Figure 1.--Iraq isessentially ancient Mesopotamia where agriculture and civilization first developed. It was also the center of the Islamic Golden Age. In modern times it was amopng the poorest countries on earth,until the discovery of oil. The press caption here from the 1950s read, "New Oil Wealth Makes Iraq a Land of Contrasts: Oil the liquid goal which flows abundantly below its soil, has made Iraq, like other countries of the Middle East, of tremendous future importance. Bagdad, the capital, presents a strange contrast of the old East and the new West, wide streets with modern buildings are filled with British and American cars, but just behind these buildings are ramshackle Arab dwellings. Hotels are modern, but swage and sanitatiion arepractically nil. Washing machines vacuume cleaners and wireless [radio] are pouring into the country for the new rich, but the peasants still live in mud huts, are illiterate and for them life has changed little. But Harrow educated King Feisal and his Ministers are planning to spend some of the enormousn oil royalties on schools, hospitals and for the general improvement of the people. Bagdad stands near the traditional site of the Garden of Eden, wise spending and planning might very result in a modern Garden of Eden for the people of 20th century Bagdad."

What is now modern Iraq has at times been an important economic center. Iraq encompses ancient Mesopotmia. It was here along the Tygrus and Euraptes Rivers that civilization first began. It ws based on the development of agriculture. Expanded agricultural harvests financed handicrafts and artisanal activities in the cities. Severl different civillizatiins develooment in Mesopotamia (Summer, Babylon, and Assyria were the most important). Agriculture was the base of these economies, bolstered by trade and commerce. Military conquest also generated great wealth for these ancient civilizations. The Caliphate centered at Baghdad was an even larger empire. The economy continued to be based on agriculture, but the huge expanse of the Caliphate opened up a vast trading empire from Spain east to Persia. An important part of the economy in the early years was the dhimma system. Christians were taxed at high levels with the jizya which helped finance the state. This was an important factor in promoting conversion. What is now Iraq was part of the Persian, Hellasnic, and Roman empires. With the Islamic outburst from the Arabian Peninsula, Bagdad became the center of the Caliphate andthe Arab Golden Age. With the collapse of the Caliphate, Iraq has been an economic backwater. During the extended period of Ottoman rule, it was one of the poorer parts of the Empire. Photographs taken in the early-20th century show a society little changed for a millenium. The country is, however, blessed with enormous oil reserves which the British began to develop after driving out the Ottomans during World War I. Indepedent Iraq with the oil income began to develop modern infrastructure. The Bath Party built a large state sector. Sadam Hussein after seizing power (1979) allowed the country's developing infrastructure to deteriorate as he squandered the country's oil earnings on military equipment and ruionous foreign adventures. Improving security and expanding oil production is now helping Iraq to repair the damage left in Sadam's wake. Economic activity is concentrated in the energy, construction, and retail sectors. The Broader economic development remains in doubt. While oil revenue is increasing, the country still has a large, inefficent state sector. There is little meaningful ecomonomic activiy outside the oil sector which generates more than 90 percent of government revenue and 80 percent of foreign exchange earnings. Iraqis produce very little that is of interest to other countries. The country is depedent of foreign technolgy for virtually all of its modern life and like other Arab countries makes no meaningful cotribution to the worldeconomy other than exporting oil.