Abstract:
This study aims to examine the economic and sociopolitical
factors determining the growth-pattern of public
spending in Iraq. During 1921-50 the capacity of the Government to spend
was constrained largely by its ability to collect taxation,
particularly indirect taxes. The Government was unable to
increase its revenue from oil since its bargaining position
against the foreign oil companies was weak due to the terms
of concessions. Evidence for 1950 to 1980 strongly supports Wagner's
Law suggesting that public spending increases along with the
level of development. Also, it shows that satisfaction of
public needs has depended largely on the availability of
financial resources, mainly oil receipts. As the revenue
constraint relaxed in the early 1970's, government spending
expanded substantially in relation to national income. Therefore,
the rapid shift in government spending and its major
categories was solely due to the "social upheaval" brought
about by oil nationalization. Experience of economic planning since 1951 reveals that
the main defect of economic policy was reliance upon crude oil
export, which is determined by exogenous factors in an
uncertain world market. Only in the late 1970's was fiscal
policy able to contribute to the integration of the oil sector
in the national economy and to curtail the dependence on oil
receipts.
