September 02, 2005

Privatize This

A while back, Brad Setser noted that the Iraqi economy doesn't much resemble Dick Cheney's erstwhile dream of a fully-privatized, neoliberal paradise. Although some of Iraq's oil fields are being opened up to foreign investment, Iraq's certainly not going to resemble a Cato theme park anytime soon, not so long as the state continues to disintegrate. Note that even back in late 2003, Paul Bremer was already backing away from industry sell-offs because of the violence (sell-offs which may well have been illegal under international law in any case), and I can't imagine the "shock" therapists are any more gung-ho about privatizing stuff nowadays.

In one sense, then, it was a bit quaint for Zalmay Khalilzad to have apparently spent so much of his time of late slipping provisions into the new Iraqi constitution that enshrine the "develop[ment] of the private sector." Why bother? As Setser notes, Iraq's a long ways away from that sort of thing, and in any case, the Shiite fundamentalists who will be running Iraq in the immediate future tend to have their own, less-than-capitalist view of economics. Khalilzad may have managed to junk that pesky bit in the constitution reading "Social justice is the basis of building society," but if Ayatollah Sistani decides that privatizing social services contradicts the tenets of Islam, well, that's that.

But perhaps I'm wrong. In that case, if the White House is pushing hard for market reforms, and if in fact he does have sway, then it's worth asking how much harm such a push might do. I wonder, for example, how many of Iraq's insurgency and crime problems could have been avoided early on had the CPA just spent billions on massive Baathist-style public-works programs, rather than getting giddy over designing a flat tax, especially given Iraq's high unemployment rate. In the long run, sure, the Arab Socialist model doesn't work very well—Egypt and Syria are proof of that—but in the shorter term it seems pretty useful for giving the kids something to do besides shoot at each other. So I would imagine the new Iraqi government will continue to push for some form of socialism, constitution be damned, though I do wonder how much pressure they're getting from the White House to go in the opposite direction. The attack on labor, after all, is already in full swing.
-- Brad Plumer 2:57 AM || ||