A tale of two economies: Iraq

That state of the Iraqi economy can be described on one word: catastrophe. The combination of the draining war with Iran, Gulf War I, a decade of crippling sanctions, and Gulf War II combined to bring down the economy to a poor state.

It has remained in that state - in fact, it has worsened due to the policies of the United States-dominated "coalition" that invaded and occupied (occupies) Iraq - while Iraqis sit idle and hungry and angry.

Iraq is suffering an acute economic crisis marked by widespread poverty, catastrophic levels of unemployment and deteriorating work conditions for those fortunate enough to have jobs. Yet according to reports by international labor and human rights groups, a series of policies enacted by US administrators and large Western contractors, who promised to bring economic recovery, have only worsened the situation.

Despite official rhetoric about Iraqi "sovereignty," the reports also suggest that the country's interim government lacks the authority and the money to enact the type of sweeping jobs programs and labor reforms needed to lift the country out of economic peril and ensure basic workers' rights,

says the New Standard News for July 9.

A major source for the article is a study done by the Education for Peace in Iraq Center (EPIC), which reported that the unemployment rate in Iraq is between 30% and 50%. By comparison, unemployment in the US in the worst of the depression of the 1930s hit 25%. What's more, the study says,

[t]he toppling of Saddam Hussein's regime has not improved economic conditions for Iraq's working families. Under U.S. occupation, the Iraqi formal economy shrank again by one-third in 2003.

A significant part of the reason for this continuing collapse is that by policy the major reconstruction contracts go to Western, indeed pro-US, firms,

granting contracts of only $50,000 or less to private sector Iraqi firms, effectively denying them participation in major reconstruction efforts.

By contrast, US-based Bechtel Group, Inc. was awarded contracts valued at $2.8 billion to rebuild Iraqi electrical plants, water and sewage facilities, airports, hospitals, schools and government buildings, according to the Center for Public Integrity, a non-profit watchdog group.

And it's not only who gets the contracts, but what they do with them.

Although they have been the beneficiaries of reconstruction contracts, many US-based contractors have been reluctant to hire Iraqi workers. Before dissolving on June 28, the Coalition Provisional Authority (CPA) reported that only about 20,000 Iraqis, out of a potential workforce of 7 million, were working on newly funded reconstruction projects. In March, CPA administrator Bremer had promised that at least 50,000 Iraqis would be working on such projects by the end of June.

Instead of hiring locals, many contractors have opted to hire American engineers and managers for high-ranking positions, while importing tens of thousands of unemployed or low-wage workers, many of them from India, Pakistan, and the Philippines, to perform hard labor and menial tasks, according to the Washington Post.

So the US controls the money, which is given to pro-US businesses, which give the work to imported workers - while Iraqis sit idle and hungry and angry. Again, this is not the result of errors but of deliberate policy intending to reshape the Iraqi economy in a properly globalized, corporatized, submissive way.

The Coalition authority also refused to award contracts to any state-owned companies in Iraq, which in many cases are the only firms qualified to do local reconstruction work, according to EPIC's study. ...

Refusal to work with Iraq's state-run companies was part of a privatization strategy - economic "shock therapy" as the EPIC report calls it - imposed by the top US administrator, Paul Bremer, who last year authorized the selling of several state-owned industries to private interests and established a fifteen percent flat tax on corporate and personal incomes.

But just as it did in Russia, such "shock therapy" benefitted a few while making things worse for the many. It was a crummy idea then, it's a crummy idea now - crummy both in the sense of indecent and of inefficient.

Sources inside Iraq echo those sentiments. From Al-Adala, the daily newspaper of the Supreme Council of the Islamic Revolution in Iraq via the Iraqi Press Monitor for June 29:

An economics expert in the Ministry of Planning warned that the result of the study made to check the negative and positive sides of privatization and free market proved the failure is going to be no less than 61% once it starts in two years. He said the closure of 192 government organisations under privatisation will increase the number of unemployed people. He added that the shortest period needed to start the project is five years from now in order to find the needed conditions for success.

The difficulties of translation make it unclear to just what "failure" the 61% refers: Perhaps it means that he estimates that 61% of newly-privatized ventures will fail because it will take five years before the groundwork can be laid for them to be successful. I admit I'm not sure. But what it clear is the conviction that the program of privatization will make things worse, not better.

And this is not likely to change anytime soon. As Haaretz noted on June 29,

[a]t face value, this is the official end of the occupation of Iraq. But in reality American rule of Iraq - both military and economic - will continue. The United States will maintain control of the foundation for Iraq's development, into which the contributions and funds remaining in the UN foundation that managed the oil for food program during Saddam Hussein's regime are funneled.

There is also little way for Iraqi workers to challenge the arrangement. In 1987 Saddam Hussein introduced a sweeping change in labor laws which effectively undermined the right of public sector workers - which of course was most of them in a highly-nationalized economy - to strike or form unions. Instead of repealing this law after the invasion, Coalition authorities vigorously enforced it, blocking attempts to form unions or engage in labor action.

But labor groups continue to struggle and took heart from the fact that

[i]n March the Governing Council, with Coalition approval, passed the Transitional Administrative Law (TAL), or interim constitution, which guaranteed workers "the right to form and join unions and political parties freely" and the right "to demonstrate and strike peaceably." It also outlawed the slave trade, forced labor, and involuntary servitude. ...

However, the status of the law is unclear now that the governing council has been dissolved and partial sovereignty transferred from US administrators to Iraq’s new interim government. The UN Security Council resolution setting conditions for the transfer, and laying out a timetable for general elections in Iraq, failed to endorse, or even mention, the interim constitution.

So things are still the same - while Iraqis sit idle and hungry and angry.