Open markets & Iraq

Over at Rational Mainifesto, Steve makes the following case for neoliberalism in Iraq.

The institutions and ideals that the market espouses and requires are in dire need in Iraq, such as protections of individual rights and freedoms, a functioning legal system, a monetary system, and much more. Only economic growth and the spread of business, brought about by investment, could hope to create jobs for the roughly 40% of Iraqis who are currently unemployed in that country.

It is still true, however, that the investment climate is less than ideal at the moment, and Iraq may not find many investors in the non-resource sectors. Once the security situation is better, we should all hope that the missteps of the United States in that country do not foster a fear of all things Western, including investment capital.

Steve fails to address an important element of the invasion of Iraq, and that is, as Naomi Klein illustrates here, the fact that one of the major "reforms" to Iraqi society imposed by the US, was indeed to "shock" them into open markets, will of the people be damned. This tactic only added to anti-Western sentiments in Iraq, and makes Steve's hope that Iraq does not succumb to a "fear of all things Western, including investment capital" pretty much dead on arrival.

That, in essence, was the working thesis in Iraq, and in keeping with the belief that private companies are more suited than governments for virtually every task, the White House decided to privatize the task of privatizing Iraq's state-dominated economy. Two months before the war began, USAID began drafting a work order, to be handed out to a private company, to oversee Iraq's “transition to a sustainable market-driven economic system.” The document states that the winning company (which turned out to be the KPMG offshoot Bearing Point) will take “appropriate advantage of the unique opportunity for rapid progress in this area presented by the current configuration of political circumstances.” Which is precisely what happened.

After an exhausting set of examples of Bremer's economic reforms she adds:

If these policies sound familiar, it's because they are the same ones multinationals around the world lobby for from national governments and in international trade agreements. But while these reforms are only ever enacted in part, or in fits and starts, Bremer delivered them all, all at once. Overnight, Iraq went from being the most isolated country in the world to being, on paper, its widest-open market.

Steve does rightly point out how the mess the US has caused in Iraq, has ironically shattered their visions of Iraq as an investors paradise. From Klein's piece:

If there ever was a moment when Iraqis were too disoriented to resist shock therapy, that moment has definitely passed. Labor relations, like everything else in Iraq, has become a blood sport. The violence on the streets howls at the gates of the factories, threatening to engulf them. Workers fear job loss as a death sentence, and managers, in turn, fear their workers, a fact that makes privatization distinctly more complicated than the neocons foresaw