The shift to a free mar­ket in Iraq has been a dif­fi­cult one. Gov­ern­ment jobs are plen­ti­ful and easy, it’s fac­to­ries have many more work­ers than needed. Work­ers in gov­ern­ment run fac­to­ries payed full time wages for only hav­ing to work 2 hours a day. Yet the fear is that remov­ing the jobs will turn the work­ers into ter­ror­ists, as they will join the insur­gency for food and money.

From this Reuters arti­cle that we found at the Qatar’s Penin­sula On-Line, we read more about the quandary.

Iraq has stuffed fac­to­ries and other state bod­ies with legions of extra work­ers to lure the poverty stricken away from a well-funded insur­gency, which has only waned in the last 18 months after more than six years since the US-led inva­sion.

At a state-owned elec­tri­cal fac­tory in Bagh­dad, a max­i­mum of 2,500 work­ers are actu­ally required, yet only a hand­ful of the 4,370 employ­ees on the pay­roll were vis­i­ble in the for­est of ancient look­ing machines in the cav­ernous fac­tory halls.

Iraq hopes to entice for­eign cap­i­tal to such plants to reha­bil­i­tate them and turn them into profit-making ven­tures, but that could mean the sack­ing of thou­sands of extra staff.

“The secu­rity sit­u­a­tion will go to pieces. The ter­ror­ists would employ them. They’d go to some­one who would pay them to lay a road­side bomb,” said tech­ni­cal ser­vices chief Haady Ali.

The US mil­i­tary believes most Iraqis work­ing with the insur­gency do so only to earn a liv­ing, not through ideology.

Years of war and sanc­tions have worn down Iraqi indus­tries, and before that decades of Soviet-style social­ist eco­nomic poli­cies under Sad­dam Hus­sein sup­ported loss-making enter­prises. Gen­er­a­tions of Iraqis are accus­tomed to a gov­ern­ment run econ­omy in which the state pro­vides for all, and a deep-rooted aver­sion to Western-style cap­i­tal­ism is part of the culture.

Yet a sharp fall in oil prices from last year forced Iraq to slash its 2009 bud­get three times, mak­ing it unlikely to be able to sup­port a huge pub­lic sec­tor indefinitely.

“Pri­vati­sa­tion won’t work. There won’t be job safety — the coun­try must pro­tect its peo­ple,” said Faiq Marhoum, a worker at the fac­tory for 37 years.

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