Why Iraq's Currency Could be Next - How the U.S. Helped Stabilize Europe and Japan’s Currency
After World War II, much of Europe and Asia was devastated—cities were in ruins, industries were crippled, and economies were shattered. The United States played a central role in rebuilding its allies, as well as former enemies like Germany and Japan. This effort wasn’t purely humanitarian; it was also a strategic move aimed at preventing the spread of communism and creating stable global markets for U.S. trade.
United Kingdom and France:
For both the UK and France, recovery began with emergency aid and evolved into larger-scale assistance under the Marshall Plan, introduced in 1948. The U.S. sent over $13 billion (more than $150 billion in today's dollars, adjusted for inflation) to help European nations rebuild. This money was allocated toward rebuilding infrastructure, restarting the economy, and stabilizing currency systems.
The UK received the largest portion of Marshall Plan funds—about $3.3 billion—while France got around $2.3 billion. These funds helped both countries to restock depleted resources, improve production, and reduce inflation. But rebuilding wasn’t instant. By the early 1950s, France had largely restored its economy, and the UK had stabilized, though it remained deeply in debt. It wasn’t until 1954 that the British pound regained much of its pre-war purchasing power. France’s franc also stabilized around the same time but eventually had to be revalued in 1960, leading to the introduction of the "new franc."
Germany:
Postwar Germany faced an entirely different situation—it was occupied and divided. In the Western zones, the U.S. initiated a combination of humanitarian relief and structural reforms. A key moment occurred in 1948 with the currency reform, which replaced the worthless Reichsmark with the Deutsche Mark. This currency reform, backed by the U.S., along with Marshall Plan aid (Germany received about $1.4 billion), helped end rampant inflation and restored public confidence in the economy.
Economic policies known as the "social market economy," introduced by German economist Ludwig Erhard with U.S. support, were critical. They emphasized free-market capitalism with social welfare protections. Within a few years, Germany’s economy surged—what’s now called the Wirtschaftswunder or "economic miracle." By the mid-1950s, the Deutsche Mark had become one of the strongest and most stable currencies in Europe.
Japan:
Unlike Europe, Japan did not receive Marshall Plan funds. Instead, the U.S. directly managed its recovery during the American occupation (1945–1952). Under General Douglas MacArthur, Japan underwent significant reforms, including land redistribution, labor rights, and the establishment of a new constitution. The U.S. also helped revitalize Japan’s industries by encouraging production for the Korean War, which provided a significant economic boost.
In 1949, the Japanese yen was fixed at 360 yen per U.S. dollar to stabilize trade and control inflation. This rate lasted until the early 1970s. By the mid-1950s, Japan had regained industrial productivity and stabilized its economy. The 1950s and 1960s marked a period of rapid growth for Japan, and by the 1970s, it had emerged as an economic powerhouse.
The U.S. helped rebuild the UK, France, Germany, and Japan through direct aid, economic reforms, and strategic partnerships. It took roughly 7 to 10 years for these countries to stabilize their currencies and economies after the war, depending on the degree of destruction and the political climate. American involvement not only reshaped these nations but also laid the foundation for a global economic system dominated by Western capitalism.
So, why is it taking Iraq over 21 Years to Level Out Its Economy?
The reason Iraq is taking so long to stabilize and revalue its currency, especially when compared to countries like Germany, France, the UK, and Japan after World War II, stems from a combination of geopolitical instability, corruption, external interference, and delayed economic reforms.
After World War II, the United States moved swiftly to help its allies and former enemies rebuild.
Iraq, on the other hand, has had a very different post-war experience. After the U.S.-led invasion in 2003, Iraq did not receive a Marshall Plan-style reconstruction. While billions of dollars were poured into the country, much of it was lost to corruption, mismanagement, or military operations, rather than being targeted for economic development.
Additionally, Iraq has endured sectarian violence, ISIS occupation, political assassinations, and continuous foreign influence, particularly from Iran and the U.S., making it difficult for any long-term plan to take root.
Unlike postwar Germany and Japan, Iraq’s internal divisions have made it hard to form a unified economic vision. Technocratic reforms proposed by Iraqi economists have often been stalled by political infighting or blocked by entrenched elites who benefit from the status quo. The Central Bank of Iraq (CBI) has taken steps to clean up its financial system, but its independence is frequently undermined by political pressure.
Furthermore, international sanctions, smuggling, and a dollar-dependent economy have also contributed to the weakness of the Iraqi dinar. The country’s oil wealth, which should be a blessing, has turned into a crutch, discouraging diversification and tying national income directly to volatile global oil prices.
The key difference is that countries like Germany and Japan were supported not just with money, but with structure, security, and a long-term blueprint for independence. Iraq is only now beginning to show signs of taking that same path—focusing on digital banking, anti-corruption efforts, currency auctions reform, and economic sovereignty. If Iraq stays the course, it could follow a delayed version of the post-World War II recovery model. But for now, the delays are rooted in decades of instability and missed opportunities.
This research reveals that the United States has the expertise to assist a country in regaining economic stability.
