only a handful of contractors before the revolution…. Now, this contractor owns not thousands [of Iraqi dinars] but millions…. I was informed that he had donated only a pittance. He did not ask himself: “Where did I get this fortune? Isn’t it thanks to these new circumstances?”

This was one of those rare occasions on which the head of state has been forced to swallow his “Arab socialist” rhetoric and admit that the net outcome of the regime’s 15 years in power was, in fact, the flourishing of capitalism. Three days later, receiving a host of new donors, he endeavored to arouse their class consciousness, threatening them with the anger of the masses:

So the private sector and owners of relatively big capital are facing a test at this stage…. Extremist thought could come to the fore and say: “They have hoarded their money though the homeland has been threatened.&rdquo People will see contractors who owned nothing and now own thousands, even millions. How will they behave? They will see the merchants and their behavior; they will see the industrialists and their behavior. [1]

How did such an apparently state-centered, nominally “socialist” economy turn out to be so profitable to private capitalists? [2] Government spending as such did not promote the flourishing of capitalism. State spending has been high for a long time in Iraq, particularly since 1952, when the government started to get 50 percent of oil export profits. The rise in oil revenues was proportionately greater in 1952 than in 1973. [3] Yet then the semi-feudal landowners were the main beneficiaries, thanks to government spending on dams and irrigation projects. [4] The Baath strategy, mapped out three years before the oil price hike, had different priorities and produced quite different results. The 1970-1974 development plan contained all the elements needed to give a big push to Iraqi capitalism. Later the fourfold increase in oil revenues provided a powerful additional impetus, but the Egyptian experience under Nasser shows that the same results can be achieved without recourse to oil money.

The Baath regime adopted its first five-year-plan at a time when oil revenues were only 169 million Iraqi dinars. This plan foresaw a relatively important role for the private sector. Private contractors were tapped to build the vast majority of the state sector’s projects. Intermediate products from state-owned industries were to furnish cheap inputs for private industries. The agrarian reform act, adopted in 1970, laid the foundations for the predominance of capitalism in the countryside. Since then, entrepreneurs in construction, industry and services have flourished and their number has multiplied several times over.

In 1975, the last year for which full data are available, the private sector accounted for 58 percent of the productive portion of the gross domestic product (GDP) against 42 percent for the state sector. Though this calculation excludes oil rent, public administration and defense, the proportion of the private sector is still quite striking. On the same basis, the private sector share rose to 60 percent in 1981 and 64 percent in 1982. Adjusting the official data for agriculture (which includes private cooperatives in the “socialist” sector), the respective figures would be 68 percent and 72 percent. In 1982, the private sector’s share was 94 percent in construction, 76 percent in transport, 44 percent in trade and 41 percent in manufacturing (the latter a 4 percent decline from 1981, apparently due to war shortages). [5]

A Contracting Boom

Since the mid-1970s, the oil sector has provided more than half of the Iraqi GDP. With oil prices soaring, government oil revenues rose rapidly — to a peak of 7,664 million dinars in 1980. Government investment expenditures nearly quadrupled from 71 million dinars in 1969-1970 to 267 million in 1973-1974, and then leaped more than fivefold to 1,517 million dinars in 1978. [6] Comparable growth took place in the investments of self-financed government corporations.

Where did all this capital expenditure go? It was mostly paid out to private firms for contracting work, equipment purchases and the like. The share of the state sector in such spending was no more than than 8 percent throughout the 1970s. And since “building and construction” as a component of the gross domestic fixed capital formation remained around 53 percent, contractors evidently enjoyed rising revenues with every rise in government investment. [7] Demand mounted rapidly for meager physical resources and contracting services. This set off inflation, which was further stimulated by forecasts of continuing increases in state spending. During 1973-1975, the average cost of capital formation increased an estimated 300 percent. [8]

By 1974-1975, there were 2,788 contractors registered officially with the Planning Council, up from just 829 in 1970-1971. These were divided into six classifications, according to their financial standing, and the vast majority were concentrated in the lower grades. [9] There were only 159 in the first three grades, against 1,825 in the sixth. Most of these were newcomers, with no experience in the complex activities demanded by the investment program.

The relatively small number of large contractors was not able to provide all the goods and services required by the investment activity. They were consequently able to raise their prices faster than their costs, because their services were in such short supply. This was in spite of the fact that the state had recourse to foreign contracting firms for a number of large projects.

Government spending was growing at a rate more than three times that of the GDP. Quite apart from grandiose investment schemes, the ordinary state budget increased from 292 million dinars in 1968-1969 to 455 million in 1973-1974 and 1,762 million in 1978. [10] Central government spending accounted for 44 percent of the GDP in 1978. The state became the major source of demand, but at the same time it did not significantly increase its role in production.

The political report presented to the July 1982 Baath congress tried to emphasize a “socialist” trend in the party. But the information it provided leads to an opposite conclusion. It showed that the construction sector achieved an annual rate of growth of 29 percent between 1975-1981, greater than that of all other productive sectors and almost twice the 15 percent rate of growth of the GDP. Construction, which accounted for only 4 percent of the GDP in 1974, comprised 17 percent in 1981 — more than the total share of agriculture and manufacturing combined (16 percent).

If we assume that the ratio of wages to gross profits remained relatively constant during the 1976-1981 period, then the declared gross profits of the construction sector exceeded 1 billion dinars in 1981. About 8 percent of these profits would have gone to the state sector (its share of value added during the 1970s was around 7 percent). So local and foreign contractors would have reaped a profit of some 940 million dinars, compared with 156 million in 1976. [11] These fabulous earnings grew faster than those in any other branch of the private sector.

Who’s Who in Contracts

Those with close contacts among high state and party officials have been able to start a contracting business quite easily. Not surprisingly, the majority of new bourgeois have emerged in this sector. In a memorandum presented to the Iraqi president in mid-1977, the Iraqi Communist Party representative in the government, a member of the Planning Council, asked:

What does the contractor need? He needs the capital, which he obtains from the state; the machinery, which he also obtains from the state; the raw materials, which are supplied by the state at subsidized prices; and technical expertise, which is available by depleting the state sector of its technicians. When all these facilities are made available to him, he has nothing left but to open an elegant office; and even this may not be necessary. [12]

In his pioneering research on the richest Iraqi bourgeois families on the eve of the 1958 revolution, Hanna Batatu found that their main fields of activity were: trade, real estate, banking and insurance, services (hotels, cinemas, etc) and manufacturing. [13] Out of 23 families owning more than 1 million dinars (not including 49 big landowners owning more than 30,000 dunams), Batatu identified only three families as contractors, and among them contracting was a secondary activity. Interestingly enough, not a single one of the three figures on our list of 31 contemporary top-rank contractors (though we have some evidence that one of these families, al-Khudhayri, is still prominent in the field).

The investment boom, which created so many new contractors, helps explain this discontinuity, as does the strong influence of the state in this sector. The new regime simply withheld construction contracts from pro-monarchy families, weeding them out of the top rank. Many such families fled Iraq after the 1958 revolution, or at least smuggled their fortunes abroad.

Our list of 75 families with fortunes exceeding 15 million dinars comprises 31 contractors, 27 industrialists, and 17 having their main field of activity in services and distribution. This is not an exhaustive list of all the wealthiest families in Iraq. Political personalities, for instance, are not included, even though they have greatly enriched themselves through their positions. We have assembled numerous instances of commissions granted by multinational companies to key figures in the Iraqi leadership, including members of the Revolutionary Command Council, members of the Regional and Pan-Arab Commands of the Baath Party, and members of President Saddam Hussein’s family.

Contractors are 41 percent of the group. This shift in the composition of the top bourgeois families 25 years after the 1958 revolution is a sign of a changing economy and of a new specialization of Iraqi capitalists within it. The leading bourgeois of the earlier era geared their activities to a backward economy. They were active in fields that complemented the landowners and satisfied their needs. The post-1968 bourgeoisie is different.

Among our 31 contractors, the majority are in civil engineering. Two contractors specialize in providing transport facilities to the state and private sectors. Their activities are closely linked to construction. Their fleets of trucks, lorries and trailers are either leased to construction contractors or are directly used to transport materials under contract. The top contractors depend on engineering consultant firms to do feasibility studies, design work and other such technical support. Since the oil boom, some of these firms have expanded into the Gulf and some have become agents of multinational corporations.

The large contractors do not not benefit from construction activity alone. Having a state license as a top-rank contractor gives them several privileges, such as the right to import heavy construction machinery tax-free or to purchase it at subsidized prices. They can make extraordinary profits by employing the machines at different state and private projects at the same time, and by leasing or reselling the equipment to lower-rank contractors, desperate to acquire such machinery.

An increasing number of contractors tend to invest their profits in related industrial projects. There are contractors who own factories producing asphalt (for road surfacing), concrete blocks, welded mesh, prefabricated houses, and so forth. In fact, two contractors on our list could be classified as industrialists, for each has a factory employing more than 500 workers.

Contracting activity has expanded so rapidly that a black market in contract licenses has developed. Four to five of our large contractors make a relatively high proportion of their profits by reselling contracts secured by their top-rank status and their political and personal connections. For a cut, they simply transfer the bulk of the jobs to subcontractors.

A capital market has emerged to finance low-rank contractors who undertake projects beyond their financial capacity. Another source of such financing is a kind of project equity. Merchants, bankers and usurers provide financing in return for a 40-45 percent of the contract’s gross profits. Those who turn to such money lenders are those who have no direct relations with influential personalities, for once a contractor is granted a state contract, usually about 40 percent of the total cost is placed at his disposal in advance.

Socioeconomic Origins

Under the monarchy, before the 1958 revolution, six of the 31 contractors on our list belonged to the middle layers of the bourgeoisie (subcontractors, owners of factories employing less than ten workers, middle rank army officers), seven were petty bourgeois (low-ranking state employees, retail traders) and seven were lumpen (outside the formal labor market and lacking a stable job). The rest could not be traced back to this period.

On the eve of the 1968 Baath takeover, 12 of our group (39 percent) belonged to the big bourgeoisie, nine belonged to the middle layers of the bourgeoisie, three belonged to the petty bourgeoisie, while five were lumpen. It is striking that among the very upper crust of the contractors, at least 16 percent did not even have a stable job a decade earlier! (The percentage may be even greater, but we cannot determine this because of gaps in the survey.) The fact that 45 percent rose from humble positions in a quarter of a century, and 26 percent from such positions in less than a decade, indicates the scale of capital accumulation under the Baath.

Good connections appear to have been the key to success. Eight were connected by family ties to senior political figures. In fact, seven of them came from the family clan of the ruling elite. Six others had joint business ventures with such persons. Two were former leading figures of the ruling party. And four belonged to families traditionally sympathetic towards the party and had relatives in it.

There seem to be two patterns of ascent. One is relatively gradual, from the position of subcontractors (middle bourgeoisie) by way of personal and economic links with influential personalities. The other phenomenon is the sudden leap experienced by family relations of the post-1968 leaders.

The provincial origins of the contractors are also interesting: 15 out of 31 come from al-Anbar and Salah al-Din provinces. Al-Anbar, northwest of Baghdad, was the home of the main political figures of the 1963-1968 period. Salah al-Din, north of Baghdad, is the birthplace of the majority of the key figures since 1968. The seven contractors of lumpen origins came from Tikrit, the administrative center of Salah al-Din and the home of Saddam Hussein. In the case of the contractors from al-Anbar, we see them rise through the 1960s to middle bourgeois positions followed by a leap in the 1970s.

Private Industry

With its large-scale but inefficient industrial projects, the state has undertaken the great majority of all investments in Iraq manufacturing, but state sector output accounts for only about half the value of production. Through 1981, the state sector furnished 98 percent of gross domestic capital formation in manufacturing. The private sector, though, was responsible for about 45 percent of the value added, a handsome share for its 2 percent contribution to capital formation. [14]

From 1970 to 1977, about half of government investment in industry was directed toward the extractive industries — gas, oil, sulphur and phosphates. [15] Laws and directives issued in the late 1960s and 1970s provided the private sector with cheap raw and intermediate materials from state-owned industries and with low-interest loans from government banks. Industrial Bank loans and facilities to the private sector increased from 610,000 dinars in 1967-1968 to 12.5 million in 1977. [16] The state also granted the private sector wide-ranging exemptions and tax immunities. [17]

Some entrepreneurs did not need to contribute any of their own capital. The Industrial Bank granted loans of up to 80 percent of the total cost of construction industry projects, while loans for other projects ranged as high as 40 percent of the total cost in the three main provinces and 60 percent of total cost in the other provinces. [18] An industrialist only had to inflate the cost of a project to obtain a loan which would cover the entire cost. Other manufacturers set up “final assembly” industries in which they imported semi-finished products and completed them. In this way the products could be classified as locally manufactured, and thus benefit from a variety of tax breaks and other privileges.

By such methods, the private sector reaped immense rewards from the regime’s industrialization strategy. The value added in the private industrial sector soared from 45.6 million dinars in 1972 to 177.5 million in 1977 to 257 million in 1981. [19] To accommodate the new scale of private sector activity, a recent decree permits an increase in the maximum capital subsidy for such projects from 70,000 dinars under the 1964 acts to 5 million. These decrees also empower the Industrial Bank to grant up to 120 percent of the capital of approved projects. [20]

The growth in industrial capital has not been quantitative only. With the advent of the 1970s, a more specialized stratum of large-scale entrepreneurs has emerged. In 1975, there were 248 private industrial enterprises employing more than 50 workers; among them were 88 employing more than 100. Though we have no access to more recent figures, the new companies law indicates a strong tendency to establish larger factories.

During the 1970s, previously established industrialists consolidated their position, several thousand small entrepreneurs arose, and hundreds of small businessmen climbed to the status of big industrialists. While the traditional pattern of labor-intensive, low technology investments still prevails in Iraq, new trends have recently developed. Out of 1,282 private factories employing more than 10 workers in 1977, 281 were in food, tobacco and beverages, 388 were in textiles and other consumer goods, 123 produced metal products, and 122 produced plastics and chemicals.

The Industrial Bourgeoisie

Private industry is no less dependent on the state than the contracting business, though this dependence is indirect and the state subsidies are less personal. Of course, under a brutal dictatorship like Iraq’s, an entrepreneur cannot show the slightest sign of opposition and stay in business. Extra-economic measures come into play: confiscation, arrest, assassination and torture. When tens of thousands of Shi‘is were deported in the early 1980s for fear that they might support opposition movements, many of their factories, shops and properties were confiscated and resold. Yet apart from such cases, not a single private local property has been nationalized under the Baath.

Twenty-seven out of 75 (36 percent) of the bourgeois families in the group were industrial entrepreneurs. Of these, only two rose to this status from a petty bourgeois or lumpen position in the 1960s (both were Baath cadres). Twenty of the families were already large bourgeois during the 1960s, though not necessarily among the very wealthiest families. The remaining five rose from middle bourgeois layers and benefited from personal and political ties to secure licenses, credits, aid and other facilities. Partnership with politically influential personalities is a familiar practice.

Two of the families were among those cited by Batatu as worth more than one million dinars on the eve of the 1958 revolution. Another sign of continuity among industrialists is the less marked geographic, ethnic and sectarian concentration of families than was the case with contractors. Ten entrepreneurs are based in Baghdad and four in Mosul, with five coming from al-Anbar. But state favoritism and rapid ascent may eventually prove to be more important than our group shows. Manufacturing requires a longer gestation period than contracting before big profits begin to show up. So the top ranks of the manufacturers may well include more newcomers by the late 1980s.

The dynamism of the manufacturing sector certainly suggests some impending changes. In 1979, 737 licenses were issued for projects whose estimated cost was 41.8 million Iraqi dinars. [21] In 1980, 806 licenses were issued. [22] In 1981, the plan was amended in order to license 989 projects with a total estimated cost of 190 million dinars, instead of only 468 projects worth 62 million. [23] Many of these licenses have probably gone to established industrialists. Equally likely, capitalists from other sectors are investing in manufacturing. This has certainly been the case with contractors and even more so ex-merchants. The Kubaysis (from Kubaysa, a town in al-Anbar) were traditional textile merchants who became quasi-textile monopolists as owners of the most advanced and profitable factories in Iraq. A “barefoot” man would not easily move into a risky field like manufacturing, but inevitably there will be some “rags to riches” stories here, too. Tikriti “industrialists” have found a cheap and simple means of entry into the manufacturing field. They mine sand and gravel with subsidized agricultural machinery, needing scarcely any capital or expertise and making a handy profit through sales to construction contractors.

Brokers, Merchants and Intermediaries

Construction and manufacturing are the two most dynamic branches of the Iraqi economy and the two most dynamic segments of the Iraqi bourgeoisie. Activities and decisions within these sectors have a lot to do with what goes on throughout the rest of the economy. But Iraq remains an underdeveloped country, with deformed capitalist markets. So there are many black-market profiteers, smugglers and speculators who reap great fortunes. In addition, there are extensive ordinary businesses in such fields as trade, transport, real estate, and other services.

Corrupt bureaucrats exist wherever there is bureaucracy; some may accumulate tremendous wealth, though they do not automatically become bourgeois. The upper echelon of Iraqi bureaucrats under the monarchy became landowners, not bourgeois, because feudal relations were predominant. But today, corrupt bureaucrats are likely to invest their money in capitalist businesses and become bourgeois. The same applies to the top leaders of the Shi‘i community, who reap tremendous sums in donations from their followers. This wealth is a type of rent, but the way the “rent” is reinvested — in real estate, for example — transforms it into capital.

Naturally, neither corruption nor religious contributions show up in the official statistics. But ordinary private business in the service field certainly does, and the figures show vigorous growth. For the 1968-1978 period, the private services sector made its biggest advance in the years 1977-1978. According to the official statistics, the service branches comprise: ownership of dwellings; social and personal services; and public administration, security and defense. The latter is, of course, an exclusively state activity. The distribution branches include: transport, communication and storage; wholesale and retail trade; and banking, insurance and real estate agents. After 1979, official statistics lumped the national accounts into three groups, in order to obscure the contributions of oil production on the one hand and “public administration, security and defense” on the other. Value added rose from 126 million dinars to 208 million, an increase of 58 percent. In distribution, the private sector realized a rate of growth of 54 percent between 1977 and 1978, after a rise of 33 percent between 1975 and 1976.

The most profitable private activities in distribution were transport and trade. In the period 1968-1980, private vehicles nearly trebled from 102,000 to 304,000. [24] In services, real estate ownership led the way. In the population census of 1977, around 19,000 persons registered their main field of “activity” as owners of dwellings. Many merchants, contractors and other bourgeois also own real estate but fall under these other categories. The fact that 19,000 people live from real estate primarily is quite significant, especially considering the great leap in rents during the last decade.

The value added in wholesale and retail trade rose nearly tenfold to 851.2 million dinars in 1981, from 86.9 million dinars in 1969. Of this, no less than half (425 million dinars) was accounted for by the private sector. [25]

Such impressive private-sector growth in distribution and services does not mean that the bourgeoisie in this sector has grown proportionately. For one thing, there is double counting in the statistics. A portion of import licenses to the private sector enables contractors and industrialists to import raw and intermediate inputs, machinery and equipment. Some illegally trade on these licenses, either by reselling the license to a professional merchant, or by themselves importing and reselling goods in high demand. Similarly, in the transport sector, many industrialists and contractors have their own fleets of trailers and trucks. Some big bourgeois work most of their time in the distribution and service sectors and have made most of their money there. But it is often difficult to distinguish them from those who have accumulated their wealth in other ways, such as the state employees and Baath cadres (or ex-cadres) who used their positions to speculate in state property, or who work as intermediaries between the state and multinational corporations.

Middle-Class Economics

The Iraqi state has been able to create capitalists out of its "barefoot" citizens, but this has not been sufficient to create capitalism. State capitalism has been a necessary transitional phase, ensuring the rise and expansion of this new mode of production.

The presence of a state sector, even in the productive branches of the economy, tells us little about the sociopolitical character of that state. Its character is determined by the sources of its capital accumulation, the nature of its transaction with the private sector and its specific fields of activity. In Iraq, this sector has been a necessary prerequisite for the flourishing of capitalism, while the presence of a state sector in other countries might indicate a socialist transformation leading to the liquidation of private ownership of the means of production.

The interaction of economic dynamics and Iraq’s political system during the last 15 years reveals the nature of the Iraqi state. Even Hanna Batatu’s profound and pioneering study of Iraqi social structure failed to identify and give proper weight to this expanding and increasingly prevailing mode of capitalist production. Batatu argued that with the end of feudal land ownership following the 1958 revolution, the social power of large private ownership was uprooted. [26]

New social classes, unlike old ones, need to be seen in the midst of dynamic transition. Analyzing the social origins of new leaders can only be confusing if this leads to unsatisfactory formulations such as “middle-class” regimes. [27]

Which classes are middle? According to Batatu, outside of agriculture the middle classes comprise teachers, army officers, engineers, lawyers, physicians, other professionals, retired employees, middle income employees, trade, industry and service “elements,” retail traders, owners of industrial firms that employ no hired labor force apart from family members, owners of small industrial firms employing less than ten workers, owners of small and medium-sized service facilities, and employees of private commercial and industrial companies. [28]

Such a loose definition, based on income rather than property relations, lumps together contradictory class positions. Class becomes a statistical sum with no social implications. The process through which capitalists emerge is overlooked, even though it is the core of social transformation. The mere expansion of intermediate strata does not lead to “middle-class” societies. The liberation of the serfs and the expansion of the urban population do not imply the “uprooting” of private property.

Oil revenues have changed the relation of the state to Iraqi social classes, but oil revenues have not meant middle-class regimes in the Gulf emirates, the Shah’s Iran or Saudi Arabia. In Iraq, tremendous revenues in the hands of the state has not uprooted the social power of private property. The social and economic power of landowners and of merchants based in land have been removed, but private property has never been identical with feudal property.

As Batatu points out, wage and salary earners have improved their standards of living in absolute terms. Yet any far-reaching social transformation spreads its benefits beyond the new dominant class. In Iraq, the fantastic growth of the economy throughout the 1970s was not reflected in a comparable growth in wages and salaries. In fact, the share of the latter dropped from 28 percent in 1968 to 19 percent in 1978. [29] By contrast, private sector earnings (after deducting wages and salaries) accounted for nearly 40 percent of the national income in 1977. The notion of “middle classes” need not be totally rejected, but the implications of the concept should be clarified. The expansion of such strata in Iraq is but a symptom of the predominance of capitalism. The emergence of a large new Iraqi bourgeoisie should be clear and positive proof.

Some Leading Iraqi Families

The al-Mahmoud family (Hamoud, Jasim, Hashim and Ghanim are civil engineering and construction contractors) owns the Eastern Welded Mesh Factory, which employs some 500 workers. The family comes from al-Anbar province and has been well established since 1952. Other industrialist-contractors have flourished in the 1970s. Such is the case with Nuri Bilal, a Shi‘i contractor and owner of an asphalt factory that employs 250 workers.

An example of the intricate relations forged with top leaders of the regime is the firm of Maktab al-Khalid. Matti Ballula and Morris Abekian are the two partners. This firm has received several contracts in the military sector, such as building the runways of Baghdad’s Saddam Airport and several military bases along the front. One of the partners owns a Boeing 707, has a large farm in Rashidiyya and is married to a close relative of ‘Adnan Khayrallah Tulfah, the minister of defense and cousin and brother-in-law of Saddam Hussein. The other partner is an officer in the Iraqi secret police (mukhabarat). Maktab Al-Khalid donated 1 million dinars for the war effort.

The al-Khirbit family, from al-Anbar province, is an example of a traditional pro-Baath family with one member a senior cadre in the ruling party and another a general in the army. Thanks to these favorable circumstances, ‘Abd al-Razzaq and ‘Abd al-Karim al-Khirbit have become two of the wealthiest contractors in Iraq. Making use of a procedure called al-amana whereby contracts are handed to “trustworthy” people without recourse to tenders, under the pretext that they deal with matters of strategic national importance, these brothers have received contracts for projects such as the military airport near the Jordanian border.

Perhaps the most influential family in the manufacturing industry is the al-Buniyya family (Mahmoud and his three sons). Their main field of interest is the highly profitable food processing industry. Among the nearly 30 firms they own are two chocolate factories, three flour mills, ice cream and biscuit factories. The al-Buniyyas run their activities, which also include trade and construction, from their seven-story headquarters in Baghdad’s exclusive Jadiriyya quarter. The al-Rawi family (Farouq, Salah and Saad) incorporates a more diversified field of industrial interest. They own a food processing factory, a plastic products factory and a printing press, in addition to four other factories. Both al-Buniyya and al-Rawi have close business relations with Saddam’s brother Barzan, former chief of the secret police.


[1] Al-Thawra, July 8 and July 11, 1983.
[2] This article draws heavily on my book, The State and Capitalist Development in Iraq, 1968-1978. For reasons of space, the procedure of sampling the Iraqi bourgeois families and statistical computations cannot be elaborated here.
[3] Between the fiscal years 1950-1951 and 1953-1954, oil revenues increased nearly tenfold, from 5.3 million Iraqi dinars to 49.75 million. Between the fiscal years 1971-1972 and 1973-1974, oil revenues only slightly more than doubled, from 349.97 million dinars to 823.22 million. Annual Reports of the Directorate General of Accounting, 1950-1953, Ministry of Planning, Department of Financial Planning: “State Revenues and Expenditure for the FYs 1965- 1975,” mimeo (Baghdad, 1976).
[4] M. H. Hassan, Studies on the Iraqi Economy (Beirut, 1966), pp. 26-27, and Abbas Alnasrawi, Financing Economic Development in Iraq (New York: Praeger, 1968), p. 68.
[5] The Economist Intelligence Unit, Iraq: A New Market in a Region of Turmoil (London, 1981), p. 31. (hereafter EIU)
[6] For 1969-1974, Ministry of Planning, “State Revenues 1975 and 1978” B. Al-Bustani, “Iraq: Economic Development,” Foreign Policy and Defense Review 2/3-4, p. 39.
[7] K. S. Gill, “Inflation in Iraq” (Baghdad: Ministry of Planning, 1975), mimeo, and T. Al-Jazrawi, The Construction Sector in Iraq (Baghdad, 1978), p. 23.
[8] F. A. Mahdi, "Estimates for the Change in the Costs of Capital Formation in Iraq," Dirasat ‘Arabiyya (November 1980), p. 155.
[9] Sabah Al-Durra, The Public Sector in Iraq (Baghdad, 1977), p. 141.
[10] For 1968 and 1973, “State Revenues 1978”; EIU, p. 45.
[11] For the estimates of 1976, see al-Khafaji, p. 71.
[12] “On the Contracts Sector and the Class Policy of the State,” Memorandum to the President, June 21, 1977. Published in al-Thaqafa al-Jadida 133 (August 1981), pp. 17-18.
[13] Hanna Batatu, The Old Social Classes and the Revolutionary Movements of Iraq (Princeton, NJ: Princeton University Press, 1978), pp. 274-281.
[14] The Political Report presented to the Ninth Regional Congress of the Arab Baath Socialist Party (as published serially in al-Thawra, January 1983).
[15] M. Sader, “Le developpement industriel de l’irak” (mimeo) (Beirut: CERMOC, 1981), p. 17.
[16] AAS (1974), p. 234 and AAS (1978), p. 337.
[17] Law 44 of 1968 amended the income tax law of 1959 to the benefit of industrialists. In 1970, machines and equipment imported by private industries were exempted from duties and new industrial projects were exempted from income taxes during their first five years in operation. See Edith and E. F. Penrose, Iraq: International Relations and National Development (Boulder, CO: Westview Press, 1978), p. 468.
[18] Alif Ba’, November 4, 1981.
[19] AAS (1976), p. 124; AAS (1978), p. 91. 1981 figures computed from the Political Report (footnote 14).
[20] Law 36 of 1983, in Official Gazette, April 18, 1983.
[21] Middle East Economic Digest, May 9, 1980.
[22] Alif Ba', June 17, 1981.
[23] Al-Thawra, February 6, 1982.
[24] Ministry of Planning, “Iraq; 13 Years of Progress” (Baghdad, n.d.), p. 19.
[25] Calculated from ibid., p. 10.
[26] Batatu, pp. 1116, 1126-1127.
[27] Batatu, pp. 1126-1129.
[28] Batatu, p. 1126.
[29] Computed from AAS (1976), p. 175 and AAS (1978), p. 137.

How to cite this article:

Isam al-Khafaji "State Incubation of Iraqi Capitalism," Middle East Report 142 (September/October 1986).

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