T
he
June 28 transfer of sovereignty from the Coalition Provisional Authority
(CPA) and the Iraqi Governing Council to the newly formed, interim
Iraqi government is political prestidigitation: it cedes no real
political or economic power to the Iraqis. It acquired virtual,
but not actual control of its economy. That, too, for the foreseeable
future, will remain under U.S. control.
While
the U.S. shadow government, buttressed by the presence of 140,000
U.S. troops, has been much discussed, the U.S. stranglehold on Iraq’s
economic reconstruction has received less attention.
To
date, the $18.6 billion economic reconstruction of Iraq has been
marred by its crass design, modeled on simplistic neoliberal precepts,
and its implementation, corrupted by cronyism, secretiveness, and
CPA-imposed economic reforms. These aspects of the reconstruction
not only undermine the effectiveness of the rebuilding, but they
evince that, like the war itself, the reconstruction is a ruse.
It primarily serves the private financial interests of a handful
of elite, U.S. corporations—and the government officials with
personal ties to those corporations—at the expense of the U.S.
taxpayer and the economic sovereignty, health, and security of Iraq.
Nearly
all of the rebuilding is being done by a handful of U.S. corporations
with close personal and business ties to the Bush administration—receiving
contracts from the Pentagon, the CPA, the Army Corps of Engineers,
and the U.S. Agency for International Development. In the words
of Peter Singer of the Brookings Institute, the reconstruction has
become the “biggest market for private military services—ever.”
Private military services include all nation-building activities,
from contracted security personnel to prison interrogators to engineers
to cooks.
From
the Administration’s perspective, the privatization of military
services and the reconstruction of Iraq promise cost savings through
a competitive bidding process. Vice President Cheney, after all,
was one of the chief architects of the privatization of military
services in the late 1980s—as secretary of defense in the first
Bush administration.
Based
on the most recent figures provided by the Brookings Institute Iraq
Index, Baghdad still suffers from daily power shortages, telephone
services are inadequate, and the rebuilding of schools and hospitals
has been slow, expensive, and not particularly successful. While
the salaries of teachers and police have surpassed what they earned
before the occupation, unemployment ranges from 45 to 70 percent.
While
the disappointing results of the reconstruction are no doubt due
in part to the volatile security situation, cronyism has undermined
U.S. credibility, systematically relegated Iraqis to subcontractors,
and inflated the costs of the reconstruction. A series of reports
by the Center for Corporate Policy and the Center for Public Integrity
and articles in
Newsweek
, the
New Yorker
, and the
Nation
have exposed the central nodes in the institutionalized
network of favoritism and influence peddling that run directly from
the deep, government-financed pockets of Vice President Cheney and
Undersecretary for Policy Douglas Feith to the overfed corporate
bank accounts of Halliburton and its subsidiary, Kellogg, Root and
Brown (KRB); Science Applications International Group (SAIC); and
Bechtel, among others.
Prior
to becoming vice president, Cheney, as is well known, headed Halliburton
from 1995 to 2000. Currently, he still receives more than $150,000
a year in deferred compensation (last year he earned $178,437) and
holds $18 million in stock options. Since the start of the reconstruction,
Halliburton has been awarded $17 billion in contracts to repair
and upgrade oil fields and power plants, supply oil and gasoline
to Iraq, and provide meals and laundry services to U.S. troops.
As a result, Halliburton stock has increased by 50 percent. According
to Stephen Pizzo, writing for the Center for Corporate Policy, the
company reported a net profit of $26 million in the second quarter
of 2003, in contrast to a $498 million loss in the same period in
2002. In a decision that will only enhance Halliburton’s influence
in post-Saddam Iraq, President Bush signed Executive Order 13303
in May 2003. EO 13303 grants sweeping legal immunity to U.S. corporations
that gain possession or control of Iraqi oil or oil products.
Through
its connection to Feith, SAIC has won more than $50 million in contracts.
Christopher “Ryan” Henry, Feith’s top deputy at the
Pentagon, worked as a senior vice president at SAIC until October
2002. In addition, retired Army General Wayne Downing, who commanded
the Special Forces in the first Gulf War, sits as a current SAIC
board member and formerly worked as an unpaid adviser to Ahmed Chalabi
and the Iraqi National Congress. Perhaps the biggest payoff for
SAIC comes from its financing of the Iraqi Reconstruction and Development
Council (IRDC). Formed as a predecessor to the Iraqi Governing Council
two months before the U.S. invasion, SAIC put every member of the
IRDC on its payroll. Today, IRDC members hold key positions at each
of Iraq’s two dozen ministries.
The
network of favoritism and influence peddling is extensive enough
to include long-standing political and military officials and individuals
embedded in the conservative corporate-military patronage complex.
Bechtel, the recipient of nearly $3 billion in contracts to repair
schools, airports, and the seaport of Umm Qasr, has used the connections
of board members George Schultz, the former Secretary of State,
and retired Army General Jack Sheehan to ensure its presence and
influence in the reconstruction process. In November, the CPA awarded
mobile telephone services contracts to friends of Ahmed Chalabi.
Jack Kemp has started a company called Free Market International,
an international company that trades in gas, petroleum, and other
resources. General Tommy Franks—the same general who commanded
the invasion of Iraq—will sit on the advisory board. L. Marc
Zell, former law partner of Douglas Feith, has formed a marketing
company, the Iraqi International Law Group, run by Salem Chalabi,
the nephew of Ahmed Chalabi. In another case, Thomas Foley, chair
of Bush’s Connecticut campaign finance committee in 2000, now
manages the privatization of Iraq’s state- owned businesses.
To
protect the profits of his business cronies, Bush persuaded the
Overseas Private Investment Corporation (OPIC), a U.S. government
agency, to insure U.S. businesses in Iraq. If in the near future
the Iraqi government expropriates any businesses, the U.S. Treasury—supported
by U.S. tax dollars—will have to compensate those businesses
for their losses.
Of
the 115 project descriptions released by the CPA, fewer than 25
mentioned hiring Iraqis or otherwise using Iraqi resources. Equally
important, it has made the reconstruction process more expensive
than it needs to be. According to Congressperson Henry Waxman (D-CA),
members of the Iraqi Governing Council claim that the costs to the
U.S. taxpayer of many projects could be reduced by 90 percent if
the projects were awarded to local Iraqi companies rather than to
large government contractors like Halliburton.
The
reconstruction has also been marred by the lack of transparency
and accountability. Since the vast majority of the recipients of
the contracts are private corporations, the provisions of the Freedom
of Information Act do not apply. Thus, the corporations control
what information, including the number of their employees killed
in Iraq, is made public.
For
the most part, the Pentagon does not know how many private military
employees or foreign subcontractors it has working for it. According
to Dan Guttman, a fellow at Johns Hopkins who specializes in the
study of military services, after years of cutting government jobs
in favor of hiring private firms, “contractors have become
so big and entrenched that it’s a fiction that the government
maintains any control.”
To
prime Iraq’s transformation into a future free-trade, oil abundant
enclave of the U.S. economy, the CPA moved quickly to implement
the following changes to the Iraqi economy: all tariffs have been
suspended; a 15 percent cap has been placed on all future taxes;
and the CPA has tried to sell 150 of Iraq’s 200 state-owned
enterprises, ranging from sulfur mining and pharmaceutical companies
to the Iraqi national airline. Most significantly, the CPA passed
Order 39, which allows foreign investors to own Iraqi companies
with no requirements for reinvesting profits into the country.
Though
critics maintain that such actions potentially violate international
law governing military occupation—particularly Article 43 of
the Hague Regulations of 1907 and the fourth Geneva Convention of
1949—the Bush administration has effectively side-stepped any
attempt to reform the reconstruction process. So far, efforts to
prevent the continuation of the corporate contract bonanza and profiteering,
such as the proposed Clean Contracting in Iraq Act of 2003 (HR 3275)
and the War Profiteering Act (HR 3673), have had little impact.
Essentially,
the reconstruction of Iraq is, in the words of Naomi Klein, “a
vast protectionist racket, a neocon New Deal that transfers limitless
public funds—in contracts, loans, and insurance—to private
firms, and even gets rid of the foreign competition to boot, under
the guise of ‘national security’.” This neocon New
Deal, marketed as a reconstruction, has enhanced the private, financial
interests of the vice president and his corporate comrades in contracts.
It has spurned the public interest of the Iraqi and U.S. people
and, unless reformed, it will not promote economic health and security
in Iraq.
Patrick
Cannon is an assistant professor of Government at California State
University, Sacramento where he teaches international politics and
international political economy.
