Bush's Iraq: A Bloodbath Economy

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" about it.

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 social tensions."

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."