by Naomi Klein
Although it was Bremer who implemented these plans, the priorities were coming straight from the top. Testifying before a Senate committee, Rumsfeld described Bremer’s “sweeping reforms” as creating “some of the most enlightened—and inviting—tax and investment laws in the free world.” At first, investors seemed to appreciate the effort. Within a few months, there was talk of a McDonald’s opening in downtown Baghdad—the ultimate symbol of Iraq joining the global economy—funding was almost in place for a Starwood luxury hotel, and General Motors was planning to build an auto plant. On the financial side, HSBC, the international bank headquartered in London, was awarded a contract to open branches all over Iraq, while Citigroup announced plans to offer substantial loans guaranteed against future sales of Iraqi oil. The oil majors—Shell, BP, ExxonMobil, Chevron and Russia’s Lukoil—made tentative approaches, signing agreements to train Iraqi civil servants in the latest extraction technologies and management models, confident that their time would soon arrive.13
Bremer’s laws, designed to create the conditions for an investor frenzy, were not exactly original—they were merely an accelerated version of what had been implemented in previous shock therapy experiments. But Bush’s disaster capitalism cabinet was not content to wait for the laws to take effect. Where the Iraq experiment entered bold new terrain was that it transformed the invasion, occupation and reconstruction into an exciting, fully privatized new market. This market was created, just as the homeland security complex was, with a huge pot of public money. For reconstruction alone, the boom was kicked off with $38 billion from the U.S. Congress, $15 billion from other countries and $20 billion of Iraq’s own oil money.14
When the initial billions were announced, there were, inevitably, laudatory comparisons with the Marshall Plan. Bush invited the parallels, declaring the reconstruction “the greatest financial commitment of its kind since the Marshall Plan,” and stating in a televised address in the early months of the occupation that “America has done this kind of work before. Following World War II, we lifted up the defeated nations of Japan and Germany, and stood with them as they built representative governments.”15
What happened to the billions earmarked for Iraq’s reconstruction, however, bore no relationship to the history Bush invoked. Under the original Marshall Plan, American firms benefited by sending equipment and food to Europe, but the explicit goal was to help war-torn economies recover as self-sufficient markets, creating local jobs and developing tax bases capable of funding domestic social services—the results of which are in evidence in Germany’s and Japan’s mixed economies today.
The Bush cabinet had in fact launched an anti-Marshall Plan, its mirror opposite in nearly every conceivable way. It was a plan guaranteed from the start to further undermine Iraq’s badly weakened industrial sector and to send Iraqi unemployment soaring. Where the post-Second World War plan had barred foreign firms from investing, to avoid the perception that they were taking advantage of countries in a weakened state, this scheme did everything possible to entice corporate America (with a few bones tossed to corporations based in countries that joined the “Coalition of the Willing”). It was this theft of Iraq’s reconstruction funds from Iraqis, justified by unquestioned, racist assumptions about U.S. superiority and Iraqi inferiority—and not merely the generic demons of “corruption” and “inefficiency”—that doomed the project from the start.
None of the money went to Iraqi factories so they could reopen and form the foundation of a sustainable economy, create local jobs and fund a social safety net. Iraqis had virtually no role in this plan at all. Instead, the U.S. federal government contracts, most of them issued by USAID, commissioned a kind of country-in-a-box, designed in Virginia and Texas, to be assembled in Iraq. It was, as the occupation authorities repeatedly said, “a gift from the people of the United States to the people of Iraq”—all Iraqis needed to do was unwrap it.16 Even Iraqis’ low-wage labor wasn’t required for the assembly process because the major U.S. contractors such as Halliburton, Bechtel and the California-based engineering giant Parsons preferred to import foreign workers whom they felt confident they could control. Once again Iraqis were cast in the role of awed spectators—first awed by U.S. military technology and then by its engineering and management prowess.
As in the homeland security industry, the role for government employees—even U.S. government employees—was cut to the bone. Bremer’s staff was a mere fifteen hundred people to govern a sprawling country of 25 million. By contrast, Halliburton had fifty thousand workers in the region, many of them lifelong public servants lured into the private sector by offers of better salaries.17
The weak public presence and the robust corporate one reflected the fact that the Bush cabinet was using Iraq’s reconstruction (over which it had complete control, in contrast to the federal bureaucracy back home) to implement its vision of a fully outsourced, hollow government. In Iraq, there was not a single governmental function that was considered so “core” that it could not be handed to a contractor, preferably one who provided the Republican Party with financial contributions or Christian foot soldiers during election campaigns. The usual Bush motto governed all aspects of the foreign forces’ involvement in Iraq: if a task could be performed by a private entity, it must be.
So while Bremer may have signed the laws, it was private accountants who designed and managed the economy. (BearingPoint, an offshoot of the major international accounting and consulting firm KPMG, was paid $240 million to build a “market-driven system” in Iraq—the 107-page contract mentions the word “privatization” fifty-one times; much of the original contract was written by BearingPoint.) Think tanks were paid to think (Britain’s Adam Smith Institute was contracted to help privatize Iraq’s companies). Private security firms and defense contractors trained Iraq’s new army and police (DynCorp, Vinnell and the Carlyle Group’s USIS, among others). And education companies drafted the post-Saddam curriculum and printed the new textbooks. (Creative Associates, a management-and-education-consulting firm based in Washington, D.C., was given contracts worth more than $100 million for these tasks.)*18
Meanwhile, the model pioneered by Cheney for Halliburton in the Balkans, where bases were transformed into mini Halliburton towns, was adopted on a vastly larger scale. In addition to Halliburton’s construction and management of military bases across the country, the Green Zone was, from the start, a Halliburton-run city-state, with the company in charge of everything from road maintenance to pest control to movie and disco nights.
The CPA was far too understaffed to monitor all the contractors, and besides, the Bush administration saw oversight as a noncore function to be outsourced. The Colorado-based engineering and construction company CH2M Hill was paid $28.5 million in a joint venture with Parsons to oversee four other major contractors. Even the job of building “local democracy” was privatized, given to the North Carolina–based Research Triangle Institute in a contract worth up to $466 million, though it’s not at all clear what qualified RTI to bring democracy to a Muslim country. The leadership of the company’s Iraq operation was dominated by high-level Mormons—people like James Mayfield, who told his mission back in Houston that he thought Muslims could be persuaded to embrace the Book of Mormon as compatible with the teachings of the prophet Muhammad. In an e-mail home, he imagined that Iraqis would erect a statue to him as their “founder of democracy.”*19
As these foreign corporations descended on the country, the machinery in Iraq’s two hundred state firms stood still, frozen by chronic power blackouts. Iraq once had one of the most sophisticated industrial economies in the region; now its largest firms couldn’t even get a subsubsubcontract in their own country’s reconstruction. To participate in the gold rush at all, Iraqi firms would have needed emergency generators and some basic repairs—which should not have been insurmountable, given Halliburton’s speed in building military bases that look like Midwestern suburbs.
Mohamad Tofiq at the Industry Ministry
told me he had made repeated requests for generators, pointing out that Iraq’s seventeen state-owned cement factories were perfectly positioned both to supply the reconstruction effort with building materials and to put tens of thousands of Iraqis to work. The factories received nothing—no contracts, no generators, no help. American companies preferred to import their cement, like their workforce, from abroad, at up to ten times the price. One of Bremer’s economic edicts specifically prohibited Iraq’s central bank from offering financing to state-owned enterprises (a fact not reported until years later).20 The reason for this effective boycott of Iraqi industry was not practical, Tofiq told me, but ideological. Among those making the decisions, he said, “no one believes in the public sector.”
While private Iraqi firms closed in droves, unable to compete with imports streaming across the open borders, Bremer’s staff had few comforting words to offer. Addressing a gathering of Iraqi businessmen, Michael Fleischer, one of Bremer’s deputies, confirmed that many of their businesses would indeed fail in the face of foreign competition, but that was the beauty of the free market. “Will you be overwhelmed by foreign businesses?” he asked rhetorically. “The answer depends on you. Only the best of you will survive.” He sounded like Yegor Gaidar, who reportedly said of small Russian businesses going under as a result of shock therapy, “So what? One who is dying deserves to die.”21
As is now well known, nothing about Bush’s anti–Marshall Plan went as intended. Iraqis did not see the corporate reconstruction as “a gift”; most saw it as a modernized form of pillage, and U.S. corporations didn’t wow anyone with their speed and efficiency; instead they have managed to turn the word “reconstruction” into, as one Iraqi engineer put it, “a joke that nobody laughs at.”22 Each miscalculation provoked escalating levels of resistance, answered with counterrepression by foreign troops, ultimately sending the country spiraling into an inferno of violence. As of July 2006, according to the most credible study, the war in Iraq had taken the lives of 655,000 Iraqis who would not have died had there been no invasion or occupation.23
In November 2006, Ralph Peters, a retired U.S. Army officer, wrote in USA Today that “we did give the Iraqis a unique chance to build a rule-of law democracy,” but Iraqis “preferred to indulge in old hatreds, confessional violence, ethnic bigotry and a culture of corruption. It appears that the cynics were right: Arab societies can’t support democracy as we know it. And people get the government they deserve…. The violence staining Baghdad’s streets with gore isn’t only a symptom of the Iraqi government’s incompetence, but of the comprehensive inability of the Arab world to progress in any sphere of organized human endeavor. We are witnessing the collapse of a civilization.”24 Though Peters was particularly blunt, many Western observers have arrived at the same verdict: blame the Iraqis.
But the sectarian divisions and religious extremism engulfing Iraq cannot be neatly detached from the invasion and the occupation. Although these forces were certainly present in advance of the war, they were far weaker before Iraq was turned into a U.S. shock lab. It’s worth remembering that in February 2004, eleven months after the invasion, an Oxford Research International poll found that a majority of Iraqis wanted a secular government: only 21 percent of respondents said their favored political system was “an Islamic state,” and only 14 percent ranked “religious politicians” as their preferred political actors. Six months later, with the occupation in a new and more violent phase, another poll found that 70 percent of Iraqis wanted Islamic law as the basis of the state.25 As for sectarian violence, it was virtually unknown for the first year of the occupation. The first major incident, the bombing of Shia mosques during the holiday of Ashoura, was in March 2004, a full year after the invasion. There can be no doubt that the occupation deepened and ignited these hatreds.
In fact, all the forces tearing Iraq apart today—rampant corruption, ferocious sectarianism, the surge in religious fundamentalism and the tyranny of death squads—escalated in lockstep with the implementation of Bush’s anti—Marshall Plan. After the toppling of Saddam Hussein, Iraq badly needed and deserved to be repaired and reunited, a process that could only have been led by Iraqis. Instead, at precisely that precarious moment, the country was transformed into a cutthroat capitalist laboratory—a system that pitted individuals and communities against each other, that eliminated hundreds of thousands of jobs and livelihoods and that replaced the quest for justice with rampant impunity for foreign occupiers.
Iraq’s current state of disaster cannot be reduced either to the incompetence and cronyism of the Bush White House or to the sectarianism or tribalism of Iraqis. It is a very capitalist disaster, a nightmare of unfettered greed unleashed in the wake of war. The “fiasco” of Iraq is one created by a careful and faithful application of unrestrained Chicago School ideology. What follows is an initial (and not exhaustive) account of the links between the “civil war” and the corporatist project at the heart of the invasion. It is a process of ideology boomeranging on the people who unleashed it—ideological blowback.
The most widely recognized case of blowback was provoked by Bremer’s first major act, the firing of approximately 500,000 state workers, most of them soldiers, but also doctors, nurses, teachers and engineers. “De-Baathification,” as it was called, was supposedly driven by a desire to clean out the government of Saddam loyalists. No doubt that was part of the motivation, but it does not explain the scale of the layoffs or how deeply they savaged the public sector as a whole, punishing workers who were not high-level officials.
The purge resembled similar attacks on the public sector that have accompanied shock therapy programs ever since Milton Friedman advised Pinochet to slash government spending by 25 percent. Bremer made no secret of his antipathy for Iraq’s “Stalinist economy,” as he described the country’s state-run companies and large ministries, and he had no appreciation for the specialized skills and the years of accumulated knowledge possessed by Iraq’s engineers, doctors, electricians and road builders.26 Bremer knew people would be upset about losing their jobs, but as his memoir makes clear, he did not consider how the sudden amputation of Iraq’s professional class would make it impossible for the Iraqi state to function and therefore hinder his own work. That blindness had little to do with anti-Saddamism and everything to do with free-market fervor. Only someone deeply inclined to see government purely as a burden and public sector workers as dead wood could have made the choices Bremer did.
That ideological blindness had three concrete effects: it damaged the possibility of reconstruction by removing skilled people from their posts, it weakened the voice of secular Iraqis, and it fed the resistance with angry people. Dozens of senior U.S. military and intelligence officers have acknowledged that many of the 400,000 soldiers Bremer laid off went straight to the emerging resistance. As Marine Colonel Thomas Hammes put it, “Now you have a couple hundred thousand people who are armed—because they took their weapons home with them—who know how to use the weapons, who have no future, who have a reason to be angry at you.”27
At the same time, Bremer’s classic Chicago School decision to fling open the borders to unrestricted imports while allowing foreign companies to own 100 percent of Iraqi assets infuriated Iraq’s business class. Many responded by funding the resistance with what little revenue they had left. After covering the first year of the Iraqi resistance in the Sunni Triangle, the investigative reporter Patrick Graham wrote in Harper’s that Iraqi businessmen “are outraged by the new foreign-investment laws, which allow foreign companies to buy up factories for very little. Their revenues have collapsed, because the country has been flooded with foreign goods…. The violence, these businessmen realize, is their only competitive edge. It is simple business logic: the more problems there are in Iraq, the harder it is for outsiders to get involved.”28
More ideological blowback came from the White House’s determination to prevent future Iraqi governments from changing Bremer’s economic laws—the same drive to �
��lock in” changes made in the wake of a crisis has been in effect since the first IMF-issued “structural adjustment” program. From Washington’s perspective, there was no point in having the most enlightened investment rules in the world if a sovereign Iraqi government could take power in a few months and rewrite them. Because most of Bremer’s decrees were in a legal gray zone, the Bush administration solution was to draft a new constitution for Iraq, a goal it pursued with bloody-minded determination—first with an interim constitution that locked in Bremer’s laws, and then with a permanent constitution that attempted (but failed) to do the same.
Many legal experts were baffled by Washington’s constitutional obsession. On the surface, there was no pressing need to write a new document from scratch—Iraq’s 1970 constitution, ignored by Saddam, was perfectly serviceable, and the country had far more urgent needs. More important, the process of writing a constitution is among the most wrenching any nation can go through, even a nation at peace. It brings every tension, rivalry, prejudice and latent grievance to the surface. To foist that process—twice—on a country as divided and shattered as Iraq after Saddam greatly exacerbated the possibility of civil strife. The social cleavages cracked open by the negotiations have in no way healed, and may yet result in the partition of the country.
Like the lifting of all trade restrictions, Bremer’s plan to privatize Iraq’s two hundred state companies was regarded by many Iraqis as yet another U.S. act of war. Workers learned that in order to make the companies attractive to foreign investors, as many as two-thirds of them would have to lose their jobs. At one of Iraq’s large state firms—a compound of seven factories that produced cooking oil, soap, dishwashing liquid and other basics—I heard a story that brought into sharp relief how many new enemies had been created by the privatization announcement.
