AN EXCELLENT ARTICLE in the Washington Post on the challenges of building a real economy, not just democracy, in Iraq. Read the whole thing here...its a good one.

"A free economy and a free people go hand in hand," said Bremer, who arrived two weeks ago to run the occupation authority. "History tells us that substantial and broadly held resources, protected by private property, private rights, are the best protection of political freedom. Building such prosperity in Iraq will be a key measure of our success here."

Bremer spoke four days after the U.N. Security Council lifted economic sanctions imposed on Iraq more than 12 years ago after the Persian Gulf War. U.S. officials had complained that the sanctions, which they once favored as a way to force Hussein to comply with U.N. arms inspections and perhaps foment an uprising against him, had become a severe hindrance to postwar recovery.

But dismantling Iraq's state-managed system holds big risks for the occupation authority at a time when most Iraqis are struggling to get by. During Hussein's 24 years as president, he and his Baath Party drew on Iraq's oil wealth to subsidize the cost of basic items, creating something like a welfare state, and people came to expect these low prices. Many free-market advocates contend that subsidies distort economic incentives, retarding growth and ultimately harming consumers....

"This place was probably affected less by the forces of supply and demand than any place I have ever seen," said Peter McPherson, who is on leave as president of Michigan State University to serve as the senior U.S. adviser to Iraq's Finance Ministry. "This was an integrated economy -- pathological, but integrated. You can't really take one piece out, fix it, and put it back. It will have to be taken all apart, and you will have to allow the forces of supply and demand to function."...

"After decades of manipulation and management, the road to a free and flourishing economy will not be an easy one," Bremer said . "But we have already taken one big step, which was the end of the sanctions."

In the short term, however, Bremer said he plans to continue elements of the old system. On Sunday, the U.S. occupation authority will distribute the first food rations across Iraq since the end of the war.

Although severe economic problems remain, security has appeared to improve in recent days. The U.S. troop presence in Baghdad has risen dramatically in the past week, with the 1st Armored Division replacing the weary 3rd Infantry Division that fought its way into Baghdad on April 9. More and more Iraqis appear to be venturing outside their homes, even in the evenings, and shops are opening their shutters with more frequency.