NCPA - National Center for Policy Analysis

Iraq Needs Private Companies

April 10, 2003

Companies, and lots of them, are exactly what Iraq (and indeed the whole of Arabia) needs, say authors John Micklethwait and Adrian Wooldridge in their new book, "The Company: A Short History of a Revolutionary Idea."

The authors explain that over the past 500 years, the much-vilified private-sector company has been the West's secret weapon in overtaking Islam:

  • In 1500, Arabia was ahead of Europe in terms of its commercial development.
  • The Prophet Muhammad, who was himself a trader, looked on commerce far more favorably than the Christian church.

Yet the Arab world -- just like that other erstwhile commercial pioneer, China -- failed to develop private-sector companies in the same way that the West did.

The Arab world's failure to adapt meant that it fell ever further behind the West. Islamic inheritance law -- dividing estates among sons -- made it difficult for partnerships to grow to a size where they needed outside capital. The result is a region mired in stagnation:

  • Leave aside oil, and the total exports of the major Arab countries are smaller than Finland's.
  • Economies such as those of Saudi Arabia and Kuwait are dominated by nationalized oil companies that specialize in providing jobs and wealth for the ruling families.

In contrast, the liberal United States has 5.5 million companies while Iraq has none.

Source: John Micklethwait and Adrian Wooldridge, "The Company Way," Wall Street Journal, April 9, 2003.

For text (WSJ subscription required),,SB10498479982994400-search,00.html


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