REP 0 R T

BAGHDADYEAR ZERO

Pillaging Iraq in pursuit of a neocon utopia- By Naomi Klein

It wasonly after I had been in Bagh-dad for a month that I found what I waslooking for. I had traveled to Iraq ayear after th~ war began, at the heightof what should have been a construc-tion boom, but after weeks of searchingI had not seen a singlepiece of heavy machin-ery apart from tanks andhumvees. Then I saw it:a construction crane. Itwas big and yellow andimpressive, and when Icaught a glimpse of itaround a corner in abusy shopping district Ithought that I was fi-nally about to witnesssome of the reconstruc-tion I had heard somuch about. But as I gotcloser I noticed that thecrane was not actuallyrebuilding any thing-not one of the bombed-out government build-ings that still lay inrubble all over the city, nor one of themany power lines that remained intwisted heaps even as the heat of sum-mer wasstarting to bear down. No, thecrane was hoisting a giant billboard tothe top of a three-story building. SUN-BULAH: HONEY 100% NATURAL, madein Saudi Arabia.

Seeing the sign, I couldn't helpbut think about something SenatorJohn McCain had said back in Octo-ber. Iraq, he said, is "a huge pot ofhoney that's attracting a lot of flies."The flies McCain was referring to

Hussein, then by asphyxiating Unit-ed Nations sanctions.

Looking at the honey billboard, Iwasalso reminded of the most commonexplanation for what has gone wrongin Iraq, a complaint echoed by every-

one from John Kerryto Pat Buchanan: Iraqis mired in blood anddeprivation becauseGeorge W. Bushdidn't have "a postwarplan." The only prob-lem with this theory isthat it isn't true. TheBush Administrationdid have a plan forwhat it would do afterthe war; put simply, itwas to layout as muchhoney as possible,thensit back and wait forthe flies.

The honey theoryof Iraqi reconstructionstems from the mostcherished belief of the

war's ideological architects: that greedis good. Not good just for them andtheir friends but good for humanity,and certainly good for Iraqis. Greedcreates profit, which creates growth,which creates jobs and products andservices and everything else anyonecould possibly need or want. The roleof good government, then, is to createthe optimal conditions for corpora-tions to pursue their bottomless greed,so that they in turn can meet the

Naomi Klein is the author of No Logo andwriter/producer of The Take, a new docu-mentary on Argentina' 5 occupied factories.

Photographs © Andrew Stern/ Andrewotern.net

SUNBULAH HONEY BILLBOARD, BAGHDAD

were the Halliburtons and Bechtels,as well as the venture capitalists whoflocked to Iraq in the path cleared byBradley Fighting Vehicles and laser-guided bombs. The honey that drewthem was not just no-bid contractsand Iraq's famed oil wealth but themyriad investment opportunities of-fered by a country that had just beencracked wide open after decades ofbeing sealed off, first by the national-ist economic policies of Saddam

/7

REPORT 43

needs of the society. The problem isthat governments, even neoconserv-ative governments, rarely get thechance to prove their sacred theoryright: despite their enormous ideo-logical advances, even George Bush'sRepublicans are, in their own minds,perennially sabotaged by meddlingDemocrats, intractable unions, andalarmist environmentalists.

Iraq was going to change all that. Inone place on Earth, the theory wouldfinally be put into practice in its mostperfect and uncompromised form.A country of 25 million would notbe rebuilt as it was before the war;it would be erased, disappeared.In its place would spring forth agleaming showroom for laissez-faire economics, a utopia such asthe world had never seen. Everypolicy that liberates multination-al corporations to pursue theirquest for profit would be put into place:a shrunken state, a flexible workforce,open borders, minimal taxes, no tar-iffs, no ownership restrictions. Thepeople ofIraq would, of course, have toendure some short-term pain: assets,previously owned by the state, wouldhave to be given up to create new op-portunities for growth and investment.Jobs would have to be lost and, as for-eign products flooded acrossthe border,local businessesand familyfarmswould,unfortunately, be unable to compete.But to the authors of this plan, thesewould be small prices to pay for theeconomic boom that would surely ex-plode once the proper conditions werein place, a boom so powerful the coun-try would practically rebuild itself.

The fact that the boom never cameand Iraq continues to tremble underexplosionsof a very differentsort shouldnever be blamed on the absence of aplan. Rather, the blame rests with theplan itself, and the extraordinarily

violent ideologyupon whichrr' it is based.

Lrturers believe that when elec-trical shocks are applied to variouspartsof the body simultaneously subjects arerendered so confused about where thepain is coming from that they becomeincapable of resistance. A declassifiedCIA "Counterintelligence Interroga-tion" manual from 1963 describes howa trauma inflictedon prisonersopens up

44 HARPER'S MAGAZINE J SEPTEMBER 2004

"an interval-which may be extreme-ly brief-of suspended animation, akind of psychological shock or paraly-sis.... [Ajt this moment the source isfarmore open to suggestion, far likelier tocomply." A similar theory applies toeconomic shock therapy, or "shocktreatment," the ugly term used to de-scribe the rapid implementation of free-market reforms imposed on Chile inthe wake of General Augusto Pino-chet's coup. The theory is that ifpainfuleconomic "adjustments" are brought

IRAQ WAS MEANT TO BE A GLEAMING

SHOWROOM FOR LAISSEZ·FAIRE

ECONOMICS, A UTOPIA SUCH AS THE

WORLD HAD NEVER SEEN

in rapidly and in the aftermath of aseismic social disruption like a war, acoup, or a government collapse, thepopulation will be so stunned, and sopreoccupied with the daily pressuresofsurvival, that it too will go into sus-pended animation, unable to resist. AsPinochet's finance minister, AdmiralLorenzo Gotuzzo, declared, "The dog'stail must be cut off in one chop."

That, in essence, was the workingthesis in Iraq, and inkeeping with thebelief that private companies are moresuited than governments for virtuallyevery task, the White House decided toprivatize the task of privatizing Iraq'sstate-dominated economy. Twomonths before the war began, USAIDbegan drafting a work order, to behanded out to a private company, tooversee Iraq's "transition to a sustain-able market-driven economic system." .The document states that the winningcompany (which turned out to be theKPMG offshoot Bearing Point) willtake "appropriate advantage of theunique opportunity for rapid progressinthis area presented by the current con-figuration of political circumstances."Which is precisely what happened.L. Paul Bremer, who led the u.s. oc-cupation ofIraq from May 2, 2003, un-til he caught an earlyflight out of Bagh-dad on June 28, admits that when hearrived, "Baghdad was on fire, literally,as I drove in from the airport." But be-fore the firesfrom the "shock and awe"

military onslaught were even extin-guished, Bremer unleashed his shocktherapy, pushing through more wrench-ing changes in one sweltering summerthan the International Monetary Fund 'has managed to enact over threedecades in Latin America. JosephStiglitz,Nobel laureate and former chiefeconomist at the World Bank, describesBremer's reforms as "an even more rad-ical form of shock therapy than pur-sued in the former Soviet world."

The tone of Bremer's tenure was setwith his first major act on the job:he fired 500,000 state' workers,most of them soldiers, but alsodoctors, nurses, teachers, pub-lishers, and printers. Next, heflung open the country's bordersto absolutely unrestricted imports:no tariffs, no duties, no inspec-tions, no taxes. Iraq, Bremer de-clared two weeks after he arrived,

was "open for business."One month later, Bremer unveiled

the centerpiece of his reforms. Beforethe invasion, Iraq's non-oil-relatedeconomy had been dominated by 200state-owned companies, which pro-duced everything from cement to pa-per to washing machines. In June,

.Bremer flew to an economic summit inJordan and announced that these firmswould be privatized immediately. "Get-ting inefficient state enterprises intoprivate hands," he said, "is essentialfor Iraq's economic recovery." It wouldbe the largest state liquidation salesince the collapse of the Soviet Union.

But Bremer's economic engineer-. ing had only just begun. In September,to entice foreign investors to come toIraq, he enacted a radical set of lawsunprecedented in their generosity tomultinational corporations. There wasOrder 37, which lowered Iraq's corpo-rate tax rate from roughly 40 percentto a flat 15 percent. There was Order39, which allowed foreign companiesto own 100 percent ofIraqi assets out-side of the natural-resource sector.Even better, investors could take 100percent of the profits they made inIraq out of the country; they wouldnot be required to reinvest and theywould not be taxed. Under Order 39,they could sign leases and contractsthat would last for forty years. Order 40welcomed foreign banks to Iraq underthe same favorable terms. All that re-

mained of Saddam Hussein's econom-ic policies was a law restricting tradeunions and collective bargaining.

If these policies sound familiar, it'sbecause they are the same ones multi-nationals around the world lobby forfrom national governments and in in-ternational trade agreements. Butwhile these reforms are only ever en-acted in part, or in fits and starts, Brem-er delivered them all, all at once.Overnight, Iraq went from being themost isolated country in the world to

being, on paper, its widest-

A open market.

. t first, the shock-therapy theo-ry seemed to hold: Iraqis, reeling fromviolence both military and economic,were far too busy staying alive tomount a political response to Bremer'scampaign. Worrying about the priva-tization of the sewage system was anunimaginable luxury with half the pop-ulation lacking access to clean drink-ing water; the debate over the flat taxwould have to wait until the lightswere back on. Even in the interna- .tional press, Bremer's new laws, thoughradical, were easily upstaged by moredramatic news of political chaos andrising crime.

Some people were paying attention,of course. That autumn was awash in"rebuilding Iraq" trade shows, in Wash-ington, London, Madrid, and Amman.The Economist described Iraq underBremer as "a capitalist dream," and aflurry of new consulting firms werelaunched promising to help companiesget access to the Iraqi market, theirboards of directors stacked with well-connected Republicans. The mostprominent was New Bridge Strategies,started by Joe Allbaugh, former Bush-Cheney campaign manager. "Gettingthe rights to distribute Procter & Gam-ble products can be a gold mine," oneof the company's partners enthused."One well-stocked 7-Eleven couldknock out thirty Iraqi stores; a Wal-Mart could take over the country."

Soon there were rumors that a Me-Donald's would be opening up indowntown Baghdad, funding was al-most in place for a Starwood luxuryhotel, and General Motors was plan-ning to build an auto plant. On thefinancial side, HSBC would havebranches all over the country, Citi-

group was preparing to offer substantialloans guaranteed against future sales ofIraqi oil, and the bell was going to ringon a New York-style stock exchangein Baghdad any day.

In only a few months, the postwarplan to turnIraq into a laboratory forthe neocons had been realized. LeoStrauss may have provided the intel-lectual framework for invading Iraqpreemptively, but it was that otherUniversity of Chicago professor, Mil-ton Friedman, author of the anti-government manifesto Capitalism andFreedom, who supplied the manual forwhat to do once the country was safe-ly in America's hands. This repre-sented an enormous victory for themost ideological wing of the Bush Ad-ministration. But it was also some-thing more: the culmination of two

Future of Iraq Project, which generat-ed.a thirteen-volume report on howto restore basic services and transitionto democracy after the war. On theother side was the "Year Zero" camp,those who believed that Iraq was socontaminated that it needed to berubbed out and remade from scratch.The prime advocate of the pragmaticapproach was Iyad Allawi, a formerhigh-level Baathist who fell out withSaddam and started working for theCIA. The prime advocate of the YearZero approach was Ahmad Chalabi,whose hatred of the Iraqi state for ex-propriating his family's assets duringthe 1958 revolution ran so deep helonged to see the entire country burnedto the ground-everything, that is.-butthe Oil Ministry, which would be thenucleus of the new Iraq, the cluster of

AN IRAQI TELECOMMUNICATIONS CENTER, BOMBED DURING THE WAR

interlinked power struggles, oneamong Iraqi exiles advising the WhiteHouse on its postwar strategy, the oth-er within the White House itself.

As the British historian Dilip Hirohas shown, in Secrets and Lies: Opera-tion 'Iraqi Freedom' and After, the Iraqiexiles pushing for the invasion weredivided, broadly, into two camps. Onone side were "the-pragmatists," whofavored getting rid of Saddam and hisimmediate entourage, securing accessto oil, and slowly introducing free-market reforms. Many of these exileswere part of the State Department's

cells from which an entire nationwould grow. He called this process"de- Baathification."

A parallel battle between pragma-tists and true believers was being wagedwithin the Bush Administration. Thepragmatists were men like Secretaryof State Colin Powell and General Jay

. Garner, the first U.S. envoy to postwarIraq. General Garner's plan wasstraightforward enough: fix the infra-structure, hold quick and dirty elec-tions, leave the shock therapy to theInternational Monetary Fund, andconcentrate on securing U.S. military

REPORT 4S

bases on the model of the Philippines."I think we should look right now atIraq as our coaling station in the Mid-dle East," he told the BBe. He alsoparaphrased T. E. Lawrence, saying,"It's better for them to do it imper-fectly than for us to do' it for themperfectly." On the other side was the

in general, and the two agendas ef-fortlesslymerged. Together, they cameto imagine the invasion of Iraq as akind of Rapture: where the rest of theworld saw death, they saw birth-acountry redeemed through violence,cleansed by fire. Iraq wasn't being de-stroyed by cruise missiles, cluster

A BLAST WALL TO PROTECT AGAINST EXPLOSIONS

usual cast of neoconservatives: VicePresident Dick Cheney, Secretary ofDefense Donald Rumsfeld (who laud-ed Bremer's "sweeping reforms" as"some of the most enlightened andinviting tax and investment laws inthe free world"), Deputy Secretary ofDefense Paul Wolfowitz, and, perhapsmost centrally, Undersecretary of De-fenseDouglasFeith. Whereas the StateDepartment had its Future of Iraq re-port, the neocons had USAID's con-tract with Bearing Point to remakeIraq's economy: in 108 pages, "priva-tization" was mentioned no fewer thanfifty-one times. To the true believers inthe White House, General Gamer'splans for postwar Iraq seemed hope-lessly unambitious. Why settle for amere coaling station when you canhave a model free market? Why settlefor the Philippines when you can havea beacon unto the world?

The Iraqi Year Zeroists made nat-ural allies for the White House neo-conservatives: Chalabi's seething ha-tred of the Baathist state fit nicelywith the neocons' hatred of the state

46 HARPER'S MAGAZINE / SEPTEMBER 2004

bombs, chaos, and looting; it was be-ing born again. April 9, 2003, the day

Baghdad fell, was Day"T One of Year Zero.

, 'hile the war wasbeing waged, itstill wasn't clear whether the pragma-tistsor the YearZeroistswouldbe hand-ed control over occupied Iraq. But thespeed with which the nation was con-quered dramatically increased the neo-cons' political capital, since they hadbeen predicting a "cakewalk" all along.Eight days after George Bush landedon that aircraft carrier under a bannerthat said MISSlON ACCOMPLISHED, thePresident publiclysignedon to the neo-cons' vision for Iraq to become a mod-el corporate state that would open upthe entire region. On May 9, Bush pro-posed the "establishment of a U.S.-Middle East free trade area within adecade"; three days later, Bush sentPaul Bremer to Baghdad to replace JayGamer, who had been on the job foronly three weeks.The messagewasun-equivocal: the pragmatists had lost;Iraq would belong to the believers.

A Reagan-era diplomat turned en-trepreneur, Bremer had recently provenhis ability to transform rubble into goldby waiting exactly one month after theSeptember 11 attacks to launch CrisisConsulting Practice, a security com-pany selling "terrorism risk insurance"to multinationals. Bremer had two lieu-tenants on the economic front: ThomasFoleyand Michael Fleischer, the headsof "private sector development" for theCoalition Provisional Authority(CPA). Foley is a Greenwich, Con-necticut, multimillionaire, a longtimefriend of the Bush family and a Bush-Cheney campaign "pioneer" who hasdescribed Iraq as a modem California ."gold rush." Fleischer, a venture capi-talist, is the brother of former WhiteHouse spokesman Ari Fleischer. Nei-ther man had any high-level diplo-matic experience and both use the termcorporate "turnaround" specialist todescribe what they do. According toFoley, this uniquely qualified them tomanage Iraq's economy because it was"the mother of all turnarounds."

Many of the other CPA postingswere equally ideological. The GreenZone, the city within a city that hous-es the occupation headquarters in Sad-dam's former palace, was filled withYoung Republicans straight out of theHeritage Foundation, all of them giv-en responsibility they could never havedreamed of receiving at home. JayHallen, a twenty-four-year-old whohad applied for a job at the WhiteHouse, was put in charge of launchingBaghdad's new stock exchange. ScottErwin, a twenty-one-year-old formerintern to Dick Cheney, reported in anemail home that "I am assisting Iraqisin the management of finances andbudgeting for the domestic securityforces." The college senior's favoritejob before this one? "My time as anice-cream truck driver." In those earlydays, the Green Zone felt a bit like thePeace Corps, for people who think thePeace Corps is a communist plot. Itwas a chance to sleep on cots, weararmy boots, and cry "incoming"-allwhile being guarded around the clockby real soldiers.

The teams of KPMG accountants,investment bankers, think-tank lifers,and Young Republicans that populatethe Green Zone have much in com-mon with the IMF missions that re-

arrange the economies of developingcountries from the presidential suites ofSheraton hotels the world over. Ex-cept for one rather significant differ-ence: in Iraq they were not negotiatingwith the government to accept their"structural adjustments" in exchangefor a loan; they were the government.

Some small steps were taken, how-ever, to bring Iraq's Ll.Sr-appoinredpoliticians inside. Yegor Gaidar, themastermind of Russia's mid-ninetiesprivatization auction that gave awaythe country's assets to the reigningoligarchs, was invited to share his wis-dom at a conference in Baghdad.Marek Belka, who as finance ministeroversaw the same process in Poland,was brought in as well. The Iraqis whoproved most gifted at mouthing theneocon lines were selected to act aswhat USAID calls local "policy cham-pions"-men like Ahmad al Mukhtar,who told me of his countrymen, "Theyare lazy. The Iraqis by nature, theyare very dependent. ... They will haveto depend on themselves, it is theonly way to survive in the world to-day." Although he has no economicsbackground and his last job was read-ing the English-language news on tele-vision, al Mukhtar was appointed di-rector of foreign relations in theMinistry of Trade and is leading the

charge for Iraq to join the

I World Trade Organization.

had been following the economicfront of the war for almost a yearbefore I decided to go to Iraq. I at-tended the "Rebuilding Iraq" tradeshows, studied Bremer's tax andinvestment laws, met with con-tractors at their home offices inthe United States, interviewed thegovernment officials in Washing-ton who are making the policies.But as I prepared to travel to Iraqin March to see this experiment in free-market utopianism up close, it was be-coming increasingly clear that all wasnot going according to plan. Bremerhad been working on the theory that ifyou build a corporate utopia the cor-porations will come-s-bur where werethey? American multinationals werehappy to accept U.S. taxpayerdollars toreconstruct the phone or electricity sys-tems, but they weren't sinking theirown money into Iraq. There was, as

yet, no McDonald's or Wal-Mart inBaghdad, and even the sales of statefactories,announced soconfidentlyninemonths earlier, had not materialized.

Some of the holdup had to do withthe physical risks of doing business inIraq. But there were other more sig-nificant risksaswell. When Paul Brem-er shredded Iraq's Baathist constitu-tion and replaced it with what TheEconomist greeted approvingly as "thewish list of foreign investors," therewas one small detail he failed to men-tion: It was all completely illegal. TheCPA derived its legal authority fromUnited Nations Security Council Res-olution 1483, passed in May 2003,which recognized the United Statesand Britain as Iraq's legitimate occu-piers. It was this resolution that em-powered Bremer to unilaterally makelaws in Iraq. But the resolution alsostated that the U.s. and Britain must"comply fully with their obligationsunder international law including inparticular the Geneva Conventions of1949 and the Hague Regulations of1907." Both conventions were born asan attempt to curtail the unfortunatehistorical tendency among occupyingpowers to rewrite the rules so that theycan economically strip the nations theycontrol. With this in mind, the con-ventions stipulate that an occupiermust abide by a country's existing lawsunless "absolutely prevented" from do-ing so. They also state that an occupi-er does not own the "public buildings,

INTERNATIONAL LAW PROHIBITS

OCCUPIERS FROM SELLING STATE

ASSETS BUT DOESN'T SAY ANYTHING

ABOUT PUPPET GOVERNMENTS

real estate, forests and agricultural as-sets" of the country it is occupying butis rather their "administrator" and cus-todian, keeping them secure until sov-ereignty is reestablished. This was thetrue threat to the Year Zero plan: sinceAmerica didn't own Iraq's assets r. itcould not legally sell them, whichmeant that after the occupation ended,an Iraqi government could come topower and decide that it wanted tokeep the state companies in public

hands, or, as is the norm in the Gulf re-gion, to bar foreign firms from owning100 percent of national assets. If thathappened, investments made underBremer's rules could be expropriated,leaving firmswith no recourse becausetheir investments had violated inter-national law from the outset.

ByNovember, trade lawyersstartedto advise their corporate clients notto go into Iraq just yet, that it would bebetter to wait until after the transi-tion. Insurance companies were sospooked that not a singleone of the bigfirms would insure investors for "po-litical risk," that high-stakes area ofinsurance law that protects companiesagainst foreign governments turningnationalist or socialist and expropri-ating their investments.

Even the U.S.-appointed Iraqipoliticians, up to now so obedient,were'getting nervous about their ownpolitical futures if they went along withthe privatization plans. Communica-tions Minister Haider al-Abadi toldme about his firstmeeting with Bremer."I said, 'Look, we don't have the man-date to sell any of this. Privatization isa big thing. We have to wait untilthere is an Iraqi government." Min-ister of Industry Mohamad Tofiq waseven more direct: "I am not going to dosomething that isnot legal,so that's it."

Both al-Abadi and Tofiq told meabout a meeting-never reported inthe press-that took place in late Oc-tober 2003. At that gathering the

twenty-five members of Iraq'sGoverning Council as well as thetwenty-five interim ministers de-cided unanimously that theywould not participate in the pri-vatization of Iraq's state-ownedcompanies or of its publicly ownedinfrastructure.

But Bremer didn't give up. In-ternationallaw prohibits occupiers

from selling state assetsthemselves, butit doesn't say anything about the pup-pet governments they appoint. Origi-nally, Bremer had pledged to hand overpower to a directly elected Iraqi gov-ernment, but in early November hewent to Washington for a private meet-ing with President Bushand came backwith a Plan B. On June 30 the occu-pation would officially end-but notreally. It would be replaced by an ap-pointed government, chosen by Wash-

REPORT 47

ington, This government would not bebound by the international laws pre-venting occupiers from selling off stateassets,but it would be bound by an "in-terim constitution," a document thatwould protect Bremer's investment andprivatization laws.

The plan was risky. Bremer's June30 deadline was awfully close, and itwas chosen for a less than ideal reason:so that President Bush could trumpetthe end of Iraq's occupation on thecampaign trail. If everything went ac-cording to plan, Bremer would suc-ceed in forcing a "sovereign" Iraqigovernment to carry out his ille-gal reforms. But if somethingwent wrong, he would have to goahead with the June 30 handoveranyway because by then KarlRove, and not Dick Cheney orDonald Rumsfeld, would be call-ing the shots. And if it came downto a choice between ideology inIraq and the electability of George W.

Bush, everyone knew which

A would win.

t first, Plan B seemed to be righton track. Bremer persuaded the IraqiGoverning Council to agree to every-thing: the new timetable, the interimgovernment, and the interim constitu-tion. He even managed to slip into theconstitution a completely overlookedclause, Article 26. It stated that for theduration of the interim government,"The laws, regulations, orders and di-rectives issued by the Coalition Pro-visional Authority ... shall remain inforce" and could only be changed after .general elections are held.

Bremer had found his legal loop-hole: There would be a window-seven months-when the occupationwas officially over but before generalelections were scheduled to takeplace. Within this window, the Hagueand Geneva Conventions' bans onprivatization would no longer apply,but Bremer's own laws, thanks to Ar-ticle 26, would stand. During theseseven months, foreign investors couldcome to Iraq and sign forty-year con-tracts to buy up Iraqi assets. If a futureelected Iraqi government decided tochange the rules, investors could suefor compensation.

But Bremer had a formidable op-ponent: Grand Ayatollah Ali al Sis-

48 HARPER'S MAGAZINE ISEPTEMBER 2004

tani, the most senior Shia cleric inIraq. al Sistani tried to block Bremer'splan at every tum, calling for .imme-diate direct elections and for the con-stitution to be written after those elec-tions, not before. Both demands, ifmet, would have closed Bremer's pri-vatization window. Then, on March 2,with the Shia members of the Gov-erning Council refusing to sign theinterim constitution, five bombs ex-ploded in front of mosques in Karbalaand Baghdad, killing close to 200 wor-shipers. General John Abizaid, the top

MANY OF THE BUSINESSMEN WHOSE

COMPANIES ARE THREATENED BY

BREMER'S INVESTMENT LAWS HAVE

MADE INVESTMENTS IN THE RESISTANCE

US. commander in Iraq, warned thatthe country was on the verge of civilwar. Frightened by this prospect, alSistani backed down and the Shiapoliticians signed the interim consti-tution. It was a familiar story: theshock of a violent attack paved theway for more shock therapy.

When I arrived in Iraq a week lat-er, the economic project seemed to beback on track. All that remained forBremer was to get his interim consti-tution ratified by a Security Councilresolution, then the nervous lawyersand insurance brokers could relax andthe sell-off of Iraq could finally begin.The CPA, meanwhile, had launcheda major new P.R. offensive designed toreassure investors that Iraq was still asafe and exciting place to do business.The centerpiece of the campaign wasDestination Baghdad Exposition, amassive trade show for potential in-vestors to be held in early April at theBaghdad International Fairgrounds. Itwas the first such event inside Iraq,and the organizers had branded thetrade fair "DBX," as if it were somesort of Mountain Dew-sponsored dirt-bike race. In keeping with the extreme-sports theme, Thomas Foley traveledto Washington to tell a gathering ofexecutives that the risks in Iraq areakin "to skydiving or riding a motor-cycle, which are, to many, very ac-ceptable risks."

But three hours after my arrival inBaghdad, I was finding these reassur-ances extremely hard to believe. I hadnot yet unpacked when my hotel roomwas filledwith debris and the windowsin the lobby were shattered. Down thestreet, the Mount Lebanon Hotel hadjust been bombed, at that point thelargest attack of its kind since the of-ficial end of the war. The next day,another hotel was bombed in Basra,then two Finnish businessmen weremurdered on their way to a meeting inBaghdad. BrigadierGeneral Mark Kim-

mitt finally admitted that therewas a pattern at work: "the ex-tremists have started shifting awayfrom the hard targets ... [and] arenow going out of their way tospecifically target softer targets."The next day, the State Depart-ment updated its travel advisory:U.S. citizens were "stronglywarned against travel to Iraq."

The physical risks of doing businessin Iraq seemed to be spiraling out ofcontrol. This, once again, was not partof the original plan. When Bremer firstarrived in Baghdad, the armed resis-tance was so low that he was able towalk the streets with a minimal secu- ,rity entourage. During his first fourmonths on the job, 109 US. soldierswere killed and 570 were wounded. Inthe followingfour months, when Brem-er's shock therapy had taken effect, thenumber of US. casualties almost dou-bled, with 195 soldierskilled and 1,633wounded. There are many in Iraq whoargue that these events are connect-ed-that Bremer's reforms were thesingle largest factor leading to the riseof armed resistance.

Take, for instance, Bremer's first ca-sualties. The soldiers and workers helaid off without pensions or severancepay didn't all disappear quietly. Manyof them went straight into the muja-hedeen, forming the backbone of thearmed resistance. "Half a million peopleare now worse off, and there you havethe water tap that keeps the insurgencygoing. It's alternative employment,"saysHussain Kubba, head of the promi-nent Iraqi business group Kubba Con-sulting. Some of Bremer's other eco-nomic casualties also have failed to goquietly. It turns out that many of thebusinessmen whose companies arethreatened by Bremer's investment laws

have decided to make investments oftheir own-in the resistance. It ispart-ly their money that keeps fighters inKalashnikovs and RPGs.

These developments present a chal-lenge to the basic logic of shock ther-apy: the neocons were convinced thatif they brought in their reforms quick-ly and ruthlessly, Iraqis would be toostunned to resist. But the shock ap-pears to have had the opposite effect;rather than the predicted paralysis, itjolted many Iraqis into action, much ofit extreme. Haider al-Abadi, Iraq's.minister of communication, puts it thisway: "We know that there are ter-rorists in the country, but previous-ly they were not successful, theywere isolated. Now because thewhole country is unhappy, and a lotof people don't have jobs ... theseterrorists are finding listening ears."

Bremer was now at odds notonly with the Iraqis who opposedhis plans but with U.S military com-manders charged with putting downthe insurgencyhis policieswere feed-ing. Heretical questions began to beraised: instead of laying people off,what if the CPA actually createdjobs for Iraqis! And instead of rush-ing to sell off Iraq's 200 state-owned

firms, how about putting

E them back to work!

rom the start, the neocons run-ning Iraq had shown nothing butdisdain for Iraq's state-ownedcompanies. In keeping with theirYear Zero-apocalyptic glee, whenlooters descended on the factoriesduring the war, U.S. forces didnothing. Sabah Asaad, managingdirector of a refrigerator factory out-side Baghdad, told me that while thelooting was going on, he went to anearby U.S. Army base and beggedfor help. "I asked one of the officersto send two soldiers and a vehicle tohelp me kick out the looters. I wascrying. The officer said, 'Sorry, wecan't do anything, we need an orderfrom President Bush. '" Back inWashington, Donald Rumsfeldshrugged. "Free people are free tomake mistakes and commit crimes

.and do bad things."To see the remains of Asaad's

football-field-size warehouse is to un-derstand why Frank Gehry had an artis-

tic crisis after September 11 and wasbriefly unable to design structures re-sembling the rubble of modem build-ings. Asaad's looted and burned facto-ry looks remarkably like a heavy-metalversion of Gehry's Guggenheim in Bil-bao, Spain, with waves of steel, buck-led by fire, lying in terrifyingly beauti-ful golden heaps. Yet all was not lost."The looters were good-hearted," oneof Asaad's painters told me, explainingthat they left the tools and machinesbehind, "so we could work again." Be-cause the machines are still there, manyfactory managers in Iraq say that it

AFTER THE ATTACK ON THE MOUNT LEBANON HOTEL

would take little for them to return tofull production. They need emergencygenerators to cope with daily black-outs, and they need capital for partsand raw materials. If that happened, itwould have tremendous implicationsfor Iraq's stalled reconstruction, be-cause it would mean that many of thekey materials needed to rebuild-s-ee-ment and steel, bricks and furniture-could be produced inside the country.

But it hasn't happened. Immedi-ately after the nominal end of the war,Congress appropriated $2.5 billion forthe reconstruction of Iraq, followed byan additional $18.4 billion in Octo-ber. Yet as of July 2004, Iraq's state-

owned factories had been pointedlyexcluded from the reconstruction con-tracts. Instead, the billions have allgone to Western companies, with mostof the materials for the reconstructionimported at great expense from abroad.

With unemployment as high as 67percent, the imported products and for-eign workersfloodingacrossthe bordershave become a sourceof tremendous re-sentment in Iraq and yet another opentap fueling the insurgency. And Iraqisdon't have to look far for reminders ofthis injustice; it's on displayin the mostubiquitous symbol of the occupation:

the blast wall. The ten-foot-highslabs of reinforced concrete areeverywhere in Iraq, separating theprotected-the people in upscalehotels, luxury homes, military bases,and, of course, the Green Zone-from the unprotected and exposed.If that wasn't injury enough, all theblast walls are imported, from Kur-distan, Turkey, or even farther afield,this despite the fact that Iraq wasonce a major manufacturer of ce-ment, and could easily be again.There are seventeen state-owned ce-ment factories across the country,but most are idle or working atonly half capacity. According to theMinistry ofIndustry, not one of thesefactories has received a single con-tract to help with the reconstruc-tion, even though they could pro-duce the walls and meet other needs'for cement at a greatly reduced cost.The CPA pays up to $1,000 per im-ported blast wall; local manufactur-ers say they could make them for$100. Minister Tofiq says there is asimple reason why the Americans

refuse to help get Iraq's cement facto-ries running again: among those mak-ing the decisions, "no one believes inthe public sector.'"

This kind of ideological blindnesshas turned Iraq's occupiers into pris-oners of their own policies, hiding be-hind walls that, by their very exis-tence, fuel the rage at the U.S.presence, thereby feeding the need for

• Tofiq did say that several U.S. companieshad expressed strong interest in bu)'ing thestate-owned cement factories. This supportsa widely held belief in Iraq that there is a de-liberate strategy to neglect the state firms sothat they can be sold more cheaply-a prac-tice known as "starve then sell."

REPORT 49

more walls. In Baghdad the concretebarriers have been given a popularnickname: Bremer Walls.

As the insurgency grew, it soon be-came clear that if Bremer went aheadwith his plans to sell off the state com-panies, it could worsen the violence.There was no question that privatiza-tion would require layoffs: the Min-istry of Industry estimates that rough-ly 145,000 workers would have to befired to make the firmsdesirable to in-vestors,with each of those workerssup-porting, on average, five family mem-bers. For Iraq's besieged occupiers thequestion was:Would these shock-ther-

apy casualties accept their~ fate or would they rebel?

~he answer arrived, in rather dra-matic fashion, at one of the largeststate-owned companies, the General

thing to a woman in a white lab coat,and suddenly the factory scrambledinto activity: lights switched on, mo-tors revved up, and workers-stillblinking off sleep-began filling two-liter plastic bottles with pale blue Zahibrand dishwashing liquid.

I asked Nada Ahmed, the woman inthe white coat, why the factory wasn'tworking a few minutes before. She ex-plained that they have only enoughelectricity and materials to run the ma-chines for a couple of hours a day, butwhen guestsarrive-would-be investors,ministry officials,journalists-they getthem going. "For show," she explained.Behind us, a dozen bulky machines satidle, covered in sheets of dusty plasticand secured with duct tape.

In one dark comer of the plant, wecame across an old man hunched overa sack filled with white plastic caps.

A MAN ATTEMPTS TO PROVIDE ELECTRICITY FOR HIS FAMILY, SADR CITY

Company for Vegetable Oils. Thecomplex of six factories in a Baghdadindustrial zone produces cooking oil,hand soap, laundry detergent, shavingcream, and shampoo. At least that iswhat I was told by a receptionist whogave me glossybrochures and calendarsboasting of "modem instruments" and"the latest and most up to date devel-opments in the field of industry." Butwhen I approached the soap factory, Idiscovered a group of workers sleep-ing outside a darkened building. Ourguide rushed ahead, shouting some-

50 HARPER'S MAGAZINE / SEPTEMBER 2004

With a thin metal blade lodged in awedge of wax, he carefully whittleddown the edges of each cap, leaving apile of shavings at his feet. "We don'thave the sparepart for the proper mold,so we have to cut them by hand," hissupervisor explained apologetically."We haven't received any parts fromGermany since the sanctions began." Inoticed that even on the assemblylinesthat were nominally working there wasalmost no mechanization: bottles wereheld under spoutsby hand because con-veyor belts don't convey, lids once

snapped on by machines were beinghammered in place with wooden mal-lets. Even the water for the factory wasdrawn from an outdoor well, hoistedby hand, and carried inside.

The solution proposed by the U.S.occupiers was not to fix the plant butto sell it, and so when Bremer an-nounced the privatization auction backin June 2003 this was among the firstcompanies mentioned. Yet when I vis-ited the factory in March, nobodywanted to talk about the privatizationplan; the mere mention of the word in-side the plant inspired awkward si-lences and meaningful glances. Thisseemed an unnatural amount of sub-text for a soap factory, and I tried to getto the bottom of it when I interviewedthe assistant manager. But the inter-view itselfwas equally odd: I had spenthalf a week setting it up, submittingwritten questions for approval, gettinga signed letter of permission from theminister of industry, being questionedand searched several times. But whenI finally began the interview, the as" .sistant manager refused to tell me hisname or let me record the conversa-tion. "Any manager mentioned in thepress is attacked afterwards," he said.And when I asked whether the com-pany was being sold, he gave thisoblique response: "If the decision wasup to the workers, they are against pri-vatization; but if it's up to the high-ranking officialsand government, thenprivatization is an order and ordersmust be followed."

I left the plant feeling that I knewless than when I'd arrived. But on theway out of the gates, a young securityguard handed my translator a note. Hewanted us to meet him after work at anearby restaurant, "to find out what isreally going on with privatization." Hisname was Mahmud, and he was atwenty-five-year-old with a neat beardand big black eyes. (For his safety, Ihave omitted his last name.) His sto-ry began in July, a few weeks afterBremer's privatization announcement.The company's manager, on his way towork, was shot to death. Press reportsspeculated that the manager was mur-dered because he was in favor of pri-vatizing the plant, but Mahmud wasconvinced that he was killed becausehe opposed the plan. "He would nev-er have sold the factories like the

Americans want. That's why theykilled him."

The dead man was replaced by a newmanager, Mudhfar ]a'far. Shortly aftertaking over, [afar called a meeting withministry officials to discuss selling offthe soap factory, which would involvelaying off two thirds of its employees.Guarding that meeting were severalsecurity officers from the plant. Theylistened closely to [afar's plansand promptly reported the alarm-ing news to their coworkers. "Wewere shocked," Mahmud recalled."If the private sector buysour com-pany, the first thing they woulddo isreduce the staffto make moremoney. And we will be forced intoa very hard destiny, because thefactory is our only way of living."

Frightened by this prospect, a groupof seventeen workers, including Mah-mud, marched into [a'far's office toconfront him on what they had heard."Unfortunately, he wasn't there, onlythe assistant manager, the one youmet," Mahmud told me. A fight brokeout: one worker struck the assistantmanager, and a bodyguard fired threeshots at the workers. The crowd thenattacked the bodyguard, took his gun,and, Mahmud said, "stabbed him witha knife in the back three times. Hespent a month in the hospital." In jan-uary there waseven more violence. Ontheir way to work, [a'far, the manager,and his son were shot and badly in-jured. Mahmud told me he had no ideawho was behind the attack, but I wasstarting to understand whyfactoryman-agers in Iraq try to keep a low profile.

At the end of our meeting, I askedMahmud what would happen if theplant was sold despite the workers'objections. "There are two choices,"he said, looking me in the eye andsmiling kindly. "Either we will set thefactory on fire and let the flames de-vour it to the ground, or we will blowourselves up inside of it. But it will notbe privatized."

If there ever was a moment whenIraqis were too disoriented to resistshock therapy, that moment has defi-nitely passed. Labor relations, likeeverything else in Iraq, has become ablood sport. The violence on thestreets howls at the gates of the facto-ries, threatening to engulf them. Work-ers fear job loss as a death sentence,

and managers, in tum, fear their work-ers, a fact that makes privatization dis-

tinctly more complicated

A than the neocons foresaw.*

s I left the meeting with Mah-mud, I got word that there was a ma-jor demonstration outside the CPAheadquarters. Supporters of the radicalyoung cleric Moqtada al Sadr were

. \

IF EVER THERE WAS A MOMENT WHEN

IRAQIS WERE TOO DISORIENTED TO

RESIST SHOCK THERAPY, THAT MOMENT

HAS DEFINITELY PASSED

protesting the closing of their news-paper, at Hawza, by military police.The CPA accused at Hawza of pub-lishing "false articles" that could "posethe real threat of violence." As an ex-ample, it cited an article that claimedBremer "is pursuing a policy of starv-ing the Iraqi people to make them pre-occupied with procuring their dailybread so they do not have the chanceto demand their political and individ-ual freedoms." To me it sounded lesslike hate literature than a concise sum-mary of Milton Friedman's recipe forshock therapy.

A few days before the newspaperwas shut down, I had gone to Kufaduring Friday prayers to listen to alSadr at his mosque. He had launchedinto a tirade against Bremer's newlysigned interim constitution, calling it"an unjust, terrorist document." Themessage of the sermon was clear:Grand Ayatollah Ali al Sistani mayhave backed down on the constitu-tion, but al Sadr and his supporterswere still determined to fight it-andif they succeeded they would sabotagethe neocons' careful plan to saddleIraq's next government with their"wish list" of laws.With the closing of

* It is in Basra where the connections betweeneconomic reforms and the rise of the resistancewas put in starkest terms. In December [heunion representing oil wOTkers was negotiatingwith the Oil Ministry for a salary increase.Gettingnowhere, the workers offered the min-istry a simple choice: increase their paltrysalaries or they would all join the armed resis-tance. They received a substantial raise.

the newspaper, Bremer was giving alSadr his response: he wasn't negotiat-ing with this young upstart; he'd rathertake him out with force.

When I arrived at the demonstra-tion, the streets were filled with mendressed in black, the soon-to-be leg-endary Mahdi Army. It struck me thatif Mahmud lost his security guard jobat the soap factory, he could be one of

them. That's who al Sadr's footsoldiers are: the young men whohave been shut out of the neo-cons' grand plans for Iraq, whosee no possibilities for work, andwhose neighborhoods have seennone of the promised recon-struction. Bremer has failed theseyoung men, and everywhere thathe has failed, Moqtada al Sadr

has cannily set out to succeed. In Shiaslums from Baghdad to Basra, a net-work of Sadr Centers coordinate akind of shadow reconstruction. Fund-ed through donations, the centers dis-patch electricians to fix power andphone lines, organize local garbagecollection, set up emergency genera-tors, run blood drives, direct trafficwhere the streetlights don't work. Andyes, they organize militias too. Al Sadrtook Bremer's economic casualties,dressed them in black, and gave themrusty Kalashnikovs. His militiamenprotected the mosques and the statefactories when the occupation au-thorities did not, but in some areasthey also went further, zealously en-forcing Islamic law by torching liquorstores and terrorizing women withoutthe veil. Indeed, the astronomical riseof the brand of religious fundamen-talism that al Sadr represents is an-other kind of blowback from Bremer'sshock therapy: if the reconstructionhad provided jobs, security, and ser-vices to Iraqis, al Sadr would havebeen deprived of both his mission andmany of his newfound followers.

At the same time as al Sadr's fat:lowers were shouting "Down withAmerica" outside the Green Zone,something was happening in anotherpart of the country that would changeeverything. Four American mercenarysoldiers were killed in Fallujah, theircharred and dismembered bodies hunglike trophies over the Euphrates. Theattacks would prove a devastating blowfor the neocons, one from which they

REPORT 51

would never recover. With these im-ages, investing in Iraq suddenly didn'tlook anything like a capitalist dream;

it looked like a macabrerJ"" nightmare made real.

~he day I left Baghdad was theworst yet. Fallujah was under siege andBrig. Gen. Kimmitt was threateningto "destroy the al-Mahdi Army." Bythe end, roughly 2,000 Iraqis werekilled in these twin campaigns. I wasdropped off at a security checkpointseveral miles from the airport, thenloaded onto a bus jammed with con-tractors lugging hastily packed bags.Although no one was calling it one,this was an evacuation: over the nextweek 1,500 contractors left Iraq, andsome governments began airliftingtheir citizens out of the country. Onthe bus no one spoke; we all just lis-tened to the mortar fire, craning ournecks to see the red glow. A guy car-rying a KPMG briefcase decided tolighten things up. "So is there busi-ness class on this flight?" he asked thesilent bus. From the back, somebodycalled out, "Not yet."

Indeed, it may be quite a while be-fore business class truly arrives in Iraq.When we landed in Amman, welearned that we had gotten out just intime. That morning three Japanesecivilians were kidnapped and their cap-tors were threatening to burn themalive. Two days later Nicholas Bergwent missing and was not seen againuntil the snuff film surfaced of his be-heading, an even more terrifying mes-sage for U.S. contractors than thecharred bodies in Fallujah. These werethe start of a wave of kidnap pings andkillingsof foreigners,most of them busi-nesspeople, from a rainbow of nations:South Korea, Italy, China, Nepal, Pak-istan, the Philippines, Turkey. By theend of June more than ninety con-tractors were reported dead in Iraq.When seven Turkish contractors werekidnapped in June, their captors askedthe "company to cancel all contractsand pull out employees from Iraq."Many insurance companies stoppedselling life insurance to contractors,and others began to charge premiumsas high as $10,000 a week for a singleWestern executive-s-the same pricesome insurgents reportedly pay for adead American.

52 HARPER'S MAGAZINE I SEPTEMBER 2004

For their part, the organizers ofDBX, the historic Baghdad trade fair,decided to relocate to the lovelytourist city of Diyarbakir in Turkey,"just 250 km from the Iraqi border."An Iraqi landscape, only without thosefrightening Iraqis. Three weeks laterjust fifteen people showed up for aCommerce Department conference inLansing, Michigan, on investing inIraq. Its host, Republican Congress-man Mike Rogers, tried to reassure hisskeptical audience by saying that Iraqis "like a rough neighborhood any-where in America." The foreign in-vestors, the ones who were offeredevery imaginable free-market entice-ment, are clearly not convinced; thereis still no sign of them. Keith Crane,a senior economist at the Rand Cor-poration who has worked for the CPA,put it bluntly: "I don't believe theboard of a multinational companycould approve a major investment inthis environment. If people are shoot-ing at each other, it's just difficult todo business." Hamid [assirn Kharnis,the manager of the largest soft-drinkbottling plant in the region, told mehe can't find any investors, even'though he landed the exclusive rightsto produce Pepsi in central Iraq. "A lotof people have approached us to investin the factory, but people are reallyhesitating now." Khamis said hecouldn't blame them; in five monthshe has survived an attempted assassi-nation, a carjacking, two bombs plant-ed at the entrance of his factory, andthe kidnapping of his son.

Despite having been granted the firstlicense for a foreign bank to operatein Iraq in forty years, HSBC stillhasn't opened any branches, a deci-sion that may mean losing the covet-ed license altogether. Procter & Gam-ble has put its joint venture on hold,and so has General Motors. The U.S.financial backers of the Starwood lux-ury hotel and multiplex have gottencold feet, and Siemens AG has pulledmost staff from Iraq. The bell hasn'trung yet at the Baghdad Stock Ex-change-in fact you can't even usecredit cards in Iraq's cash-only econo-my. New Bridge Strategies, the com-pany that had gushed back in Octoberabout how "a Wal-Mart could takeover the country," issounding distinctlyhumbled. "McDonald's is not opening

anytime soon," company partner EdRogers told the Washington Post. Nei-ther is Wal-Mart. The Financial Times

-has declared Iraq "the most dangerousplace in the world in which to do busi-ness." It's quite an accomplishment: intrying to design the best place in theworld to do business, the neocons havemanaged to create the worst, the mosteloquent indictment yet of the guidinglogic behind deregulated free markets.

The violence has not just kept in-vestors out; it also forced Bremer, be-fore he left, to abandon many of hiscentral economic policies. Privatiza-tion of the state companies is off thetable; instead, several of the state com-panies have been offered up for lease,but only if the investor agreesnot to layoff a single employee. Thousands ofthe state workers that Bremer firedhavebeen rehired, and significant raiseshavebeen handed out in the public sector asa whole. Plans to do away with thefood-ration program have also beenscrapped-it just doesn't seem like agood time to deny millions of Iraqis

the only nutrition on whichrJ"" they can depend.

Le final blow to the neocon dreamcame in the weeks before the hand-over. The White House and the CPAwere rushing to get the U.N. SecurityCouncil to pass a resolution endors-ing their hand over plan. They hadtwisted arms to give the top job to for-mer CIA agent Iyad Allawi, a movethat will ensure that Iraq becomes, atthe very least, the coaling station forU.S. troops that Jay Garner originallyenvisioned. But if major corporate in-vestors were going to come to Iraq inthe future, they would need a strongerguarantee that Bremer's economic lawswould stick. There was only one wayof doing that: the Security Councilresolution had to ratify the interimconstitution, which locked in Bremer'slaws for the duration of the interimgovernment. But al Sistani once againobjected, this time unequivocally, say-ing that the constitution has been "re-jected by the majority of the Iraqipeople." On June 8 the Security Coun-cil unanimously passed a resolutionthat endorsed the hand over plan butmade absolutely no reference to theconstitution. In the face of this far-reaching defeat, George W. Bush eel-

ebrated the resolution as a historic vic-tory, one that came just in time for anelection trail photo op at the G-8 Sum-mit in Georgia.

With Bremer's laws in limbo, Iraqiministers are already talking openlyabout breaking contracts signed by theCPA. Citigroup's loan scheme hasbeen rejected as a misuse of Iraq's oilrevenues. Iraq's communication min-ister is threatening to renegotiate con-tracts with the three communicationsfirms providing the country with itsdisastrously poor cell phone service.And the Lebanese and u.s. compa-nies hired to run the state tele-vision network have been in-formed that they could losetheir licenses because they arenot Iraqi. "We will see if wecan change the contract,"Hamid al-Kifaey,spokespersonfor the Governing Council,said in May. "They have noidea about Iraq." For most in-vestors, this complete lack oflegal certainty simply makesIraq too great a risk.

But while the Iraqi resistancehas managed to scare off thefirst wave of corporate raiders,there's little doubt that theywill rerum. Whatever form thenext Iraqi government takes-nationalist, Islamist, or freemarket-it will inherit a shat-tered nation with a crushing$120 billion debt. Then, as inall poor countries around theworld, men in dark-blue suitsfrom the IMF will appear at thedoor, bearing loans and promis-es of economic boom, provid-ed that certain structural ad-justments are made, which will,of course, be rather painful atfirstbut well worth the sacrificein the end. In fact, the processhas already begun: the IMF ispoised to approve loans worth $2.5-$4.25 billion, pending agreement onthe conditions. After an endless suc-cessionof courageous last stands and fartoo many lost lives, Iraq will become apoor nation like any other, with politi-cians determined to introduce policiesrejected by the vast majority of thepopulation, and all the imperfect com-promises that will entail. The free mar-ket will no doubt come to Iraq, but the

neoconservative dream of transform-ing the country into a free-marketutopia has already died, a casualty of agreater dream-a second term forGeorge W. Bush.

The great historical irony of thecatastrophe unfolding in Iraq is thatthe shock-therapy reforms that weresupposed to create an economicboom that would rebuild the countryhave instead fueled a resistance thatultimately made reconstruction im-possible. Bremer's reforms unleashedforces that the neocons neither pre-dicted nor could hope to control,

SEWAGE FLOWS THROUGH THE STREETS OF BAGHDAD

from armed insurrections inside fac-tories to tens of thousands of unem-ployed young men arming them-selves. These forces have transformedYear Zero in Iraq into the mirror op-posite of what the neocons envi-sioned: not a corporate utopia but aghoulish dystopia, where going to asimple business meeting can get youlynched, burned alive, or beheaded.These dangers are so great that in

Iraq global capitalism has retreated,at least for now. For the neocons, thismust be a shocking development:their ideological belief in greed turnsout to be stronger than greed itself.

Iraq was to the neocons whatAfghanistan was to the Taliban: theone place on Earth where they couldforce everyone to live by the most lit-eral, unyielding interpretation of theirsacred texts. One would think that thebloody results of this experiment wouldinspire a crisis of faith: in the countrywhere they had absolute free reign,where there was 'no local government

to blame, where economic re-forms were introduced at theirmost shocking and most per-fect, they created, instead of amodel free market, a failedstateno right-thinking investorwould touch. And yet theGreen Zone neocons and theirmasters in Washington are nomore likely to reexamine theircore beliefs than the Talibanmullahs were inclined to searchtheir souls when their Islamicstate slid into a debauchedHades of opium and sex slavery.When facts threaten true be-lievers, they simply close theireyes and pray harder.

Which is precisely whatThomas Foley has been doing.The former head of "privatesector development" has leftIraq, a country he had de-scribed as "the mother of allturnarounds," and has accept-ed another turnaround job, asco-chair of George Bush's re-election committee in Con-necticut. On April 30 inWashington he addressed acrowd of entrepreneurs aboutbusiness prospects in Baghdad.It was a tough day to be givingan upbeat speech: that morn-

ing the first photographs had appearedout of Abu Ghraib, including one of ahooded prisoner with electrical wiresattached to his hands. This was an-other kind of shock therapy, far moreliteral than the one Foley had helpedto administer, but not entirely uncon-nected. "Whatever you're seeing, it'snot as bad as it appears," Foley toldthe crowd. "You just need to acceptthat on faith." _

REPORT 53