Piratyzacja Irakoriko

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Privatisation won't make you popular

Resistance has forced a military rethink - but not an economic one

Kamil Mahdi
Wednesday November 26, 2003
The Guardian

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.

· Kamil Mahdi is an Iraqi and lecturer in Middle East economics, University
of Exeter

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