History of the Iraq War, Part XVII: Iraqi Torture Victims

Iraqi Prisoner Bearing Signs of Torture (Amnesty International, 2010)

Iraqi journalist Muntadar al-Zaidi described his personal grief as he:

"was roaming throughout the past years of the war in our scorched land and I was seeing with my own eyes the pains of the victims and hearing the weeping of the grieving women and orphans. Shame was chasing me, like an ugly name for my helplessness."

At a press conference he famously threw his shoes at President Bush, shouting, “This is your farewell kiss, you dog!” He was tackled, beaten with pipes, electrocuted, imprisoned for nine months and then released to his tearful family (Santora, 2009).

The American-led torture of people like Muntadar al-Zaidi in Iraq, Cuba, Afghanistan and throughout the world has been a subject of repeated scrutiny since late 2001. The philosophy was described in the McCain-Levin ‘Torture Report’ by the Senate Armed Services Committee as: “If the detainee dies, you’re doing it wrong” (Warrick, 2008). The resulting practices have become familiar: beatings; mock executions; sexual humiliation; long periods of sleep deprivation and exposure to extremes of heat and cold; sexual abuse; religious humiliation; threats of rape and other crimes made against family members (Mayer, 2009, p. 250). The impetus behind America’s brand of torture at Abu Ghraib, including the death by torture of Manadel Al-Jamali (images of his body covered with bags of ice were printed globally) resulted from Secretary of Defense Donald Rumsfeld’s order to “Gitmoize” Iraqi prisons (Mayer, 2009, p. 41). In Senate testimony on the Abu Ghraib ‘scandal,’ retired Army Major General John Batiste testified that “probably 99 percent of [prisoners] were guilty of absolutely nothing.” Estimates of the Iraqi prison population range from 60,000 to 120,000 (Hedges & al-Arian, 2008, p. 72).

The violence is similar in prisons and torture chambers nominally controlled by the Iraqi army and intelligence services (Figure 10). According to the UN Special Rapporteur Martin Scheinin, inmates are (2010, p. 8):

"Severely ill-treated, including by beating with cables, suspension from the ceiling with either the feet or hands upwards for up to two days, or electro-shocks. Some had black bags put over their heads and were suffocated for several minutes until the bodies became blue several times in a row. Also, some had plastic sticks introduced in the anus. They were also threatened with the rape of members of their families. They were forced to sign and fingerprint pre-prepared confessions."

The Christian Science Monitor reports that some refugees have experienced state-sponsored rape (Badhken, 2008). An elaborate state torture regime makes all the more courageous the resistance of the Iraqi unions and individuals like Muntadar al-Zaidi.

References

Amnesty International. 2010. “New Order, Same Abuses: Unlawful Detentions and Torture in Iraq.” http://www.amnesty.org/en/news-and-updates/report/thousands-iraqi-detainees-risk-torture-after-us-handover-2010-09-13.

Badkhen, Anna. November 24, 2008. “Rape’s Vast Toll in Iraq War Remains Largely Ignored.” Christian Science Monitor.

Hedges, Chris and Laila al-Arian. 2008. Collateral Damage: America’s War against Iraqi Civilians. Nation Books.

Mayer, Jane. 2009. The Dark Side: The Inside Story of How the War on Terror Turned into a War on American Ideals. Anchor Books.

Santora, Marc. September 15, 2009. “Freed, Shoe-Hurling Iraqi Alleges Torture in Prison.” New York Times.

Scheinin, Martin. February 18, 2010. “Report of the Special Rapporteur on the Promotion and Protection of Human Rights and Fundamental Freedoms while Countering Terrorism.” United Nations General Assembly Human Rights Council. http://www2.ohchr.org/english/bodies/hrcouncil/docs/13session/A-HRC-13-37-Add1_EFS.pdf.

Warrick, Joby. June 18, 2008. “CIA Played Larger Role in Advising Pentagon.” Washington Post.

History of the Iraq War, Part XVI: 'Liberation' and the Effects on the Iraqi People

Mortality due to Violence in Iraq, 2003 (Roberts, et al., 2004)

The Iraqi people have paid the heaviest price for American greed, hubris, jingoism and bloodlust. The war was found to be responsible for more than 650,000 Iraqi deaths – 600,000 by violence and the remainder from a economic collapse – (Brownstein & Brownstein, 2008) and, at its peak, 4.7 million out of a population of 27 million, or one in six, had been made refugees (United Nations High Commissioner for Refugees, 2007).  The unfathomable destruction of these people and their country is the preeminent legacy of this disastrous, criminal war. Simply reading and writing about the stories and statistics of this unending nightmare is at times hard to bear and no language can possibly do justice for the victims.

Nuremberg Principle VI defines “war crimes” in part as “wanton destruction of cities,…or devastation not justified by military necessity” (International Committee of the Red Cross, 2012). During the November 2004 invasion of Fallujah (Schwartz, 2008, p. 112):

"US forces surrounded the city and barred entry to everyone. Even humanitarian and medical personnel were not allowed to enter for the next two months. The commanders of the siege then invited all women, children, and older men to leave through a few of [the] heavily guarded checkpoints. All fighting-age men were prohibited from exiting….Civilians who stayed in the city during the fighting, estimated to be about fifty thousand of the two hundred fifty thousand residents, found themselves in a kill-anything-that-moves free-fire zone."

The city was destroyed, has not been rebuilt and will probably not recover in a generation. This great victory was mimicked in Baiji and Ramadi, cities of 200,000 and 500,000, respectively. A study by the Iraq Body Count found that of all people in Iraq killed by air strikes, 46% are women and 39% are children (Sengupta, 2009). Mortality due to violence in Iraq increased 58-fold in 2003 (Roberts, et al., 2004).

Victims’ compensation is disgustingly low, at $2,500 per death, $1,500 for serious injury and $200 for minor injuries. Of course, most people receive nothing at all: from 2003 to 2006, the Pentagon paid out $31 million in total claims for both the wars in Iraq and Afghanistan (Hedges & al-Arian, 2008, pp. 44-45). Only one in six Iraqi widows receive the government stipend for widows ($50 per month plus $12 for each child). As a response to this inconvenience, the government is starting “a campaign to arrest beggars and the homeless, including war widows” (Williams, 2009). The Iraqi surplus, which could easily provide a modicum of dignity for those that have lost everything, rests in US and European banks, the oil and banking sectors partially sold to foreign investors, and the proceeds used to construct opulent military suburbias, swimming pools and fast-food restaurants in the Green Zone, as discussed above.

The purported ‘democracy’ in Iraq is a rhetorical façade. After invading the country, the United States installed an American viceroy, who appointed a temporary government to hold elections. The Ba’ath party, which would be the chief political opposition to the occupation, is still banned from running in elections (Shadid, 2010). According to the 2009 UN Arab Human Development Report, “it is a crime to insult any public institution or official. It is also a crime, under article 227, to publicly insult a foreign country or an international organization with an office in Iraq.” The Report concludes: “Bad as Iraq’s economic legacy was, it does not compare to the economic breakdown that followed the US-led invasion...standards of living are still lower than they were before the invasion.” Iraq ranks 152nd out of 179 countries in Reporters without Borders’ Press Freedom Index (2012).


References

Brownstein, Catherine A. and John S. Brownstein. 2008. “Estimating Excess Mortality in Post-Invasion Iraq.” New England Journal of Medicine, 358(5), pp. 445-447.

Hedges, Chris and Laila al-Arian. 2008. Collateral Damage: America’s War against Iraqi Civilians. Nation Books.

International Committee of the Red Cross. 2012. “Principles of International Law Recognized in the Charter of the Nuremberg Tribunal and in the Judgment of the Tribunal, 1950.” http://www.icrc.org/ihl.nsf/full/390.




Reporters without Borders. 2012. Press Freedom Index. http://en.rsf.org/press-freedom-index-2011-2012,1043.html

Roberts, et al. November, 2004. “Mortality before and after the 2003 Invasion of Iraq: Cluster Sample Survey.” Lancet 364(9448), pp. 1857-1864.


Schwartz, Michael. 2008. War without End: The Iraq War in Context. Haymarket Books.

Sengupta, Kim. April 16, 2009. “Iraq Air Raids Hit Mostly Women and Children.” Independent.

Shadid, Anthony. January 14, 2010. “Iraqi Commission Bars Nearly 500 Candidates.” New York Times.

United Nations High Commissioner for Refugees. 2007. “Statistics on Displaced Iraqis around the World.” http://www.unhcr.org/cgi-bin/texis/vtx/home/opendoc.pdf?tbl=SUBSITES&id=470387fc2.

Williams, Timothy. February 22, 2009. “Iraq’s War Widows Face Dire Need with Little Aid.” New York Times.

History of the Iraq War, Part XV: Who Benefitted? American Politicians and Their Allies

Large amounts of war profits were recycled as campaign contributions. “According to The New York Times, ‘the top 20 service contractors have spent nearly $300 million since 2000 on lobbying and have donated $23 million to political campaigns.’ The Bush administration, in turn, increased the amount spent on contractors by roughly $200 billion between 2000 and 2006” (Klein, 2007, p. 412). To take just one example, the rise of the mercenary force Blackwater (now called Xe Services) and others can be credited to the Iraq War (Bryer, 2008).

The connections between Vice President Cheney and his former employer Halliburton almost exceed the historically brazen corruption expected during wartime. For the first five years of his vice presidency, Cheney received not only deferred compensation of approximately $200,000 per year (more than his government salary), but also held 433,000 Halliburton shares, or about $10 million worth, in a form of stock options (Chatterjee, 2004, p. 43). During the period of the war, KBR, which was spun off from Halliburton in 2007, received more in war contracts than any other company, an astonishing $38.4 billion (Feinstein, 2011, p. 404). In one example of the sort of leadership this money bought, a GAO investigation discovered a “$700 million ‘discrepancy’ between Halliburton’s estimate of $2.7 billion to provide food and other logistics services to the government, and the company’s own line-by-line breakdown of the estimated expenses. After the Defense Department’s questioning, the company slashed its estimate for the work to $2 billion” (Chatterjee, 2004, p. 55). If this is not a conflict of interest, then nothing is.

Feinstein (2011, p. 404) summarizes a fifty year-old Vietnam veteran’s report on the corporate pep talk he received as a newly hired KBR contractor being sent to Iraq:

"The recruits were told they were going to Iraq ‘for the money.’ The trainer told them they were not going to help the troops, not going to help the Iraqi people, not going for America, but ‘FOR THE MONEY,’ a slogan they had to chant repeatedly."

At least they were honest.

Halliburton/KBR is far from an isolated case. Hogan, et al. (2006, p. 284) found that there was a statistically significant relationship between campaign finance activities and the awarding of contracts in Iraq and Afghanistan. In particular, “campaign donations, donation amounts, and corporate political connections in the form of lobbyists and political action committees are positively associated with the likelihood that a company will receive a post-war [sic] contract.”

It is not that this tremendous corruption went unnoticed. A 2010 audit by the Office of the Special Inspector General for Iraq Reconstruction found that the Pentagon could not account for an astonishing 96% of $9.1 billion it has received from Iraqi oil revenues for reconstruction (Chwastiak, 2011). And of the 185,000 AK-47s, 170,000 pistols, 215,000 body armor pieces and 140,000 helmets that the US delivered to the Iraqi army from 2003-2005, the majority could not be accounted for by 2007 (Feinstein, 2011, p. 419).  Chwastiak (2011) reviews fourteen additional audits from the Office of the Special Inspector General for Iraq Reconstruction and found the audits variously shift the blame from political and corporate corruption to: incompetence; low-level employees; the fog of war; government regulators; Iraqis. Though the number of war contracts increased by 328% from 2001-2009, audit staff levels remained the same (Feinstein, 2011, p. 406). Of all of the billions in fraud, only one company has been convicted: Raman International, which has two employees and revenues of $170,000 (Chwastiak, 2011).

One of the reasons the victors and victims of the war were not articulated to the American people was a six year-long Pentagon information campaign that paid retired military officers, who themselves were often on the payroll of contractors, to appear on television networks and other media with administration talking points (Barstow, 2008).  This group of more than 75 retired officers was extremely prolific in orchestrated media appearances on ABC, CBS, CNN, Fox, NBC, NPR and influential print media. Many were paid by the number of times they could appear on TV. While their paymasters were not revealed to viewers, the program was micromanaged by Donald Rumsfeld and the purposes of the financial arrangements appeared clear to those involved. As retired Marine colonel and Fox News ‘analyst’ John Garrett put it in an email to Pentagon staffers in 2007, “Please let me know if you have any specific points you want covered or that you would prefer to downplay.” By contrast, William Cowan, another former Marine colonel and Fox analyst, was fired from the information program after he criticized the war on Fox in August, 2005. The Pentagon provided its “surrogates” (their wording) not only media talking points, but also frequent access to Cabinet officials and supervised trips to Cuba and Iraq. Columnists were also paid to write themselves or submit ghost-written columns (nine of them for the New York Times, which exposed the story). Canned segments were provided for free to local TV news stations. The type of viewpoints that would emerge from this information campaign serve to hide the nature of the propagandists – and war (Herman and Chomsky, 2002, pp. 1-2).

Aside from the corporate-political connections, the Bush administration also used the Iraqi occupation to reward domestic and foreign political allies. Chandrasekaran (2006, pp. 91-92) recounts a CPA staffer lamentation that he “watched résumés of immensely talented individuals who had sought out CPA to help the country thrown in the trash because their adherence to ‘the President’s vision for Iraq’ (a frequently heard phrase at CPA) was ‘uncertain.’ I saw senior civil servants from agencies like Treasury, Energy… and Commerce denied advisory positions in Baghdad that were instead handed to prominent [Republic National Committee] contributors.”

This favoritism also extended to foreign political allies, as the United States excluded from lucrative reconstruction contracts companies from those countries – like Russia, Germany and France – that had opposed the initial invasion. Unfortunately for Iraqi citizens and US taxpayers, 3/4 of the power plants in Iraq had been built by manufacturers in those three countries (Chatterjee 2004, p. 62). At the World Bank, the short-lived presidency of Bush hawk Paul Wolfowitz saw him appoint five officials, three of whom were conservative politicos from governments supporting the war rather than qualified economists (Peet, 2009, pp. 175-176).

References

Barstow, David. April 20, 2008. “Message Machine – Behind TV Analysts, Pentagon’s Hidden Hand.” New York Times.

Bryer, Thomas A. 2008. “Warning: The Hollow State Can Be Deadly.” Public Administration Review 68(3), pp. 587-590.

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.

Feinstein, Andrew. 2011. The Shadow World: Inside the Global Arms Trade. Farrar, Straus and Giroux.

Herman, Edward and Noam Chomsky. 2002. Manufacturing Consent: The Political Economy of the Mass Media. Pantheon.

Hogan, Michael, Michael A. Long, Paul B. Stretesky & Michael J. Lynch. 2006. “Campaign Contributions, Post-War Reconstruction Contracts, and State Crime.” Deviant Behavior, 27:3, pp. 269-297.

Klein, Naomi. 2007. The Shock Doctrine: The Rise of Disaster Capitalism. Metropolitan Books.

Peet, Richard. 2009. Unholy Trinity: The IMF, World Bank and WTO. 2nd ed. Zed Books.

History of the Iraq War, Part XIV: Who Benefitted? American Corporations

In a practice recalling the mandated importation of goods under the now defunct Oil-for-Food Program, “U.S. government regulations dictated that everything, even the water in which hot dogs were boiled, to be shipped in from approved suppliers in other nations…Whatever could be outsourced was” (Chandrasekaran, 2006, pp. 9, 13). Chatterjee (2004) recounts that from schools to electricity to the military itself, what had been sacrosanct was now up for sale. Mega-corporations like Bechtel, Halliburton and KBR received no-bid, cost-plus contracts, leading to blundering mismanagement, inefficiencies and even dismantlement of the country’s electricity, health, education and sanitation infrastructure.

An accounting by Chandrasekaran (2006, p. 288) summarizes the entire snafu:

"Because of bureaucratic delays, only 2 percent of the $18.4 billion Supplemental [appropriation from the US Congress] had been spent. Nothing had been expended on construction, health care, sanitation, or the provision of clean water, and more money had been devoted to administration than all projects related to education, human rights, democracy, and governance combined. At the same time, the CPA had managed to dole out almost all of a $20 billion development fund fed by Iraq’s oil sales, more than $1.6 billion of which had been used to pay Halliburton, primarily for trucking fuel into Iraq."

Reflecting the particular style of Keynesianism favored by the dominant class, the American government used Iraqi oil to guarantee profits for American companies. Chatterjee describes the financing mechanism (2004, p. 93):

"The money from ExIm [the United States Export-Import Bank] ensured that the investments of US corporations in Iraq were risk-free. If Iraqi ministries defaulted on any of their payments to US companies, ExIm would be required to pay in their place. Then ExIm would take its money back from Iraq’s Development Fund, the acting budget for Iraq that is 95 percent made up of oil revenues."

Furthermore, “the occupation authority did take possession of $20 billion worth of revenues from Iraq’s national oil company, to spend as it wished” (Klein 2007:345). As will be discussed later, a medium-term oil bubble clearly benefits companies and governments that control oil and negatively affects any production or consumption that depends on oil, e.g., everything else (see “American Taxpayers”).

American banks have made out handsomely during the Iraq War. About $10 billion from Iraq’s coffers is deposited with U.S. banks (Glanz, 2008) through a bizarre mechanism that funnels all oil revenue through the Federal Reserve Bank of New York, skims off 5% for Kuwaiti reparations, and deposits the remaining 95% in a Ministry of Finance account at the Central Bank of Iraq (Blanchard, 2009, p. 16). Part of the substantial Iraqi surplus is the result of debt forgiveness that the United States orchestrated in 2004 to the tune of $29.7 billion, with a fraction ($4.1 billion) coming from the United States Treasury (Stiglitz & Bilmes 2009, p. 134), an extremely generous handout to the investment banks that owned that debt. All of this was in addition to CPA Order 39, which allowed Iraq’s banks to be 100 percent foreign-owned.

The Iraq War may have enshrined military Keynesianism to an extent unfathomable even by Eisenhower (Hossein-Zadeh, 2006, pp. 132-133). In Klein’s (2007, p. 13) opinion:

"Before, wars and disasters provided opportunities for a narrow sector of the economy – the makers of fighter jets, for instance, or the construction companies that rebuilt bombed-out bridges. The primary economic role of wars, however, was as a means to open new markets that had been sealed off and to generate postwar peacetime booms. Now wars and disaster responses are so fully privatized that they are themselves the new market."


References

Blanchard, Christopher M. 2009. “Iraq: Oil and Gas Legislation, Revenue Sharing and US Policy.” Congressional Research Service.

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.

Glanz, James. August 5, 2008. “High Oil Prices Giving Iraq up to $79 Billion in Surplus Cash.” International Herald-Tribune.

Hossein-Zadeh, Ismael. 2006. The Political Economy of US Militarism. Palgrave MacMillan.

Klein, Naomi. 2007. The Shock Doctrine: The Rise of Disaster Capitalism. Metropolitan Books.

Stiglitz, Joseph and Linda Bilmes. 2009. The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Penguin.

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).

References

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.”

History of the Iraq War, Part XII: The International Monetary Fund Reforms Iraq's Economy

The CPA dissolved in 2004 but the implementation of its laws continued through the actions of the IMF and the nascent, puppet Iraqi government. The IMF is the primary agency that orchestrates Washington Consensus reforms globally through structural adjustment programs. These programs are usually foisted on countries as conditions to secure loans from the IMF (Peet, 2009, pp. 136-137).

During its tenure in Iraq, the IMF has advocated moving towards implementation of neoliberal economic reforms. Early IMF actions were limited to changing the picture on the Iraqi currency from Saddam Hussein to Iraqi monuments (CPA Order 43, 2003). In 2004, however, the IMF resumed its traditional role as purveyor of structural adjustments. In its first contract with the Iraqi government, the IMF (2004b) stated its goals were to:

"Stabilize the economy, lay the groundwork for the development of a reform program that could be undertaken in years to come, and to begin the process of restoring Iraq's external debt sustainability. The authorities' program is to be underpinned by a prudent fiscal policy that aims to limit spending to available government revenues and external resources, the use of the exchange rate to anchor inflationary expectations, and the implementation of key structural reforms to transform Iraq into a market economy."

This loan was labeled as “Emergency Post-Conflict Assistance” because the IMF’s mission allows it to dictate the disbursement of funds to other countries if they are “unable to implement and prepare a comprehensive economic program” for themselves. When Iraq received this loan of approximately $440 million from the IMF, both parties agreed to continue the reforms that the CPA began (Boon, 2006, pp. 525-526).

The second contract, which was signed on December 23, 2005, garnered Iraq a loan of roughly $730 million. As with the first IMF action, for the second the Iraqi government promised to continue the reforms that the CPA initiated. An important additional reform was the promise to move towards “putting oil sector enterprises on a full commercial basis” (IMF 2005, p. 10), a key step towards gaining foreign control over Iraq’s oil revenues. Iraq paid back its first two loans one week ahead of schedule, on December 12, 2007 – and then almost immediately took another one. Iraq had a surplus of tens of billions of dollars at the time (United States Government Accountability Office, 2008a) and had no legitimate reason for a multi-year loan of less than $1 billion. The conditions were the contract.

IMF austerity measures are often justified by the alleged need to control inflation (Peet, 2009, p. 67). In the case of Iraq, the IMF itself caused the high inflation, then took punitive mitigation measures. Based on the advice of the IMF, the Iraqi currency was taken off of a fixed exchange rate at the end of 2006. Inflation quickly jumped to sixty-five percent. Fiscal and monetary austerity measures were subsequently used to cut down inflation (Vrijer et al., 2008). In light of evidence to be discussed later (“Who Pays the Costs?”) it is particularly outrageous that international development experts could justify behavior that destroyed millions of lives.


The third IMF loan followed the trend of furthering Washington Consensus reforms. Iraq agreed to a loan of approximately $740 million from the IMF on January 16, 2008 despite having a projected budget surplus of $50 to $60 billion (Sassoon, 2009, p. 133), a number that ballooned with oil prices that summer to nearly $80 billion. About $10 billion of that was deposited with U.S. banks (Glanz, 2008) while social services continued to decline. The London-based branch of one of the last two remaining state banks was liquidated in order to pay off foreign debt, principally owed as reparations to Kuwait for the Gulf War. The IMF loan (2008) also came with conditions that cuts would be made in social services. While overall social spending was increased by hiring slightly more workers, the government froze wages while decreasing social spending elsewhere. The agreement continued policies to decrease the number of items offered to the Iraqi people in a ration basket by “limit[ing] the number and rations of goods in the basket, increas[ing] the price of a ration card, and further restrict[ing] eligibility to well-off families” (2008, pp. 45-50). In 2006, a Government Accountability Office stated that “it is unclear how US efforts are helping Iraq obtain clean water, reliable electricity, or competent health care” (Chwastiak, 2011). But the IMF succeeded in deepening the involvement of Iraq in neoliberal economic policies.

References


Boon, Kristin E. 2006. ““Open for Business”: International Financial Institutions, Post-Conflict Economic Reform, and the Rule of Law.” New York University Journal of International Law and Politics 39, pp. 514-580.

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



Coalition Provisional Authority Orders, full text. http://www.iraqcoalition.org/regulations/.

Glanz, James. August 5, 2008. “High Oil Prices Giving Iraq up to $79 Billion in Surplus Cash.” International Herald-Tribune. 

International Monetary Fund. September 29, 2004b. “IMF Executive Board Approves US$436.3 Million in Emergency Post-Conflict Assistance to Iraq.” Press release no. 04/206.


International Monetary Fund. December 5, 2005. “Iraq: Letter of Intent, Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding.”

International Monetary Fund. January 16, 2008. “Iraq: Letter of Intent, Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding.”

Peet, Richard. 2009. Unholy Trinity: The IMF, World Bank and WTO. 2nd ed. Zed Books.

Sassoon, Joseph. 2009. The Iraqi Refugees: The New Crisis in the Middle East. International Library of Migration Studies. IB Tauris.

United States Government Accountability Office. January, 2008a. “Better Data Needed to Assess Iraq’s Budget Execution.”

United States Government Accountability Office. 2008b. “Stabilizing and Rebuilding Iraq: Iraqi Revenues, Expenditures, and Surplus.”

Vrijer, Erik, Udo Kock, and David Grigorian. February 13, 2008. IMF Survey.

History of the Iraq War, Part XI: Neoliberal Reaganomics and Changing Iraq's Economy

With the 2003 invasion of Iraq came the opportunity for the United States to remake Iraq’s economy in a neoliberal mold. The economic reforms carried out by the United States in Iraq fall under Williamson’s (2000, pp. 252-255) classic ten-point definition of the Washington Consensus framework (Table 1). Soon after the invasion, neoliberal economic policies were implemented by the Coalition Provisional Authority (CPA) within two months, a duty that was shifted to the IMF a year later. Contrasting this approach with other economic wars, Klein argues that “in Iraq, Washington cut out the middlemen: the IMF and the World Bank were relegated to supporting roles, and the U.S. was front and center. Paul Bremer was the government” (Klein, 2007, p. 343). Bremer instituted neoliberal economic reforms by fiat, backed by an army.

Table 1: Agencies Implementing Neoliberalism in Iraq

Reform    Implementing Agency
Fiscal Discipline    CPA, IMF, World Bank
Decrease in Social Spending    CPA, IMF
Flat Tax    CPA
Financial Liberalization    CPA, IMF, World Bank
Floating Exchange Rate    IMF
Trade Liberalization    CPA, IMF, USAID
Unregulated FDI    CPA, USAID
Privatization    CPA, USAID
Deregulation    CPA
Property Rights    CPA

Table 2: Evidence of Implementation of Neoliberalism in Iraq

Reform    Evidence

Fiscal Discipline    Based on an oil price of $100/bbl., Iraq was estimated (United States Government Accountability Office, 2008b) to have an approximately $68 billion surplus by the end of 2008. This represented more than 50% of GDP (CIA World Factbook, 2012).

Decrease in Social Spending    The first two IMF loans (IMF, 2004a; 2005) have included decreasing social spending as conditions while the current one (IMF, 2008) contains three mandates: an overall increase in social spending through hiring more workers; freezing wages; and decreasing all other social spending.

Flat Tax    Under CPA Order 37, NGOs, foreign governments, CPA employees and contractors pay no taxes. Other individuals and corporations pay 15% (Bremer, 2003a). Due to this and lack of even minimal enforcement, the Iraqi government now receives 99% of its revenues from oil rents (Figure 6).

Financial Liberalization    Capital import and export restrictions are placed only on money tied to ‘terrorism’ (CPA Order 46, 2003).

Floating Exchange Rate    The Iraqi currency was pegged to the dollar until the end of 2006. It is now free-floating (IMF, 2005).

Trade Liberalization    This was carried out by the CPA (Bremer, 2003b) and continued by the IMF (2004b; 2005; 2008). Interestingly, UNSC Resolution 1483 “abolish[ed] trade restrictions,” (2003) an unusual and ultimately toothless foray into neoliberal restructuring (Looney, 2003).
Unregulated FDI    Foreign investors are legally considered the same as domestic investors (Bremer, 2003b).

Privatization    The CPA permitted private foreign ownership in all sectors except oil (wholly state owned) and banking (50% foreign ownership limit). The IMF (2005, p. 10) moved to privatize the oil sector and liquidate some national bank holdings (2008).

Deregulation    On September 19, 2003, Bremer abolished all previous economic laws except harsh anti-union laws, which Saddam himself had ordered in 1987 (Chatterjee, 2004, p. 18).

Property Rights    CPA order 4 established a government group reporting to the CPA for people to pursure property claims (2003).

Note: the full text of CPA Orders can be found at http://www.iraqcoalition.org/regulations/ (accessed May 29, 2012).

It is worth quoting at length the summary given by Schwartz (2008, p. 34) of the consequences and rationales behind the neoliberal destruction of the Iraqi economy:

"Besides dismantling both the army and the state apparatus, [Bremer] sought to implement virtually every neoliberal reform that had been adopted piecemeal in other countries during the previous thirty years. These included immediately shuttering all state-run (nonoil [sic]) enterprises (which were viewed as inefficient, unprofitable, and corrupt); selling those that were potentially viable (at distress prices, if necessary); dismantling tariff and tax barriers that prevented the entry of foreign products and companies (which would be expected to introduce superior products, modern technology, and efficient methods into the economy); voiding state regulations and subsidies that protected domestic businesses (which were accused of selling worse goods at higher prices than foreign competitors); weakening some and outlawing other labor unions (because they produced or protected wages and benefits and therefore created an unprofitable business climate); eliminating laws that restricted the use of foreign workers (who were expected to work harder for lower wages);  and removing state subsidies on food and fuel (which gave unemployed workers sufficient resources to demand wages that could undermine profitability)."

Chandrasekaran (2006, p. 110) reports that under Saddam, “nobody paid for electricity, not even the state-owned factories that guzzled hundreds of megawatts. Every family received monthly food rations from the state. Education, even college, was free. So was health care.” Baker, Ismael, & Ismael (2010, p. 225) put it well: in a socialist nation, “the public sector as a whole was now under suspicion.”

This can be contrasted with the American treatment of the Iraqi oil industry, which was left intact and reconfigured piecemeal. Klein contends, with some poetic license, the reasons for this seemingly schizophrenic difference in treatment: “The U.S. government presence in Iraq during the first year of its economic experiment had been a mirage – there had been no government, just a funnel to get U.S. taxpayer and Iraqi oil dollars to foreign corporations, completely outside the law” (Klein, 2007, p. 358). The following sections will discuss how the IMF, USAID, World Bank and WTO implemented neoliberalism in Iraq during the war.

References

Baker, Raymond, Shereen Ismael and Tareq Ismael (ed.). 2010. Cultural Cleansing in Iraq: Why Museums Were Looted, Libraries Burned and Academics Murdered. Pluto Press.

Bremer, Paul. 2003a. “Coalition Provisional Authority Number 37: Tax Strategy for 2003.”

Bremer, Paul. 2003b. “Coalition Provisional Authority Number 39: Foreign Investment.”

Central Intelligence Agency World Factbook. 2012. https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html.

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.

International Monetary Fund. October 18, 2004a. “Iraq: Use of Fund Resources – Request for Emergency Post-Conflict Assistance.”

International Monetary Fund. September 29, 2004b. “IMF Executive Board Approves US$436.3 Million in Emergency Post-Conflict Assistance to Iraq.” Press release no. 04/206.

International Monetary Fund. December 5, 2005. “Iraq: Letter of Intent, Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding.”

International Monetary Fund. January 16, 2008. “Iraq: Letter of Intent, Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding.”

Klein, Naomi. 2007. The Shock Doctrine: The Rise of Disaster Capitalism. Metropolitan Books.

Schwartz, Michael. 2008. War without End: The Iraq War in Context. Haymarket Books.

United States Government Accountability Office. January, 2008a. “Better Data Needed to Assess Iraq’s Budget Execution.”

United States Government Accountability Office. 2008b. “Stabilizing and Rebuilding Iraq: Iraqi Revenues, Expenditures, and Surplus.”

Williamson, John. 1990. “What Washington Means by Policy Reform.” In John Williamson, ed., Latin American Adjustment: How Much Has Happened? Washington, DC: Institute for International Economics.