Outline
I. Iraqi economy
Main sources
Naomi Klein, Baghdad Year Zero, Harper’s, September 2004
. Iraq’s Neoliberal; Institution, Herbert Docena, Foreign Policy in Focus, Sept. 2, 2005
Argues that original project was a laboratory for a totally neoliberal economy, model to spread
through middle east
Neoliberal—unregulated capitalism—liberal in 18th, 19th century meaning of the term
Market determination of prices, little public production—privatization of goods and services, Cut
government spending—
Low taxes, particularly on capital, free trade, encouragement of foreign investment,
convertibility of currency; no restrictions on capital flows. Pushed by IMF since 1970’s, by U.S.
government since early 1980’s. Sometimes called the Washington Consensus.
Theory, efficient, capital, technology inflows, wages and production will rise over time
1. Dominated Latin America in 1980’s, 1990’s—big reaction against it.
Chile—one of the first after Allende overthrow—considered a success story?
Growing inequality, destruction of formal sector, secure jobs—see U.S.
A. Iraq seen as place to do this rapidly—fits in with what is neoliberal adherents called shock
therapy—need to do it all at once—Sachs, Bolivia—Poland, Russia-privatize rapidly, markets
will work—rapid gains—otherwise stagnation.
b. Non shock therapy neoliberalism. mainstream economists—more liberal such as Joseph
Stiglitz—argued for slower movement—build markets, need to develop competition, maintain
government providing of basic needs until markets are ready--gradual
Played out in Iraq according to Klein—Year Zero Plan—Ahmad Chalabi and Iraqi National
Congress-wanted to destroy Baath with Neoconservatives hatred of state for social purposes,
belief in strong state for repression, military but not economic except for property rights.
Maybe—not go after oil directly
Paul Bremer—represented this-also Wolfowitz, Feith, etc.,firing of 500,000 state workers first
order, rapid privatization
Alternative position—pragmatists—Garner, Allawi, Powell-Alawi ex-Baathist—CIA asset,
State Department Report. Limited firing, maintain public production, over time develop
conditions for market capitalist economy—deregulate slowly, limit foreign ownership at first—
leave privatization, cut government spending—leave it to IMF—Future of Iraq report—used
“experts”
Baghdad captured April 9th—in 108 page report—privatization mentioned 51 times—define
privatization—attempt to privatize 200 businesses in May 2003—cement, paper, books, water
treatment plants, consumer durables like washing machines.
9/2003—order 37—reduced corporate taxes to a flat 15%, had been graduated and averaged 40%
Order 39-foreign companies could own 100% of business and send out 100% of profits
Except for natural resources—
Too much opposition
Order 40—foreign banks permitted under same terms, HSBC
No tariffs—proposal of Middle East Free trade area Area-Arrogance and ignorance—in another article Klein she says neoliberal laboratory—colonial
solution—even quicker than Chile, Eastern Europe,--no restraints
Model assumes foreign investment comes in—didn’t—also assumes stable environment—clearly
not—huge unemployment, insurgency, lack of infrastructure, electricity—hardly functioning
economy
Has fed insurgency
Production has gone to mainly U.S. companies—much of capital has flown out
DISASTER—
What about Garner, Allawi, State Dept plan—who actually came in 2004, less chaotic but still
problematic
Many of these orders were no longer directly operative as the CPA was replaced but a look at the
new constitution, which Tony Blair was lauding yesterday is clearly neoliberal
Note private property, education, health, 25 is key
Still non-functioning
II. Costs of war to U.S.
Based on The Economic Costs of the Iraq War—Linda Bilmes and Joseph Stiglitz—Kennedy
School working paper, January 2006Costs--How large, who has paid for them
Need for movement to connect costs at home, more than U.S. lives, less secure, price of oil,
growing instability of economy, used to cut social spending, neglect infrastructure—e.g., New
Orleans
Who is Joseph Stiglitz—world bank, need for regulated markets
Ask for costs
Stiglitz—
1. Budget costs—copy page 6
Explain-conservative vs moderate—stay until 2015,
Increased defense spending, 30% of additional spending—recruiting, higher salaries, more wear
and tear of equipment that must be replaced quicker
Borrowed money—Interest payments—over 5, vs. 20—no taxes to fund it.—interest costs
2. Cost of war to U.S. economy
A. Figure 2—P. 13
Measures cost at foregone salaries and benefits—use estimates of foregone salaries
Use 6 million which is used by environmental agencies to measure dearth
Cost-benefit analysis—general question—cost is much more than govt cost
Mainly measures brain damage and loss of limbs—30% of 550,000 with increased health care
costs
Think of Vietnam—Suicides-Hardware—depreciation vs. replacement (omit)
Macroeconomic
a. insecurity
b. Oil—12 million barrels imported a day, 4.5 billion barrels a year, at $50 = $270 billion, oil at
$25, $10 increase is $50 billion, lowers GDP—raises inflation, further cutbacks, income is lessmultiplier makes it greater;
c. Would money be going for education, investment in infrastructure—crowding out argument,
political or economic
d. Multiplier—spending has less effect than being spent here.
e. U.S. exports less for political, economic reasons—hostility of other countries
By not taxing more, interest cost although some stimulation of economy—cost of higher balance
of payments problems—imports, spending abroad
Cost over $2 trillion, 100,000 million families--$20,000 per family—of course unevenly
distributed-probably higher with PTSD, Depleted Uranium
Does it benefit production—maybe in certain sectors--Vietnam didn’t—little teaching of skills.