The On The Flip Side

1815 Words8 Pages
On the flip side, Gunter argues that Iraq enjoys a glowing and vibrant "underground economy" that is a direct side effect of its bureaucracy and corruption. Private businesses in Iraq must choose between seeking to become a legal enterprise, which due to regulatory hostility is a difficult and expensive process, or operating in the underground economy with all of the associated inefficiencies. One characteristic common to both options is the necessity of paying bribes to a long line of corrupt officials. One survey of corruption in Iraq showed that one-fifth of private businesses reported paying 40% or more of their firm’s total revenues in bribes. Excluding agriculture, an estimated 6% of the labor force is employed by private legal enterprises while 20% is employed in the underground economy. Firms in the underground economy tend to be small-scale, engaged in services or light manufacturing. In many cases, underground entities are engaged in illegal activities such as selling black market fuel or smuggling across Iraq’s long open borders. However, other underground firms are engaged in other wise legal activities that are concealed to avoid the choice of meeting arduous regulations or paying bribes to inspectors to ignore violations. As expected, workers in the underground economy lack legal protections and there are stories of workers being denied pay or even physically abused. Generally firms in Iraq’s underground economy are very inefficient. This inefficiency arises
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