23 September 2003

Guardian Unlimited | Leader: Say no to Iraqi privatisation

This is where the problems begin. First, these plans have no popular mandate. It would have been better to wait for an elected Iraqi government to produce a national economic plan rather than get a US-appointed Iraqi finance minister to rubber stamp them. Second, any dreams of a rapid transition to a free market in Iraq must be tempered by the fact that most of the population is dependent on state handouts. Not only is the state Iraq's biggest employer but the Iraqi people depend on a heavily subsidised system of inputs to industry and the inexpensive goods and services that result. In privatising Iraq's industries, one would expect businesses to become profitable - by raising prices or cutting costs and staff. The outcome could be unemployment and inflation, a recipe for chaos. Third, there is no effective legal system and Iraqi state institutions are still not functioning - both of which the Russian experiment showed were needed for big structural reforms.

It is true that Iraq's vast oil reserves, the world's second largest after Saudi Arabia's, will remain in government hands. But Washington is inflicting on Iraq what it would never accept itself. The US protects its airlines and media with foreign ownership restrictions, heavily subsidies its farmers and is prepared to slap import duties on steel. The US-inspired tariff-lowering and tax-cutting regime for Iraq is clearly inappropriate - especially when there is a clear need for revenue to finance the health and education needs of 25 million Iraqis. What the US is planning in Iraq is presumably what the world would look like if no one dissented. But they do - that is why the trade talks in Cancun failed. In adopting a neoliberal economic orthodoxy, the US falls into the trap of believing that the state has only to be removed from the sphere of the economy to see a vibrant free market appear. History suggests this process has to be managed by a stable, home-grown government. Iraq deserves to get one before enacting such major changes. In imposing free trade and removing the right to set tariffs, America has written its own unequal treaty with Baghdad. Washington should tear it up, before it is torn up by events.

The Fourth Geneva Convention, as noted by Juan Cole makes it unlawful for an occupation to do more than take essential caretaker decisions. This radical plan violates the convention and fundamentally changes Iraqi society without Iraqi consent.

In addition to the reasons advanced in the Guardian editorial, the plan should be withdrawn because it will make any Iraqi successor government incapable of managing its own economy or satisfying the demands of the Iraqi people and that is a recipe for the deepest chaos.

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