Privatisation won't make you popular
Resistance has forced a military rethink - but not an economic one
The war against Iraq began with simultaneous marches by the military and by Bechtel and Halliburton - the corporations coming as planners, consultants, contractors and public accountants all in one. From the outset, the US assumed that Iraq's public institutions were, at best, superfluous. There was little interest in rehabilitation and reform, let alone empowerment. Instead, key Iraqi establishments were subjected to the command of private US enterprises under cover of a war emergency.
The US corporations were granted protection by the military, while state institutions and public property were left to face the onslaught of a destructive mob. Not for the first time in the history of the Middle East, imperial interference both unleashed and benefited from chaos.
The destruction of Iraq's public facilities and infrastructure, together with the induced paralysis of its public institutions, has been the Coalition Provisional Authority's (CPA) path to privatisation in Iraq. Although remaining controversial, privatisation in Britain usually follows a period of reform, commercialisation and institutional strengthening. Moreover, the UK's financial markets and private sector can sustain a gradual introduction of public stock. None of these conditions applies to Iraq, where privatisation is being imposed by bombing, looting, freezing of assets, random sacking of staff and exposure to unfair competition.
There has been no assessment of the social or economic impact of privatisation, and no alternatives are being considered. Privatisation now appears to be the only policy, as if by default. Severe financial constraints imposed in abnormal circumstances, together with price and foreign exchange measures, will sink the public sector and prepare it for a bargain sale.
Unlike the former Soviet states, Iraq already had a private sector and a strong business culture. A market-oriented reform programme would not find many enemies if it were to support the private sector while rehabilitating the public sector, and if it were to leave the issue of privatisation until the restoration of normality and constitutional government. By the same token, nothing will damage private-sector development and foreign investment more than associating them with a military occupation, cronyism and mass misery.
Paul Bremer's ideological drive has shocked Iraqis. I was there when the law permitting full foreign business ownership was announced; Iraqis were united in opposition to it. The Iraqi Governing Council, sidelined by the CPA, was severely embarrassed, while the business sector was up in arms over the charade of "consultation". For most people, the law confirmed Iraq's colonial status.
The allocation of large funds from the US and other countries for reconstruction will not alter the reality that Iraqi institutions, businesses and workers will not be able to direct, develop or benefit from the funds. On the contrary, the money can be seen as a force to undermine the productive and creative capacity of Iraqis, and to clear the way for domination by foreign firms.
Iraqis are keenly aware that those US funds will not be subject to any overall national economic policy. While the so-called "reconstruction" aid will have a few local benefits, its main effect will be to draw skills and resources away from Iraqi institutions and to raise domestic production costs. Iraq is having no say in who spends what, how much and where in its own economy. This could result in a lot of damage and few benefits.
The dangers of the CPA's policies were also highlighted by Abbas Alnasrawi, of the University of Vermont, who argues that foreign portfolio investment under the prevailing circumstances would lead to capital flight and that the ultimate prize of the neo-conservatives, oil privatisation, would be detrimental to Iraq's interests.
Oil as a national resource, and a development strategy stemming from that, are at the centre of Iraqi popular aspirations. If the CPA were to break the link between oil and national objectives and denationalise the oil industry, it would unite the Iraqi people in opposition.
Bremer probably knows this, which may be the reason why the US has not rushed into an oil sell-off. However, the neo-conservative project remains on automatic pilot even as resistance is forcing a rethink of military strategy.
Now that the oil-for-food programme has been handed over to US control, the next CPA objective may be the gradual destruction of the ration system that has kept millions of Iraqis from famine for the past 13 years. Again, there is no economic justification for such a move, but the ration system offends free-market sensibilities.
The search for a way out of the US and British military predicament has led to a number of political and security-policy reversals. None of these will bring about stability as long as extremist economic policies continue to be forced upon Iraq by what is widely perceived to be a colonial venture.
This article originally appeared in The Guardian. Copyright 2003 The Guardian