This article studies Iraq's recent economic development. It views development as a process mediated by institutions and driven by the attainment of human capabilities and capacities, including state capacity. This approach departs from the two prevalent sets of models that have been used to explain Iraq's lacklustre economic performance: theories that highlight the negative effects of oil on economic outcomes as well as those that stress the importance of the, often formulaic, application of policies that advocate economic liberalization and marketization. This study posits that many of Iraq's economic difficulties, including those of the provision of public services and realizing investment, are best comprehended as the result of prolonged institutional decline and decay in human capabilities, especially since 1990. What is more, the article contests some basic maxims concerning Iraq's recent economic history. For example, the post-2003 era is viewed primarily as a continuation of the sanctions period to the extent that it has been characterized by continued deterioration in both human capabilities and economic institutions, despite radically changed political and economic arrangements.