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Re: [casi] Analysts say market-based economy is reckless in Iraq

In addition:

US occupation authority tramples on Iraqi workers' rights
By Alex Lefebvre
25 November 2003

The legal and economic position of workers in Iraq gives the lie to the Bush
administration's avowed democratic intentions in the occupied country. Few
reports on the subject have appeared in the establishment media. However,
what information has filtered through demonstrates that the American
government has no intention of protecting the democratic rights of the
working population.

Journalist David Bacon, who traveled to Iraq in late October, has written
several articles on the state of labor relations in Iraq, detailing the
anti-democratic methods of the US occupying authority, the Coalition
Provisional Authority (CPA), in dealing with public sector workers, who
constitute the majority of the Iraqi workforce. On October 30 he gave an
interview at, and on November 9 the Los Angeles Times
published an article by Bacon titled "An Anti-Labor Line in the Sand." He
maintains a list of some of his articles on a web site,

According to documents available on the CPA's web site, the CPA last
September imposed a wage scale on public sector workers: $60 per month for
most workers, $120 for a small section of skilled workers, $180 for
administrators and managers, and $400 for high officials.

The monthly $60 payment is roughly equivalent to the salary level for most
government workers during the last years of Saddam Hussein's regime, when
UN-imposed sanctions were devastating the country's economy. However, the
CPA has eliminated profit-sharing and subsidies-notably for food and
housing-that the Hussein regime granted its employees.

As a result, public sector workers in Iraq find it increasingly impossible
to make ends meet. In an article published on November 9 in the Los Angeles
Times, Bacon wrote: "At the Al Daura refinery on the outskirts of
Baghdad-one of three such huge installations in Iraq-the plant manager knows
workers can't live on their salaries, which average $60 per month, so to
keep them working he gives them oil, which their children hawk daily outside
the plant."

The CPA refuses to grant Iraqi workers collective bargaining rights, in
violation of the statutes of the UN's International Labor Organization
(ILO), to which the US is a signatory.

In discussions with Iraqi workers, Bacon discovered that the CPA continues
to enforce a 1987 law passed under Saddam Hussein that bars public sector
workers from organizing unions or engaging in collective bargaining. In an
interview published on, Bacon said: "We met with the
assistant minister of labor, Dr. Nouri Bashad, and his British minder, a
woman named Leslie Findley, and asked them point blank, first of all, if the
Coalition was going to continue enforcing the 1987 law. They refused to
answer that question."

Bacon told that CPA chief Paul Bremer has declared strikes
to be illegal, branding strikers the enemies of US soldiers. In June 2003,
when Bremer cancelled scheduled municipal elections, he issued a list of
"prohibited activities," for the most part targeting the Iraqi media.

According to Bacon, "Item B under prohibited activities is encouraging
anybody to organize any kind of strike or disruption in a factory or any
kind of economically important enterprise. And the punishment for this is
being arrested by the occupation authority and being treated as a prisoner
of war."

US forces have detained union activists engaged in peaceful demonstrations,
including Qasim Hadi and 54 other members of the Union of the Unemployed,
who staged a sit-in in early August to protest US treatment of the
unemployed and the activities of US corporations in Iraq.

Despite a current unemployment rate of 70 to 75 percent, CPA authorities
have not set up any system of unemployment benefits. Bacon told his
interviewer on, "[Assistant Minister of Labor] Bashad went
on a long explanation of the new unemployment benefit system he intended to
set up and concluded by saying, unfortunately, we can't find any country
that's willing to fund it. That includes the United States."

Nor are Iraqi workers the only laborers facing difficult conditions in
US-controlled Iraq. Poorly paid foreign workers brought in from throughout
the region have become essential to running the US administration, despite
Iraq's gigantic unemployment rate. When asked by the British daily Financial
Times about the importation of low-wage foreign workers, Colonel Damon
Walsh, the head of US procurement in Iraq, said: "We don't want to overlook
Iraqis, but we want to protect ourselves. From a force protection
standpoint, Iraqis are more vulnerable to a bad guy influence."

An anonymous Pakistani manager for the Tamimi company, a subcontractor for
Halliburton subsidiary Kellogg, Brown and Root, put it more bluntly: "Iraqis
are a security threat. We cannot depend on them."

Some 1,800 Pakistani, Indian, Bangladeshi, and Nepalese workers receive $3
per day from the Tamimi Company, which organizes 180,000 meals daily for US
forces in the region. These workers are given leave only once every two
years. Tamimi hires "a few dozen" Iraqis for cleaning.

The low wages, poor working conditions and anti-union regulations enforced
by the US occupation forces reflect the general policies of the Bush
administration and its corporate backers in the US and throughout the world.
An organization of labor activists opposed to the invasion of Iraq, USLAW
(US Labor Against the War) published an investigation showing that the 18
main American corporations receiving US government contracts in Iraq were
either non-union companies or largely non-union companies with a history of
opposition to unionization.

The Bush administration's anti-democratic treatment of workers and unions in
Iraq flows from the essential character of the invasion and occupation of
the country. The economic policies of the CPA are in line with an overall
plan to eradicate all vestiges of state control and open the country and its
oil resources to unrestrained exploitation by US-based corporations. In so
far as American companies plan to hire Iraqi workers, they want a labor
market that is stripped of any genuine labor rights or protections, so that
they can subject the work force to brutal levels of exploitation.

The Bush administration's ultimate program for Iraq's economy is to break up
and sell off Iraq's assets to international investors, in the style of the
"shock therapy" that virtually destroyed the economy of the former USSR and
facilitated the theft of industrial and financial assets.

Such considerations underlay the decision of the victorious US forces, after
the fall of the Saddam Hussein regime, to allow looters to plunder
government facilities, including museums holding cultural and historical
treasures dating back thousands of years. Once in control of the country,
the occupying forces ordered mass layoffs, most notably in the army. They
cancelled all tariffs protecting Iraqi industry on June 8, and severely
slashed subsidies to state-owned enterprises. Finally, the CPA passed its
Order 39 on September 21, sanctioning 100 percent foreign ownership of Iraqi
companies and the repatriation of all profits earned by those companies to
investors abroad.

These policies have had a devastating effect on the Iraqi economy, reflected
in the first instance in the country's staggering unemployment rate. Other
indices give further evidence of the economic disaster produced by the US
invasion and occupation.

On October 10, the BBC reported on estimates provided by the World Bank,
which concluded that the Iraqi economy will have shrunk by 22 percent by the
end of this year. Average yearly income per capita will have fallen from
$3,600 in 1980 to $770-$1,020 in 2001 to $450-$610 in 2003. The German
foreign ministry's web site, in an economic analysis of Iraq, indicates that
a mere 12 percent of the country's industrial capacity is currently being

Mark Malloch Brown, administrator of the UN Development Program, told the
Associated Press on November 4 that 60 percent of Iraq's population depends
on UN food shipments. This echoed a June 2003 report by Quest Economics
Database, cited in an August 28 Washington Post article, according to which
"the majority of Iraqis are ... jobless, penniless and dependent on UN food

These food "handouts" were, in fact, paid for by sales of Iraqi oil through
the UN oil-for-food program, which has now come under CPA control. The Post
added that Iraqis often sell some of their food rations to get money for
other necessities, like medicine.

The Bush administration's longer-term plan to sell Iraqi assets to foreign
investors through privatization has run into serious difficulty. One problem
is that such sales violate the 1907 Hague Convention on the laws of war,
since they are illegal under the Iraqi constitution, which US occupying
forces are legally obliged to obey whenever possible. More significantly,
the inability of US forces to put down armed Iraqi resistance has
discouraged potential investors.

An article published in the Boston Globe, detailing tactical objections to
Bush's plans by more liberal-leaning establishment economists such as former
World Bank chief Joseph Stiglitz and the architect of Poland's
post-Stalinist "shock therapy," Jeffrey Sachs, made it clear these plans
could be realized only through plunder. It said: "Given the violence and the
uncertain legality of the sales of state enterprises, the only way foreign
investors will be enticed to enter Iraq is to be allowed to purchase assets
for far less than they are worth, economists say."

The economists with whom the Globe spoke ultimately emitted pious hopes that
"Iraqization" might make privatization more palatable to the Iraqi working
masses. The Globe wrote: "Experts argue instead for a gradual economic
transition that would preserve some subsidies and delay privatization until
a sovereign Iraqi government takes office."

However, even if US forces were able to set up an Iraqi puppet regime, it
would encounter mass hostility to such projects. Not only would they involve
selling off Iraqi state property to foreign investors, but they would
involve the mass impoverishment of large sections of the population. When
David Bacon spoke to the Al Daura refinery's manager, he told Bacon that
with privatization, "I'll have to fire 1,500 [of the refinery's 3,000]
workers. In America, when a company lays people off, there's unemployment
insurance, and they won't die from hunger. If I dismiss employees now, I'm
killing them and their families."

In this context, the CPA views any organization that could mobilize workers
in opposition to the Bush administration's goals with hostility and fear. As
Bacon told his interviewer on, "workers are motivated to
form these unions, both by the fact that they're unhappy over their economic
situation in the wake of the Occupation, but also because they're very
concerned about these plans for privatizations that are being announced
almost daily in the newspapers in Iraq."

See Also:
The New York Times "sours" on Bush's new plan for Iraq
[19 November 2003]
US media sanctions campaign of atrocities in Iraq
[17 November 2003]
US 'turning point' in Iraq--deeper into the abyss
[15 November 2003]
A study in political cowardice:
Congress strips profiteering penalties from $87.5 billion Iraqi occupation
[13 November 2003]

----- Original Message -----
From: "as-ilas" <>
To: "casi" <>
Sent: Tuesday, November 25, 2003 12:22 PM
Subject: [casi] Analysts say market-based economy is reckless in Iraq

> Analysts say market-based economy is reckless in Iraq
> 25.11.2003 [10:17]
>       Sunday, November 23, 2003 - 12:00 AM
>       Top economists are making dire predictions about the Bush
> administration's plan for a shock-therapy style reorganization of Iraq's
> postwar economy -- a policy that met with mixed success across eastern
> Europe after the fall of the Soviet Union a decade ago.
>       Experts say the U.S. plans, which aim to upend Iraq's closed
> economy and convert it to one of the most open, capitalist economies in
> world, would unleash new waves of unrest in an already strife-weary Iraqi
> population. International law forbids occupying powers from making such
> changes, they say.
>       To revive Iraq's wilting economy, U.S. administrators and their
> allies approved a plan to abolish most restrictions on trade, capital
> and foreign investment, allowing, for instance, foreign banks to open
> branches and buy Iraqi banks. It sets the top personal income and
> tax rates at 15 percent, while slashing import tariffs to 5 percent.
>       The new investment law approved last month doesn't address one of
> most contentious issues -- privatization of state-owned companies other
> those dealing with oil -- that the U.S.-led Coalition Provisional
> and its Iraqi allies are considering.
>       Such moves would be controversial anywhere. In Iraq, the
> society-transforming actions would happen in the midst of a guerrilla war,
> and be imposed by occupying powers of
>       disputed legitimacy without Iraqis' consent, economists say.
>       "This is all reckless in the context of Iraq. There's no peace, no
> stability, no rule of law, no court system," said Jeffrey Sachs, director
> Earth Institute at Columbia University and architect of the post-communist
> transformation of Poland's economy. "We don't even have a legal standing
> make the changes we're talking about."
>       A Congressional Research Service report concurs, saying the sale by
> occupying power of state assets violates the 1907 Hague Convention on the
> laws of war. Iraqi law still on the books strictly limits foreign
> investment, the CRS report states.
>       "Most authorities believe that Iraq will need a legitimate
> before permanent changes can be made in its laws, economy and
> states the June report written for Congress.
>       Peter McPherson, former top economic adviser in Iraq, told a
> congressional committee earlier this month that Iraqis have had a
> significant say in economic reforms. He described Iraqi members of an
> economic council as sophisticated and assertive.
>       U.S. occupation officials reviewed the new investment law and
> it did not violate international conventions, McPherson said.
>       The law is "more sweeping, frankly, than anything in the Middle
> McPherson said in an interview with The Associated Press. Even so, he
> "We cannot expect substantial, real growth soon. There is no evidence that
> that happens in a case like this."
>       There is little doubt that Iraq's economy needs a boost.
>       Iraqis' personal incomes have been in free-fall for decades, with
> average compensation shriveling to the equivalent of $600 a year, from
> $3,600 in the early 1980s.
>       The nation, kept alive through subsidies on everything from food to
> gasoline, is straitjacketed by $120 billion in foreign debt, including $8
> billion it owes the United States.
>       Access to electricity, clean water and health care has plummeted.
> than half of Iraqis are unemployed -- which leaves many angry and easily
> recruited into battling the U.S.-led occupation.
>       In such a dire situation, delaying economic reforms isn't a viable
> option, McPherson said, explaining, "It would've deferred recovery."
>       In October, the U.S.-led administration sold cellular telephone
> development rights to three foreign companies and issued a new Iraqi
> currency -- one that doesn't bear an engraving of deposed Iraqi President
> Saddam Hussein.
>       Subsidies for state-run companies have been rolled back, and will be
> cut more next year, McPherson said. The Iraq Central Bank has been granted
> independence, and six foreign banks are being screened for operations
> Iraq, McPherson said.
>       Some private enterprise has sprung up with no government help.
>       On the superhighway that crosses the western desert, convoys of
> trucks can be seen rolling west into Jordan and returning laden with air
> conditioners, refrigerators and the essential portable generators. The
> wind up stacked in the shops and on sidewalks of the teeming commercial
> boulevards of Baghdad and other Iraqi cities.
>       It is the prospect of shock-therapy-style privatization of
> industry that has economists issuing the direst predictions. Before the
> U.S.-led invasion, Iraq counted some 200 state-owned firms that had about
> 500,000 workers making everything from steel pipe to medicine to tires.
> State firms mine sulfur, weave carpets and extract oil and gas. Most are
> still operating and many are overstaffed.
>       There have been discussions about selling off state industries, but
> not the lucrative oil sector, which is too politically sensitive,
> and others said.
>       "We have an enormous record of shock therapy and it's almost
> unambiguously a disaster," said Joseph Stiglitz, a former chief economist
> for the World Bank who now teaches at Columbia University. "There's no
> reason to suspect that the special circumstances in Iraq will make it a
> special case. I think it's a crazy
>       strategy."
>       Given the violence and the uncertain legality of the sales of state
> enterprises, the only way foreign investors will be enticed to enter Iraq
> to be allowed to purchase assets for far less than they are worth,
> economists say.
>       The result, say Sachs, Stiglitz and others, could be deep resentment
> by Iraqis at the stripping and sale of publicly owned companies and
> assets -- mirroring the anger of Russians who saw the bargain sale of
> property create an instant class of tycoons.
>       Experts argue instead for a gradual economic transition that would
> preserve some subsidies and delay privatization until a sovereign Iraqi
> government takes office. Some suggested using oil revenues to fund public
> works jobs aimed at relieving unemployment.
>       Sachs said he made his feelings known to U.S. planners who solicited
> his advice.
>       Shock therapy in post-communist eastern Europe was a quick path to
> capitalism through selling public industries and abolishing subsidies and
> controls on prices and wages. Critics say the process fueled corruption as
> it sparked recessions and deep unemployment, an eventuality U.S. planners
> are keen to avoid in Iraq.
>       To that end, McPherson said the U.S.-led administration in Iraq
> ordered state-owned factories be kept open and workers paid through U.S.
> subsidies. The U.S. taxpayer will also be funding many of those jobs next
> year, McPherson said, through the $18.6 billion reconstruction package
> passed by Congress.
>       Much of Iraq's economic future hinges on oil, with Halliburton Co.
> frenetically renovating the oil infrastructure even as guerrillas blow up
> pipelines and crucial power pylons. Output next year is expected to
> about $12 billion for Iraq's national budget, which, added to the $18.6
> billion in U.S. grants, still leaves the country with a deficit of over $8
> billion, according to the International Monetary Fund.
>       Iraq floats atop the world's second largest oil reserves -- 112
> billion barrels, second only to Saudi Arabia. Bush administration
> insisted before the war that Iraq's oil wealth would cover the country's
> reconstruction -- a prediction that has thus far proven false. The oil
> sector also generates few jobs, which means oil wealth must be funneled
> social programs if it is to benefit most Iraqis.
>       Sachs and others say the best way to jump-start Iraq's economy is to
> keep U.S. involvement to a minimum by transferring power to Iraqis so
> reforms are seen as legitimate.
>       "What the economy needs is a sense of order that an army can't
> impose," Sachs said.
>       This story appeared in The Daily Herald on page E1.
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