Opinion\Editorial
The Calculus of Pleasure and Pain: Heeding the Lessons of Post-War Japan
Abdul Aziz Said
Benjamin Jensen
Published in Al-Hayat London, September 28, 2003
The Bush Administration’s plan to open Iraq to foreign investment recalls an old
maxim….economics is often the calculus of pleasure and pain. Interests are weighed and profits
taken at the expense of one group over another. Unlike fairytales, not everybody wins in
business. The pain is clear. Foreign business interests will not ‘democratize’ the Iraqi economy.
American officials continue to assert that opening Iraq to foreign investment is an important step
in the reconstruction process. This is the Bush administration’s operative definition of what it
means to ‘democratize the economy’. There is a real perception confirmed by a report Bremer’s
staff has recently circulated through the Governing Council that foreign businesses can be used
to revitalize the economy. But whose democracy is it and to what end does it operate? Business
interests are not the same as national interests. Do foreign businesses or market concerns have a
vested interested in the democratization of Iraq? If the US is not mindful of its actions in
rebuilding the shattered Iraqi economy it risks producing ‘pain’ in the Iraqi population at the
expense of ‘pleasing’ foreign business interests.
Taken literally, ‘democratizing an economy’ means ensuring that the economy is vested
in the people as a whole. That is, to ensure sovereign control over all decisions associated with
production, consumption, and investment. This is not to say that foreign firms should not
participate in the reconstruction process. Rather, Iraq gains from foreign investment only after
this investment is in an economy vested in the people’s interest.
If the economy is not
democratized, all foreign capital potentially crowds out domestic business interests.
1
Opinion\Editorial
The United States has experience democratizing economies under occupation. In seeking
to democratize post-war Japan and rebuild the countries fractured, mercantile economy, the
scales of pleasure and pain tipped in favor of the masses. Worried that the democratization
program in Japan might fail if the poverty level were not reduced, General MacArthur posed a
stark choice to his superiors: send more troops or more economic assistance. As a result, the
overall economic program put forward by the United States and MacArthur’s staff focused on
wealth redistribution.
Economic policy has historically been subordinated to political objectives in post-conflict
areas. This is vital. One must reshape the economy in a way that supports the political
environment, being mindful of the nature of wealth distribution on the ground and how it
balances social capital and political power. Japan was a quasi-feudal society in which the
majority of the population had no economic interest in the nation. They lived on subsistence
wages while large business groups or ‘zaibatsu’ controlled the commanding heights of the
economy. The idea was simple but worth remembering. If the economy were democratized, i.e.
large business monopolies broken, labor unions established and property ownership encouraged,
than the majority of the population would have an economic interest in the future
democratization of the nation.
Shifting the balance from large enterprise to medium and small scale businesses was
more than sound economic policy. It was probably the most decisive political decisions made by
the US in an effort to rebuild the Japanese nation. By encouraging the sale of large enterprises
not to foreign business interests but to local investors, trade unions, and domestic cooperatives,
the US in effect was pushing for the creation of a robust and politically salient middle-class.
2
Opinion\Editorial
Buying hearts and minds through the equitable redistribution of wealth is a far cry from
what is being proposed in Iraq. A political system capable of supporting an open market
economy in an equitable manner must be established before selective privatization and foreign
investment gets underway. Politics must come before economics. The Governing Council,
backed by the full resources of Bremer and his office, needs to heed the lessons of post-war
Japan. Opening the economy to foreign investment before creating the infrastructure necessary
to support domestic business interests is not democratization. In the end it is nothing more than
exchanging long-term ‘pain’, i.e. foreign dominance of the Iraqi economy, for instant ‘pleasure’,
the limited creation of jobs and investment. There is nothing democratic about it.
3