The president's plans to subject Iraq to the most radical forms of
capitalism are as responsible as the war itself for the destruction of Iraq.
Iraqis have been brutalized not only by bombs and bullets; they've also been
the victims of economic violence in the form of the free market "shock
therapy" cooked up by a firm in Virginia on a $250 million no-bid contract
before the U.S. invasion. Tranforming Iraq's economy overnight was a matter
of ideology trumping commonsense, and it's killed thousands of innocent Iraqis
and shattered a way of life for hundreds of thousands more.
That the radical restructuring of Iraq's political economy has received so
little critical attention -- even as Iraq's nascent government threatens to
crash and burn -- is a testament to how deeply indoctrinated we are --especially
our media -- in the narrative of what "American-style" capitalism
is. It was taken as a given that after knocking off Saddam, we'd rapidly privatize
huge swaths of Iraq's national companies, get rid of hundreds of thousands of
civil servants, completely restructure the country's tax and finance laws and
throw Iraq's economy wide open for foreign multinationals. File it under bringing
"democracy and capitalism" to the poor, backward Arabs.
The reality is that the economic policies we imposed on Iraq were not some
generic form of "capitalism"; they included the most radical business-state
rules imaginable -- policies that developing countries have vehemently resisted
for over a decade. What's more, imposing them at the point of a gun appears
to have violated both international and U.S. laws. There's nothing "normal"
And while "democratization" and "free markets" supposedly
go hand-in-hand, the truth is that Iraq's economic transformation was mutually
exclusive with the goal of forming a legitimate government, and the Bush administration
knew it well in advance of the occupation.
That's because it's universally accepted -- even among the most vocal proponents
of the very model of corporate globalization that inspired Iraq's new economy
-- that in the short-term those policies create economic pain, displacement,
anger and civil unrest, as well as a lack of faith in government. That's no
way to win hearts and minds.
Even the man who implemented the shock therapy, coalition boss L. Paul Bremer,
understood this quite well. Before his installation as "the dictator of
Iraq" -- in the words of one UN envoy -- Bremer was a risk management consultant.
In 2002, he wrote in a report to his corporate clients: "The painful consequences
of globalization are felt long before its benefits are clear… Restructuring
inefficient state enterprises requires laying off workers. And opening markets
to foreign trade puts enormous pressure on traditional retailers and trade monopolies."
Bremer noted that corporate globalization is "good for the economy and
society in the long run, [but has] immediate negative consequences for many
people," and concluded that those consequences cause "political and
Pushing those policies in a country like Iraq was a matter of ideological preference
and greed, not necessity. A good example is Iraq's new flat-tax, established
by Order #37 (now Law #37). As the Washington Post reported
: "It took L. Paul Bremer, the U.S. administrator in Baghdad, no more than
a stroke of the pen … to accomplish what eluded [Republicans] over the
course of a decade and two presidential campaigns."
Former Reagan and Bush 41 official Bruce Bartlett said with no small amount
of envy that an occupation government doesn't have to "worry about all
the political and transition problems that have made adoption of fundamental
tax reform here so difficult," and Grover Norquist, head of Americans for
Tax Reform, called the move "extremely good news." Meanwhile, one
Middle East expert briefed on the plan told the Post "A piece of social
engineering is being done on Iraq, but it has almost no support from other members
of the U.S.-appointed Iraqi Governing Council."
Putting "free-markets" before what are recognized as "best practices"
in post-conflict reconstruction had an immediate relationship with Iraq's insurgency.
Consider the impact of two of Bremer's
100 Orders. Order #1 was the "De-Ba`athification of Iraqi Society."
It laid off 120,000 senior civil servants (and a half million Iraqi soldiers
and officers), ostensibly to clean out the government of holdovers from Saddam's
Ba'ath party. But you had to be a Ba'athist to get those civil service jobs
in the first place. Antonia Juhasz, author of The
Bush Agenda, told me in a recent
interview that "it wasn't an indication that they were a party to Saddam
Hussein's crimes ... they were fired because they could have stood in the way
of the economic transformation."
When I say "civil servants," don't think about the pasty men and
women down at the Social Security office. Think about mostly Sunni civil servants
-- men accustomed to influence -- fresh out of a job, with few prospects and
facing a new order of Shi'ite rule, and remember that they all had compulsory
military training and a collection of automatic weapons.
Now look at Order #1 in relation to Order #39, which made it a violation of
Iraqi law fo the government to favor local Iraqi businesses or Iraqi workers
for reconstruction work, meaning that all those pissed off, heavily-armed and
newly unemployed men could not be put to work rebuilding their country.
That killed the State Department's own exhaustively prepared plans for post-war
Iraq -- plans that the administration had announced they'd follow prior to the
invasion. According to a report by the Center for Strategic and International
The Administration … announced plans to employ the bulk of Iraq's
regular army to rebuild Iraq's critical infrastructure, such as roads and
bridges, after a conflict. The United States would pay the salaries of Iraqi
soldiers to perform this work, thereby ensuring - at least in the immediate
term - against their return to civilian life without any gainful employment.
We'll never know how differently things might have turned out if the administration
had listened to its own experts instead of the Chamber of Commerce's lobbyists.
That's not to say these policies caused the insurgency -- it's not that direct
-- but they created circumstances in which it could flourish and guaranteed
it would have some popular support. This was, after all, an economic order that
had led people living in much better circumstances in places like Seattle, Geneva
and Montreal to riot. It was predictable that, on the heels of an invasion,
they'd be greeted with violent resistance. Michael O'Hanlon of the Brookings
Institution was right when he
called post-conflict Iraq "a debacle that was foreseeable and indeed
foreseen by most experts in the field."
Much of this policy mix also violated international and U.S. law. It's no small
irony given that one of the reasons given for the invasion was to confront a
"rogue" regime that scoffed at international law.
Article 43 of the Hague Convention says that an occupying power must "take
all the measures in his power to restore, and ensure, as far as possible, public
order and safety, while respecting, unless absolutely prevented, the
laws in force in the country." The only law that the American
forces left standing was Saddam Hussein's ban on public-sector unions.
Article 55 says an occupying force can only serve as the "administrator"
of "public buildings, real estate, forests, and agricultural estates."
As the Guardian pointed out, those rules also "apply to structural changes
to a public resource or service." Naomi Klein asked: "what could more
substantially alter 'the substance' of a public asset than to turn it into a
The questionable legality of the policy was also well understood. Just a week
after the bombs started falling on Baghdad, Britain's Attorney General Lord
Peter Goldsmith sent a memo to Tony Blair (PDF)
warning that "the imposition of major structural economic reforms would
not be authorized by international law." He added: "the longer the
occupation of Iraq continues, and the more the tasks undertaken by an interim
administration depart from the main objective, the more difficult it will be
to justify the lawfulness of the occupation."
The Bush administration -- dominated by Big Business ideologues -- went ahead
with the plan nonetheless, and the consequences have been wholly predictable.
After all, we've seen them before, in the former Soviet states after the USSR's
The adminsitration actually cited Russia's economic transition as a model for
Iraq. But the University of North Carolina's Jonathan Weiler, an expert on Russia
and author of Human
Rights in Russia: A Darker Side of Reform told me that while "the ideology
of democracy promotion says that democratic political institutions and free
market reforms are two sides of a coin in terms of liberal freedoms. In fact,
Russian reformers were always more interested in an economic transformation
that would enrich their allies." Russia's transition to a market-based
economy was anything but smooth, and Weiler says "it's certainly not a
model that's compatible with trying to create a broadly legitimate government
in a country that's been torn up by war and years of dictatorship. Essentially,
implementing Russia's economic 'reforms' required institutions resolute enough
to carry them out despite widespread opposition, and that undermined genuine
political accountability. So when you look at Russian human rights since 1991,
you see that the victims have changed--to the socially disadvantaged rather
than the politically suspect--but the realities of life for many vulnerable
Russians have in fact become worse."
None of this is to suggest that Iraq's economy didn't have serious inefficiencies
or wasn't in need of deep structural reform. But what economists call "inefficiencies"
are most commonly someone's job, or a farmer's subsidy -- people's livelihoods.
The reforms could have been phased in over a long period, or, better yet, started
after an Iraqi government was established.
Common sense should have dictated that, after the destruction of its infrastructure
and the dismantling of its (brutal but stable) government, Iraq didn't need
to become a laboratory for neoliberal economics. It needed jobs and basics like
electricity, water and sewage systems, and it needed them quickly.
That meant local firms, local workers and small, local projects -- which make
less juicy targets for saboteurs -- to rebuild the country's public infrastructure.
Development experts call that "local ownership," and consider it crucially
important for good outcomes.
But commonsense has always been in short supply in the Bush administration,
and they chose to make the country into a trough full of slop for the big multinationals.
Make no mistake about it, Iraq's economic transformation is an example of war
profiteering by other means, and the disastrous results are plain to see.
is an AlterNet staff writer.
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Corporate Takeover of Iraq's Economy: Looting By Another Name
economic invasion of Iraq
corporate plunder of Iraq