September 24, 2004
Harper's Magazine

Pillaging Iraq in Pursuit of a Neocon Utopia

by Naomi Klein

. . . 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. . . .

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. . . .

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. . . .

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. . . .

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. . . .

International law prohibits occupiers from selling state assets themselves, but it doesn't say anything about the puppet governments they appoint. Originally, Bremer had pledged to hand over power to a directly elected Iraqi government, but in early November he went to Washington for a private meeting with President Bush and came back with a Plan B. On June 30 the occupation would officially end-but not really. It would be replaced by an appointed government, chosen by Washington. This government would not be bound by the international laws preventing occupiers from selling off state assets, but it would be bound by an "interim constitution," a document that would protect Bremer's investment and privatization laws. . . .

Immediately after the nominal end of the war, Congress appropriated $2.5 billion for the reconstruction of Iraq, followed by an additional $18.4 billion in October. Yet as of July 2004, Iraq's state-owned factories had been pointedly excluded from the reconstruction contracts. Instead, the billions have all gone to Western companies, with most of the materials for the reconstruction imported at great expense from abroad.

With unemployment as high as 67 percent, the imported products and foreign workers flooding across the borders have become a source of tremendous resentment in Iraq and yet another open tap fueling the insurgency. And Iraqis don't have to look far for reminders of this injustice; it's on display in the most ubiquitous symbol of the occupation: the blast wall. The ten-foot-high slabs of reinforced concrete are everywhere in Iraq, separating the protected-the people in upscale hotels, luxury homes, military bases, and, of course, the Green Zone-from the unprotected and exposed.

Iraq was to the neocons what Afghanistan was to the Taliban: the one place on Earth where they could force everyone to live by the most literal, unyielding interpretation of their sacred texts. . . .

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Naomi Klein, "What is Being Planned in Iraq is Not Reconstruction but Robbery," Guardian, April 14, 2003

Enver Masud, "AN OPEN LETTER TO THE PEOPLE OF IRAQ," The Wisdom Fund, April 23, 2003

David Teather, "American to Oversee Iraqi Oil Industry," Guardian, April 26, 2003

Enver Masud, "New Iraq Constitution a Pretext for Exploitation," The Wisdom Fund, September 16, 2003

Enver Masud, "Iraq: $64 Lunch, $125,000 Truck Driver," The Wisdom Fund , January 29, 2004

Evelyn Leopold, "UN Council Unanimously Adopts Iraq Resolution," Reuters, June 8, 2004

[The main proposal would transfer ownership of $57bn in unpaid Iraqi debts. The debts would be assigned to a foundation created and controlled by a consortium in which the key players are the Carlyle Group, the Albright Group (headed by another former secretary of state, Madeleine Albright) and several other well-connected firms.

Under the deal, Kuwait would also give the consortium $2bn to invest in a private equity fund devised by the consortium, with half of that going to Carlyle.

The consortium would then use its personal connections to persuade world leaders that Iraq must "maximize" its reparation payments to Kuwait. The more the consortium gets Iraq to pay over a period, the more Kuwait collects, with the consortium taking a 5% commission or more.

The goal of maximizing Iraq's debt payments directly contradicts the stated US foreign policy aim of drastically reducing Iraq's debt burden.--Naomi Klein, "Bush special envoy embroiled in controversy over Iraq debt: Consortium plans to cash in as Baker asks countries to end £200bn burden," October 13, 2004]

[The Economy Plan goes boldly where no invasion plan has gone before: the complete rewrite, it says, of a conquered state's "policies, laws and regulations." Here's what you'll find in the Plan: A highly detailed program, begun years before the tanks rolled, for imposing a new regime of low taxes on big business, and quick sales of Iraq's banks and bridges - in fact, "ALL state enterprises" - to foreign operators. There's more in the Plan, part of which became public when the State Department hired consulting firm to track the progress of the Iraq makeover. Example: This is likely history's first military assault plan appended to a program for toughening the target nation's copyright laws.

And when it comes to oil, the Plan leaves nothing to chance - or to the Iraqis. Beginning on page 73, the secret drafters emphasized that Iraq would have to "privatize" (i.e., sell off) its "oil and supporting industries." The Plan makes it clear that - even if we didn't go in for the oil - we certainly won't leave without it. . . .

The oil section of the Plan, obtained after a year of wrestling with the administration over the Freedom of Information Act, calls for Iraqis to sell off to "IOCs" (international oil companies) the nation's "downstream" assets - that is, the refineries, pipelines and ports that, unless under armed occupation, a Mideast nation would be loathe to give up. . . .

Garner's 90-days-to-democracy pledge ran into a hard object: The Economy Plan's 'Annex D.' Disposing of a nation's oil industry - let alone redrafting trade and tax laws - can't be done in a weekend, nor in 90 days. Annex D lays out a strict 360-day schedule for the free-market makeover of Iraq. And there's the rub: It was simply inconceivable that any popularly elected government would let America write its laws and auction off the nation's crown jewel, its petroleum industry.

Elections would have to wait. As lobbyist Norquist explained when I asked him about the Annex D timetable, "The right to trade, property rights, these things are not to be determined by some democratic election." Our troops would simply have to stay in Mesopotamia a bit longer.

New World Orders 12, 37, 81 and 83

Gen. Garner resisted - which was one of the reasons for his swift sacking by Secretary of State Donald Rumsfeld on the very night he arrived in Baghdad last April. Rummy had a perfect replacement ready to wing it in Iraq to replace the recalcitrant general. Paul Bremer may not have had Garner's experience on the ground in Iraq, but no one would question the qualifications of a man who served as managing director of Kissinger Associates.--Greg Palast, "Adventure Capitalism," TomPaine.com, October 26, 2004]

[The New York Times has not printed a word about Baker's conflict, despite the fact that when Baker was first appointed envoy, it published an editorial calling on him to resign from Carlyle in order to "perform honorably in his new public job." The Kerry campaign has been equally silent, apparently for fear that any criticism would boomerang onto the Democrats because of Albright. . . .

Iraq is being plunged deeper into debt, with $836 million in new loans and grants now flowing from the IMF and the World Bank.--Naomi Klein, "Carlyle Covers Up," The Nation, October 29, 2004]

Craig S. Smith, "Major Creditors in Accord to Waive 80% of Iraq Debt," New York Times, November 22, 2004

Rajiv Chandrasekaran, "Ties to GOP Trumped Know-How Among Staff Sent to Rebuild Iraq," Washington Post, September 17, 2006

MOVIE: Robert Greenwald, "Iraq for Sale," iraqforsale.org, September 26, 2006

[An unpublished 513-page federal history of the American-led reconstruction of Iraq depicts an effort crippled before the invasion by Pentagon planners who were hostile to the idea of rebuilding a foreign country, and then molded into a $100 billion failure by bureaucratic turf wars, spiraling violence and ignorance of the basic elements of Iraqi society and infrastructure.--James Glanz and T. Christian Miller, "Official History Spotlights Iraq Rebuilding Blunders," New York Times, December 14, 2008]

Iraq Investment and Reconstruction Task Force