Even while serious fighting continues, the economic destiny of Iraq is being decided — not by the Iraqis themselves, but by the occupying powers and the United States-appointed governing council, almost half of whom are exiles.
On the initiation of Paul Bremer, the US head of the Coalition Provisional Authority, a new law, Order 39, came into force last month. It permits complete foreign ownership of Iraqi companies and assets (apart from natural resources) that have hitherto been publicly owned, total overseas remittance of profits and some of the lowest corporate tax rates in the world. In short, Iraq’s economy has been put up for sale.
The reforms are inconsistent with the undertaking at the United Nations to promote “the right of the Iraqi people freely to determine their own political future”. Nor do they sit well with international law. The Hague regulations require that occupying powers respect the laws in force in a country “unless absolutely prevented”. The attorney general himself warned in March that this would rule out “major structural economic reforms”. But that is exactly what is now being imposed.
It is extraordinary to hear a Labour (albeit New Labour) government endorsing such economic shock therapy. An extreme market model proved disastrous in post-Soviet Russia, where half the population fell below the poverty line. In Iraq, the effects are already being felt. Rather than repair the Baghdad telephone exchange, which the coalition bombed, the elitist decision has been made that Iraqis should rely on foreign-owned cellphone networks. Press reports indicate that Iraqi hospitals, once famed as the best in the region, now face plans for privatisation.
The British government is plainly on the back foot. Hilary Benn, the British International Development Secretary, claimed recently that “Iraq’s assets are not for sale”. Bremer himself contradicted that assertion this week, saying “if the economy is going to grow, it’s going to have to happen”.
It has been claimed that the economic reforms were the inspiration of Iraqis. But the Iraq governing council, some of whose members have declared their outright opposition, only endorsed the order after Bremer had signed it. Iraqi unemployment is running at 60% to 70%, and privatisation by foreign companies would lead inevitably — according to Rubar Sandi, a leading Iraqi adviser to the US State Department — to yet more lay-offs, crime and social unrest.
Reforms that change the face of the Iraqi economy should wait until the Iraqi people can be consulted and a democratic government is established. Iraqis must feel they have ownership over what is happening in their country, and this cannot happen while fundamental policies determining their future are imposed by foreign occupiers — occupiers that have shown little consideration for the needs of ordinary Iraqis. — Â