In this paper, we contest the applicability of recent conceptualizations of economic development. Specifically, we examine Iraq’s post 2003 economic and political transition in light of Acemoglu and Robinson’s formulation of the relationship between inclusive (or extractive) political and economic institutions, with the former affecting the latter. Inclusive economic institutions offer broad-based economic incentives and opportunities, while extractive economic institutions present opportunities to a narrow segment of the population only. Using a variety of metrics (including World Bank governance surveys) we show that politically more inclusive institutions have not resulted in more economic inclusion--contrary to what Acemoglu and Robinson would predict. This is a major shortcoming of their approach, which is now regularly applied to developing countries, including in MENA. In contrast, we argue that more political inclusion has worked indirectly to reduce state capacity, hindering economic inclusion rather than promoting development.