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PART 1 OF 3
THE BAGHDAD YEAR ZERO BY NAOMI KLEIN
www.harper.org/BaghdadYearZero.html
www.truthout.org
September 26, 2004
It was only after I had been in Baghdad for a month that I found what
I was looking for. I had traveled to Iraq a year after the war began,
at the height of what should have been a construction boom, but after
weeks of searching I had not seen a single piece of heavy machinery
apart from tanks and humvees. Then I saw it: a construction crane. It
was big and yellow and impressive, and when I caught a glimpse of it
around a corner in a busy shopping district I thought that I was
finally about to witness some of the reconstruction I had heard so
much about. But as I got closer I noticed that the crane was not
actually rebuilding anything - not one of the bombed-out government
buildings that still lay in rubble all over the city, nor one of the
many power lines that remained in twisted heaps even as the heat of
summer was starting to bear down. No, the crane was hoisting a giant
billboard to the top of a three-story building. SUNBULAH: HONEY 100%
NATURAL, made in Saudi Arabia.
Seeing the sign, I couldn't help but think about something Senator
John McCain had said back in October. Iraq, he said, is "a huge pot of
honey that's attracting a lot of flies." The flies McCain was
referring to were the Halliburtons and Bechtels, as well as the
venture capitalists who flocked to Iraq in the path cleared by Bradley
Fighting Vehicles and laser-guided bombs. The honey that drew them was
not just no-bid contracts and Iraq's famed oil wealth but the myriad
investment opportunities offered by a country that had just been
cracked wide open after decades of being sealed off, first by the
nationalist economic policies of Saddam Hussein, then by asphyxiating
United Nations sanctions.
Looking at the honey billboard, I was also reminded of the most common
explanation for what has gone wrong in Iraq, a complaint echoed by
everyone from John Kerry to Pat Buchanan: Iraq is mired in blood and
deprivation because George W. Bush didn't have "a postwar plan." The
only problem with this theory is that it isn't true. The Bush
Administration did have a plan for what it would do after the war; put
simply, it was to lay out as much honey as possible, then sit back and
wait for the flies.
The honey theory of Iraqi reconstruction stems from the most cherished
belief of the war's ideological architects: that greed is good. Not
good just for them and their friends but good for humanity, and
certainly good for Iraqis. Greed creates profit, which creates growth,
which creates jobs and products and services and everything else
anyone could possibly need or want. The role of good government, then,
is to create the optimal conditions for corporations to pursue their
bottomless greed, so that they in turn can meet the needs of the
society. The problem is that governments, even neoconservative
governments, rarely get the chance to prove their sacred theory right:
despite their enormous ideological advances, even George Bush's
Republicans are, in their own minds, perennially sabotaged by meddling
Democrats, intractable unions, and alarmist environmentalists.
Iraq was going to change all that. In one place on Earth, the theory
would finally be put into practice in its most perfect and
uncompromised form. A country of 25 million would not be rebuilt as it
was before the war; it would be erased, disappeared. In its place
would spring forth a gleaming showroom for laissez-faire economics, a
utopia such as the world had never seen. Every policy that liberates
multinational corporations to pursue their quest for profit would be
put into place: a shrunken state, a flexible workforce, open borders,
minimal taxes, no tariffs, no ownership restrictions. The people of
Iraq would, of course, have to endure some short-term pain: assets,
previously owned by the state, would have to be given up to create new
opportunities for growth and investment. Jobs would have to be lost
and, as foreign products flooded across the border, local businesses
and family farms would, unfortunately, be unable to compete. But to
the authors of this plan, these would be small prices to pay for the
economic boom that would surely explode once the proper conditions
were in place, a boom so powerful the country would practically
rebuild itself.
The fact that the boom never came and Iraq continues to tremble under
explosions of a very different sort should never be blamed on the
absence of a plan. Rather, the blame rests with the plan itself, and
the extraordinarily violent ideology upon which it is based.
Torturers believe that when electrical shocks are applied to various
parts of the body simultaneously subjects are rendered so confused
about where the pain is coming from that they become incapable of
resistance. A declassified CIA "Counterintelligence Interrogation"
manual from 1963 describes how a trauma inflicted on prisoners opens
up "an interval - which may be extremely brief - of suspended
animation, a kind of psychological shock or paralysis. . . . [A]t this
moment the source is far more open to suggestion, far likelier to
comply." A similar theory applies to economic shock therapy, or "shock
treatment," the ugly term used to describe the rapid implementation of
free-market reforms imposed on Chile in the wake of General Augusto
Pinochet's coup. The theory is that if painful economic "adjustments"
are brought in rapidly and in the aftermath of a seismic social
disruption like a war, a coup, or a government collapse, the
population will be so stunned, and so preoccupied with the daily
pressures of survival, that it too will go into suspended animation,
unable to resist. As Pinochet's finance minister, Admiral Lorenzo
Gotuzzo, declared, "The dog's tail must be cut off in one chop."
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.
L. Paul Bremer, who led the U.S. occupation of Iraq from May 2, 2003,
until he caught an early flight out of Baghdad on June 28, admits that
when he arrived, "Baghdad was on fire, literally, as I drove in from
the airport." But before the fires from the "shock and awe" military
onslaught were even extinguished, Bremer unleashed his shock therapy,
pushing through more wrenching changes in one sweltering summer than
the International Monetary Fund has managed to enact over three
decades in Latin America. Joseph Stiglitz, Nobel laureate and former
chief economist at the World Bank, describes Bremer's reforms as "an
even more radical form of shock therapy than pursued in the former
Soviet world."
The tone of Bremer's tenure was set with his first major act on the
job: he fired 500,000 state workers, most of them soldiers, but also
doctors, nurses, teachers, publishers, and printers. Next, he flung
open the country's borders to absolutely unrestricted imports: no
tariffs, no duties, no inspections, no taxes. Iraq, Bremer declared
two weeks after he arrived, was "open for business."
One month later, Bremer unveiled the centerpiece of his
reforms. Before the invasion, Iraq's non-oil-related economy had been
dominated by 200 state-owned companies, which produced everything from
cement to paper to washing machines. In June, Bremer flew to an
economic summit in Jordan and announced that these firms would be
privatized immediately. "Getting inefficient state enterprises into
private hands," he said, "is essential for Iraq's economic recovery."
It would be the largest state liquidation sale since the collapse of
the Soviet Union.
But Bremer's economic engineering had only just begun. In September,
to entice foreign investors to come to Iraq, he enacted a radical set
of laws unprecedented in their generosity to multinational
corporations. There was Order 37, which lowered Iraq's corporate tax
rate from roughly 40 percent to a flat 15 percent. There was Order 39,
which allowed foreign companies to own 100 percent of Iraqi assets
outside of the natural-resource sector. Even better, investors could
take 100 percent of the profits they made in Iraq out of the country;
they would not be required to reinvest and they would not be
taxed. Under Order 39, they could sign leases and contracts that would
last for forty years. Order 40 welcomed foreign banks to Iraq under
the same favorable terms. All that remained of Saddam Hussein's
economic policies was a law restricting trade unions and collective
bargaining.
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.
At first, the shock-therapy theory seemed to hold: Iraqis, reeling
from violence both military and economic, were far too busy staying
alive to mount a political response to Bremer's campaign. Worrying
about the privatization of the sewage system was an unimaginable
luxury with half the population lacking access to clean drinking
water; the debate over the flat tax would have to wait until the
lights were back on. Even in the international press, Bremer's new
laws, though radical, were easily upstaged by more dramatic news of
political chaos and rising crime.
Some people were paying attention, of course. That autumn was awash in
"rebuilding Iraq" trade shows, in Washington, London, Madrid, and
Amman. The Economist described Iraq under Bremer as "a capitalist
dream," and a flurry of new consulting firms were launched promising
to help companies get access to the Iraqi market, their boards of
directors stacked with well-connected Republicans. The most prominent
was New Bridge Strategies, started by Joe Allbaugh, former Bush-Cheney
campaign manager. "Getting the rights to distribute Procter & Gamble
products can be a gold mine," one of the company's partners
enthused. "One well-stocked 7-Eleven could knock out thirty Iraqi
stores; a Wal-Mart could take over the country."
Soon there were rumors that a McDonald's would be opening up in
downtown Baghdad, 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 would have branches all over the country,
Citigroup was preparing to offer substantial loans guaranteed against
future sales of Iraqi oil, and the bell was going to ring on a New
York-style stock exchange in Baghdad any day.
In only a few months, the postwar plan to turn Iraq into a laboratory
for the neocons had been realized. Leo Strauss may have provided the
intellectual framework for invading Iraq preemptively, but it was that
other University of Chicago professor, Milton Friedman, author of the
anti-government manifesto Capitalism and Freedom, who supplied the
manual for what to do once the country was safely in America's
hands. This represented an enormous victory for the most ideological
wing of the Bush Administration. But it was also something more: the
culmination of two interlinked power struggles, one among Iraqi exiles
advising the White House on its postwar strategy, the other within the
White House itself.
As the British historian Dilip Hiro has shown, in Secrets and Lies:
Operation ‘Iraqi Freedom' and After, the Iraqi exiles pushing for
the invasion were divided, broadly, into two camps. On one side were
"the pragmatists," who favored getting rid of Saddam and his immediate
entourage, securing access to oil, and slowly introducing free-market
reforms. Many of these exiles were part of the State Department's
Future of Iraq Project, which generated a thirteen-volume report on
how to restore basic services and transition to democracy after the
war. On the other side was the "Year Zero" camp, those who believed
that Iraq was so contaminated that it needed to be rubbed out and
remade from scratch. The prime advocate of the pragmatic approach was
Iyad Allawi, a former high-level Baathist who fell out with Saddam and
started working for the CIA. The prime advocate of the Year Zero
approach was Ahmad Chalabi, whose hatred of the Iraqi state for
expropriating his family's assets during the 1958 revolution ran so
deep he longed to see the entire country burned to the ground -
everything, that is, but the Oil Ministry, which would be the nucleus
of the new Iraq, the cluster of cells from which an entire nation
would grow. He called this process "de-Baathification."
A parallel battle between pragmatists and true believers was being
waged within the Bush Administration. The pragmatists were men like
Secretary of State Colin Powell and General Jay Garner, the first
U.S. envoy to postwar Iraq. General Garner's plan was straightforward
enough: fix the infrastructure, hold quick and dirty elections, leave
the shock therapy to the International Monetary Fund, and concentrate
on securing U.S. military bases on the model of the Philippines. "I
think we should look right now at Iraq as our coaling station in the
Middle East," he told the BBC. He also paraphrased T. E. Lawrence,
saying, "It's better for them to do it imperfectly than for us to do
it for them perfectly." On the other side was the usual cast of
neoconservatives: Vice President Dick Cheney, Secretary of Defense
Donald Rumsfeld (who lauded Bremer's "sweeping reforms" as "some of
the most enlightened and inviting tax and investment laws in the free
world"), Deputy Secretary of Defense Paul Wolfowitz, and, perhaps most
centrally, Undersecretary of Defense Douglas Feith. Whereas the State
Department had its Future of Iraq report, the neocons had USAID's
contract with Bearing Point to remake Iraq's economy: in 108 pages,
"privatization" was mentioned no fewer than fifty-one times. To the
true believers in the White House, General Garner's plans for postwar
Iraq seemed hopelessly unambitious. Why settle for a mere coaling
station when you can have a model free market? Why settle for the
Philippines when you can have a beacon unto the world?
The Iraqi Year Zeroists made natural allies for the White House
neoconservatives: Chalabi's seething hatred of the Baathist state fit
nicely with the neocons' hatred of the state in general, and the two
agendas effortlessly merged. Together, they came to imagine the
invasion of Iraq as a kind of Rapture: where the rest of the world saw
death, they saw birth - a country redeemed through violence, cleansed
by fire. Iraq wasn't being destroyed by cruise missiles, cluster
bombs, chaos, and looting; it was being born again. April 9, 2003, the
day Baghdad fell, was Day One of Year Zero.
While the war was being waged, it still wasn't clear whether the
pragmatists or the Year Zeroists would be handed control over occupied
Iraq. But the speed with which the nation was conquered dramatically
increased the neocons' political capital, since they had been
predicting a "cakewalk" all along. Eight days after George Bush landed
on that aircraft carrier under a banner that said MISSION
ACCOMPLISHED, the President publicly signed on to the neocons' vision
for Iraq to become a model corporate state that would open up the
entire region. On May 9, Bush proposed the "establishment of a
U.S.-Middle East free trade area within a decade"; three days later,
Bush sent Paul Bremer to Baghdad to replace Jay Garner, who had been
on the job for only three weeks. The message was unequivocal: the
pragmatists had lost; Iraq would belong to the believers.
A Reagan-era diplomat turned entrepreneur, Bremer had recently proven
his ability to transform rubble into gold by waiting exactly one month
after the September 11 attacks to launch Crisis Consulting Practice, a
security company selling "terrorism risk insurance" to
multinationals. Bremer had two lieutenants on the economic front:
Thomas Foley and Michael Fleischer, the heads of "private sector
development" for the Coalition Provisional Authority (CPA). Foley is a
Greenwich, Connecticut, multimillionaire, a longtime friend of the
Bush family and a Bush-Cheney campaign "pioneer" who has described
Iraq as a modern California "gold rush." Fleischer, a venture
capitalist, is the brother of former White House spokesman Ari
Fleischer. Neither man had any high-level diplomatic experience and
both use the term corporate "turnaround" specialist to describe what
they do. According to Foley, this uniquely qualified them to manage
Iraq's economy because it was "the mother of all turnarounds."
Many of the other CPA postings were equally ideological. The Green
Zone, the city within a city that houses the occupation headquarters
in Saddam's former palace, was filled with Young Republicans straight
out of the Heritage Foundation, all of them given responsibility they
could never have dreamed of receiving at home. Jay Hallen, a
twenty-four-year-old who had applied for a job at the White House, was
put in charge of launching Baghdad's new stock exchange. Scott Erwin,
a twenty-one-year-old former intern to Dick Cheney, reported in an
email home that "I am assisting Iraqis in the management of finances
and budgeting for the domestic security forces." The college senior's
favorite job before this one? "My time as an ice-cream truck driver."
In those early days, the Green Zone felt a bit like the Peace Corps,
for people who think the Peace Corps is a communist plot. It was a
chance to sleep on cots, wear army boots, and cry "incoming" - all
while being guarded around the clock by real soldiers.
The teams of KPMG accountants, investment bankers, think-tank lifers,
and Young Republicans that populate the Green Zone have much in common
with the IMF missions that rearrange the economies of developing
countries from the presidential suites of Sheraton hotels the world
over. Except for one rather significant difference: in Iraq they were
not negotiating with the government to accept their "structural
adjustments" in exchange for a loan; they were the government.
Some small steps were taken, however, to bring Iraq's U.S.-appointed
politicians inside. Yegor Gaidar, the mastermind of Russia's
mid-nineties privatization auction that gave away the country's assets
to the reigning oligarchs, was invited to share his wisdom at a
conference in Baghdad. Marek Belka, who as finance minister oversaw
the same process in Poland, was brought in as well. The Iraqis who
proved most gifted at mouthing the neocon lines were selected to act
as what USAID calls local "policy champions" - men like Ahmad al
Mukhtar, who told me of his countrymen, "They are lazy. The Iraqis by
nature, they are very dependent. . . . They will have to depend on
themselves, it is the only way to survive in the world today."
Although he has no economics background and his last job was reading
the English-language news on television, al Mukhtar was appointed
director of foreign relations in the Ministry of Trade and is leading
the charge for Iraq to join the World Trade Organization.
I had been following the economic front of the war for almost a year
before I decided to go to Iraq. I attended the "Rebuilding Iraq" trade
shows, studied Bremer's tax and investment laws, met with contractors
at their home offices in the United States, interviewed the government
officials in Washington who are making the policies. But as I prepared
to travel to Iraq in March to see this experiment in free-market
utopianism up close, it was becoming increasingly clear that all was
not going according to plan. Bremer had been working on the theory
that if you build a corporate utopia the corporations will come - but
where were they? American multinationals were happy to accept
U.S. taxpayer dollars to reconstruct the phone or electricity systems,
but they weren't sinking their own money into Iraq. There was, as yet,
no McDonald's or Wal-Mart in Baghdad, and even the sales of state
factories, announced so confidently nine months earlier, had not
materialized.
PART 2 OF 3
About the Author: Naomi Klein is the author of "No Logo" and
writer/producer of "The Take", a new documentary on Argentina's
occupied factories.
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