A complex web of social, economic, ethnic, religious, and ideological conflicts has hindered the process of state formation in Iraq since it gained independence from Britain in 1932. Festering socioeconomic problems—such as widespread poverty and deep divisions between the Sunnis and the Shi'ites in the post-World War II period—were compounded by an enduring leadership crisis that continued to afflict Iraqi politics and society for more than 5 decades after independence. The political process has been characterized by deep social and political divisions that have meant that no single political group was able to gain enough support to rule the country without resorting to violence. As a result, Iraq's deep-rooted fragmentation has allowed the armed forces to exercise great control over politics since the 1930s. A total of 11 coups took place between 1936 and 1968. The Ba'ath party, which came to power in 1968, also through a military coup, has greatly shaped the country's modern history and its economic system. The party espouses the goals of socialism , freedom, and unity, and has attempted to redress widespread social inequality through the redistribution of wealth.
According to the constitution, Iraq is a republic with an elected legislature and an independent judiciary. Executive power is concentrated in the hands of the president and Council of Ministers. In reality, and owing to the revolutionary nature of Iraqi politics, all executive and legislative powers rest with the Revolutionary Command Council president (RCC). The RCC elects the president, who, in addition to being the chairman of the RCC, also serves as prime minister and commander of the armed forces. The president and the Council of Ministers are accountable to the RCC.
Since the late 1960s, the ruling Ba'ath Party has used vast oil revenues to build a modern state, although it is also one of the most highly militarized countries in the world. The Ba'ath party adopted a centralized socialist welfare system, which regulated every aspect of the economy, with the exception of the agriculture and personal services sectors. Much of Ba'ath party's ambitious plans to develop Iraq and exploit its vast oil resources were done with Soviet technical assistance. Since taking office in 1979, President Saddam Hussein pursued a state-sponsored industrial modernization program that led to a more equitable distribution of wealth, greater social mobility, improved education and health-care standards, as well as the redistribution of land. The government experimented with economic liberalization in the 1980s, which sought to ease state control of the economy and to increase commercialization in the state sector. These efforts, however, were largely unsuccessful, mainly due to a long legacy of state control and a bloated state bureaucracy that was unable to meet the challenges of reform.
Iraq's spending on defense has traditionally accounted for 25-33 percent of the state budget, even when the country was not at war with any of its neighbors. Since the early 1970s, the government has dedicated huge resources to thwart efforts by the Kurdish people to establish their own state in the northern Kurdistan region. After efforts to reach an agreement to establish a politically and culturally autonomous area in the north failed in 1975, the government waged in 1976 a costly campaign to forcibly evacuate 800 Kurdish villages along the border with Iran. This campaign to replace the Kurdish population with Arabs resumed after an 8-year hiatus during the Iraq-Iran war. At least 300,000 Kurds were deported from their villages in the north, and chemical weapons were used against Kurdish civilians at Halabjah in 1988 in which more than 5,000 Kurds were killed. Following Iraq's military defeat in 1991, U.S.-led allied forces carved out an autonomous region for the Kurds in the north, effectively separating the region from the rest of the country. Since 1991, the Iraqi Kurds have enjoyed a large degree of autonomy from the central government in Baghdad under the protection of allied forces. Nevertheless, the Kurds live in primitive conditions, often in large "tent cities," with only the barest necessities (such as food, medicine and clean water) supplied by aid agencies.
In the wake of the Gulf War and its aftermath, the Iraqi government's role in the economy is bigger than ever, as it continues to control the vast majority of imports and foreign exchange flowing into the country from the limited sale of oil allowed under the sanctions. The government, however, lacks a clear economic objective, given its primary goal since the 1990 Gulf War has been to ensure the survival of the regime in the face of international political and economic isolation. Instead of using its limited resources from oil sales to benefit the economy and expand its base, the state has redirected its efforts toward guaranteeing the continued support of the regime's chief domestic allies, mainly the merchant class and the military. This class has been both paid off and allowed to accumulate wealth illegally to ensure its continued allegiance to the state.
Taxation is not and has never been a major source of government income. Iraq's relative prosperity in the years preceding the Iran-Iraq war enabled the government to adopt a welfare system that exempted the population from paying taxes. After the 1990 Gulf War, however, the government has attempted to impose taxes to increase its revenue, but collection enforcement has been rather poor. Private sector employees are required to pay income tax , although the tax is rarely collected. State employees continue to be exempt from taxation.