Iraq and Neoliberalism: Creating a New Neoliberal State in The Middle East

Saya Omar Abdulrahman

SLEMANI (AUIS Voice) — Neoliberalism is a doctrine that first began in the 1970s and is run by a ruling class that encloses both economics and politics, and attempts to move the control of economic components from the public sector to the private sector.

The ruling ideas of Neoliberalism are the freedom of the market, privatization, entrepreneurialism of the self, individual liberty, and, most importantly, it introduced a new social order. The neoliberalism project was a plan for the capitalists to preserve their wealth and power.

Iraq is one of the countries where economic failure, mismanagement, and corruption are causing a heavy toll. Since 2003, Iraq has experienced an intense economic and political transformation. From then, the U.S. imposed a neoliberal economic policy on Iraq under the Bush administration. The U.S. transformed Iraq’s economic system from a state-based system to a private-based system.

The main goal of the U.S. for imposing this new economic policy was to integrate Iraq into a global capitalist system through neoliberal policies. The Bush administration appealed to bringing freedom to Iraq as a justification to initiate war in the country.

The U.S. started introducing the system of freedom which they called democracy through the privatization of public enterprises, repatriating foreign profits, and opening of Iraq’s banks to foreign control… etc.

Imposing neoliberalism on Iraq led the country’s economy to complete economic failure and increased the power and wealth of the capitalists through market freedom and individual liberty which produced greater levels of social inequality.

Therefore, introducing neoliberalism to Iraq was to reorganize international capitalism and to restore class power which produced more inequality. Why did the U.S. introduce a system that is not beneficial to Iraq? What did neoliberalism do to the Iraqi people? What are the consequences of neoliberalism on Iraqi everyday life? How did the new economic policy lead Iraq toward economic failure and corruption? This article investigates the answers to these questions.

The integration of Iraq into the global capitalist system occurred through different paths by the United States. The first path that the U.S. took was through trans-nationalizing the state, the second was through forcing the local elites to adopt neoliberal policies on the people, and the third was through military intervention. Along with the U.S., global technocrats, Non-Governmental Organizations (NGOs), government officials, and military officials all together had roles in integrating Iraq into the global economy.

The U.S. integrated Iraq into the global economy by rewriting the country’s legal framework. This occurred during the reign of Lewis Paul Bremer III from May 2003 to June 2004 who headed The Coalition Provision Authority (CPA). The CPA then put the Transitional Administrative Law (TAL) as a precursor to Iraq and a set of 12 regulations and 100 orders.

The neoliberal framework strengthened the foundation of ministries, and government institutions by managing to hide the class relations behind a jurisdiction used as a façade. Bremer’s laws lead to the foundation of a new economic system in Iraq through economic reforms.

For instance, in the preamble to order 51, the CPA stated that “it is determined to create conditions for the development of a free-market economy by encouraging trade and open competition”.

Privatization, patent imposition, free-trade, and other intellectual property regimes were found among Bremer’s orders which lead Iraq under the influence of international financial institutions such as the International Monetary Fund (IMF), The World Bank (WB), and the United Nations Development Program (UNDP) which lead Iraq to create a financial market and opened it to the world of foreign investment.

Neoliberalism consists of four main elements which are privatization, financialization, the management and manipulation of crises, and state redistributions. Privatization aims to sell state-owned enterprises to the citizens. In Iraq privatizing public utilities such as transportation, telecommunications, water, healthcare, and education are all transferred from public assets to private and elite companies.

In return, the state is selling back natural resources to its citizens by selling these resources to private companies. For example, order 65 established the Iraqi Telecommunication and Media Commission which opened the system of competition between the providers without respect for their nationalities. This order led to the privatizing of the telecommunications and media sectors in Iraq.

Financialization, the second main element of neoliberalism is known for its predatory style. Deregulation enabled the financial system to become a center of transfer of income and wealth through thievery, fraud, and predation.

Stock promotion, stock manipulation, and dispossession of assets are properties of a capitalist state’s financial system. For example, the CPA allowed foreign banks to operate in Iraq and allowed the country to create private banks that Iraq had no control over.

Moreover, CPA made Baghdad’s Stock Exchange independent both administratively and financially by replacing the bank with the changed Iraqi Stock Exchange. Therefore, the CPA integrated the Iraqi financial system into the global economy by freeing the country’s financial markets from the state’s regulations and integrating an Iraqi class with global investors by creating an infrastructure that would be able to operate upon transnational investor groups.

The third element is the management and manipulation of crises. In a deliberat act, Iraq’s wealth was transferred to rich countries as a result of mismanagement. For example, under order 81, the CPA gave the same right to foreign seed breeders as Iraqis. This way, Iraqi farmers became dependent on the foreign breeders for agriculture because Iraq went through sanctions and wars, both of which damaged the agricultural sector and the seed banks.

Also, corporate fraud is present in a country where neoliberalism is being imposed. As the Professor of Socio-legal Studies David Whyte says, “In a neoliberalised state, corporate fraud is present regardless of the state’s income state, whether the country is an income-rich or income-poor country”.

In 2003, rich countries were able to manipulate the war in Iraq and, in turn, this enabled them to transfer Iraq’s wealth to their countries. Recall that, besides the siphoning of money outside Iraq, the country’s wealth and assets were also devalued because of the state’s mismanagement.

As a result, economic corruption in Iraq made the country’s economic reconstruction to be stalled and led Iraq to rely on U.S.-based multinational corporations.

The fourth element is state redistributions which occur as a result of unequal income. The more unequal the income distribution is, the greater the redistribution that occurs. Thus, income inequality and state redistribution are inversely related to each other. Iraq practices redistributions through the implementation of privatization which increases income inequality.

The orders of CPA lead to a new and permanent Iraqi constitution which was the final step of making Iraq a globally integrated and trans-nationalized state. After the dissolution of the CPA, the U.S. ambassador, Zalmay Khalilzad, set the parameters of drafting the Iraqi constitution. The final draft of the constitution was a neoliberal constitution that lacked any social guarantees.

Neoliberalism presents itself as a general solution or a package of reform that fits all countries. In the case of Iraq, neoliberalism was a way for the U.S. to colonize Iraq by introducing Iraq into a global capitalist system by transnational practices.

Imposing a neoliberal system on Iraq minimizes the state’s intervention in the economy and privileges the so-called market autonomy, deepens inequality of income, and widens the gap between the highest and lowest social classes. While U.S. policymakers have maintained that neoliberalism would improve Iraq’s economy, the fact on the grounds shows a different reality.

Iraq’s economy is worse than before. Political chaos, incessant violence, and social turmoil are the results of the American neoliberal project in Iraq. The U.S. then was successful in implementing its project through structuring a new economic framework at the cost of the people’s well-being and future.

Now, regardless of the problems that emerge in the state, Iraq is still on the track of neoliberalism and this leads the country toward a globally integrated state if the system is left unchanged.

A message from AUIS Voice editorial staff to our readers:

The Voice is committed to publishing a diversity of opinions. The views expressed in this Editorial are those of the author, and do not necessarily represent the views of the AUIS Voice editorial staff or AUIS in general.

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