History of the Iraq War, Part XIII: The US Agency for International Development and Iraq's Economy

The United States Agency for International Development (USAID) is not typically mentioned in discussions of neoliberalism, but its role in Iraq was even more instrumental than the those of World Bank or WTO. According to the report Moving the Iraqi Economy from Recovery to Sustainable Growth, USAID “was to lay ‘the groundwork for a market-oriented private sector economic recovery.’ The plan envisioned the sale of state-owned enterprises through a ‘broad-based mass privatization program,’ the establishment of a ‘world-class exchange’ for trading stocks, and ‘a comprehensive income tax system consistent with current international practice’” (cited in Chandrasekaran, 2006, p. 115; see also USAID, 2005, p. 21). This money was distributed with liberal doses of incompetence and corruption.

The USAID was heavily involved in creating what is misleading called ‘civil society,’ or a collection of American-funded nonprofits supportive of the occupation. Muttitt (2011, pp. 71-72) observes that from 2003-6, USAID distributed civil society grants totaling $337 million, supplemented by funds from the International Republican Institute and National Democratic Institute, which are controlled by their respective American political parties. Much of the money was doled out through a $167 million grant to the Research Triangle Institute in North Carolina, a think tank founded to foster communication between local universities and businesses, now almost comically refocused on a mission to bring democracy to Iraq. An unknown amount of this money was corruptly recycled to the United States. For example, one beneficiary was Women for a Free Iraq, headed by neoconservative jingoists William Kristol and Richard Perle (Chatterjee, 2004, p. 183).

An audit report from the Office of the Special Inspector General for Iraq Reconstruction indicates the environment in which USAID taxpayer money was flushed down the drain. One Inspector General report described how Bechtel siphoned USAID reconstruction funds. Bechtel subcontracted out 90% of the tasks of their largest contract while pocketing 21.8% of the total contact value.  The corporation also subcontracted out all of a $50 million deal to build the Basra Children’s Hospital to a Jordanian company for $37 million. After cost overruns, the Army Corps of Engineers replaced Bechtel and projected cost dropped from $131 million to $90 million solely on the basis of removing Bechtel as an intermediary. Prior to this replacement, not even one Western engineer was working on-site (Chwastiak, 2011). It is of note that Donald Rumsfeld had served on Bechtel’s board of directors (Randall, 2005, p. 310).


Chandrasekaran, Rajiv. 2006. Imperial Life in the Emerald City: Inside Iraq’s Green Zone. Knopf.

Chatterjee, Pratap. 2004. Iraq, Inc.: A Profitable Occupation. Seven Stories Press.

Chwastiak M. 2011. “Profiting from Destruction: The Iraq Reconstruction, Auditing and the Management of Fraud.” Critical Perspectives on Accounting. In press.

Muttitt, Greg. 2011. Fuel on the Fire: Oil and Politics in Occupied Iraq. Bodley Head: Random House.

Randall, Stephen. 2005. United States Foreign Oil Policy since World War I: For Profits and Security. 2nd ed. McGill-Queen’s University Press.

United States Agency for International Development. 2005. “Our Commitment to Iraq.”

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