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| A U.S. soldier watches as a statue of Saddam Hussein is toppled. |
The president was not about to legitimize the United Nations as an engine of reconstruction. In a joint statement released by Bush and Blair at Hillsborough Castle, the two leaders said: "As early as possible, we seek the formation of an Iraqi Interim Authority, a transitional government run by Iraqis. ... [It] will be established first and foremost by the Iraqi people with the help of members of the coalition, and working with the [U.N.] secretary-general." Clearly, the secretary-general, Kofi Annan, would work from the sidelines.
"The U.N. brings to the table a number of very important and useful functions, such as its expertise in child survival, refugee health, immunization, refugee assistance and the world food program, feeding centers and the like. That can be helpful to the Iraqi people," says House International Relations Committee Chairman Henry Hyde (R-Ill.). "But on the governing side it becomes much more problematic," he tells Insight. "Nobody who witnessed the events in the U.N. Security Council of the last three months can be very sanguine about a dominant role for the Security Council in the governing of Iraq. It is quite clear that the commercial conflicts of interest by France and Russia make Security Council participation in the interim governing structure problematic."
Nevertheless, Annan, French President Jacques Chirac, Russian President Vladimir Putin and German Chancellor Gerhard Schroeder moved immediately to try to undermine a dominant role for the coalition forces in Iraq's reconstruction. In New York City, Annan insisted, "I do expect the U.N. to play an important role, whether it is the issue of political facilitation leading to the emergence of a new or interim administration." Annan then appointed a Pakistani, Rafeeuddin Ahmed, as his special adviser on Iraq, with a portfolio including "political facilitation." As Insight went to press, the contentious quartet was to meet in St. Petersburg with Blair to try to leverage its strategy against coalition policy.
In the United States, the controversy has been mirrored by a debate on whether the Department of Defense or the State Department should take the lead role. Sens. Joseph Biden of Delaware, ranking Democrat on the Senate Foreign Relations Committee, and Chuck Hagel of Nebraska, a liberal Republican on the committee, argued implicitly for Foggy Bottom to get the lead role. "We must internationalize our policies for rebuilding a postwar Iraq, even as we retain full control on the security side, ideally with the involvement of the U.N., NATO, the EU [European Union] and countries in the region. The best way to do that is through a new United Nations resolution authorizing the necessary security, humanitarian, reconstruction and political missions in post-conflict Iraq," they announced in an op-ed in the Washington Post.
But Bush has another vision. The White House long has made clear not only its concern about the disintegration and chaos that could result in a postwar vacuum, but also problems likely to result from creation of political and economic structures that would mimic the failed social institutions of neighboring countries. The president quietly has made clear to insiders that he wants none of the outdated, collectivist economic-development concepts that dominate the Security Council and, in fact, most of the U.N. member nations.
White House planners emphasize that reconstruction for the benefit of Iraqis cannot take place unless an economic framework is put in place that actually works. They note that planning for a post-conflict transition based on free-market and republican principles began months ago, first in a White House committee headed by Elliot Abrams and then moving to the Pentagon shop run by Undersecretary of Defense for Policy Douglas Feith.
On Jan. 20, the president set up the Office of Reconstruction and Humanitarian Assistance in the Pentagon under Feith's direction, but in liaison with an interagency working group from the National Security Council, the Office of Management and Budget, the State Department, the Office of the Vice President, Treasury, the Office of the Secretary of Defense, the Joint Chiefs of Staff, U.S. Central Command and the CIA. Later retired three-star general Jay Garner, who had directed humanitarian aid to the Kurds in the early 1990s, was appointed head of the office and sent to Kuwait to work under the commander of the Central Command, Gen. Tommy Franks. In February, Feith laid out the administration's five planning goals in testimony before the Senate Foreign Relations Committee:
- The United States aspires to liberate the country, not occupy it or control the economic resources.
- It must eliminate Iraq's chemical and biological weapons, its nuclear program, related delivery systems and research and production facilities.
- It must eliminate Iraq's terrorist infrastructure.
- It must safeguard the territorial integrity of Iraq.
- It must begin the process of economic and political reconstruction, working to put Iraq on a path to become a prosperous country, establishing a rule of law and other aspects of democracy under a broad-based government that represents the various parts of Iraqi society.
Analysts say the first four of these points clearly require a military-force structure that will keep order and have the authority to uncover the hidden terrorist and WMD resources and secure or destroy them. There is little reason to believe that the United Nations, having failed in its inspection process, would have the will or the power to compel disclosure. But Feith's last point also requires a strong authority to overturn past regimes of socialist economics and central planning while preventing the activities of warlords, gangsters and ethnic or religious coups against an emerging democratic government.
"The first government to replace Saddam could falter quickly if U.S. forces do not intervene to prevent coups," says Patrick Clawson of the Washington Institute for Middle East Policy. "Faced with vaguely similar situations in Korea and South Vietnam in the 1960s, the United States chose an unsuccessful policy of standing aside during coup attempts. If such a policy were adopted in Iraq, a coup could produce a successor regime that renounces commitments made by an initial, more favorable post-Saddam government" to give up WMDs.
Feith took pains to emphasize that U.S. aims did not include seizure of Iraq's oil. "The United States does not steal from other nations," he told the senators. "We did not pillage Japan; on the contrary, we helped rebuild them after World War II. After Desert Storm, we did not use our military power to establish control over the oil resources of Iraq or any other country in the gulf region. The United States pays for whatever we import."
Nevertheless, the success of Iraq's oil industry remains crucial to a successful reconstruction. Despite having one of the largest oil reserves in the world, Iraq has seen its production fall to 2.3 million barrels per day, reduced because of sanctions, aging facilities and mismanagement of field exploitation. Sanctions reduced exports to 5 percent of previous production, nevertheless providing revenues supplying 60 percent of food for the country's people under the U.N.-approved food-for-oil program. That program was suspended on March 17 when U.N. personnel were ordered out of Iraq at the beginning of coalition military action to enforce disarmament. Eleven days later the Security Council reauthorized the program for 45 days, after acrimonious objections from the French that feeding the hungry would somehow "legitimize" coalition actions.
Oil is the key to the rehabilitation of the Iraqi nation, since the next leading export by value is dates. "One reason why Iraq is likely to remain intact is that it is entirely dependent on oil income," writes Clawson. "Control of Iraq's oil income means control of Iraq itself; it is a powerful glue holding the country together. This factor would become all the more important if Iraq were to increase oil production to at least 6 million barrels per day within the first decade after Saddam's removal."
These goals should be attainable if the right conditions of stability and incentive are provided to investors. Despite the fact that Gen. Franks' lightning-strike strategy prevented the torching of all but a handful of the oil wells, it has been estimated that Iraq will need about $20 billion to put the fields back in "working" condition after years of neglect, and about $100 billion for a proper revitalization. Pro-forma estimates indicate that the country could have a cumulative total of $137.5 billion in related revenues within five years. Thus the oil could pay for revitalization and development with significant funds left over for general revenues.
But more is required than just development capital. Basil Rahim, a development banker who is a U.S. citizen of Iraqi heritage, points out that Iraq has been in a state of war for 20 years, it has had 11 years of debilitating sanctions, all productive assets have been owned by the regime since nationalization in 1964 and there is no respect for private property. Although Iraq has a high degree of educational attainment, including a large professional community, it has suffered a serious brain drain and destruction of the middle class. Its currency has collapsed, and a black-market economy built on nepotism, corruption and favoritism flourishes. As a result many infrastructures are in disrepair through lack of maintenance and investment - not only in oil and gas, but in electrical power, health, education and communications.
When the war is over, Iraq will have more than just a shortage of palaces. The challenge, Rahim tells Insight, is to quadruple gross domestic product (GDP) per capita during the next five years to $10,000; then to $23,000 in 10 years. But to do so the Iraq transitional government will have to eliminate the present bottlenecks to growth. To achieve that goal, Iraq must adopt policies not found in the United Nations' economic-development handbooks. Iraq will have to phase out the role of the "state" in setting national priorities, eliminate central planning, establish laws to protect private property, phase in free markets and rebuild the banking sector and capital markets. Rahim says it will require a five-year program of economic deregulation, the stabilization of monetary policy and reinvigoration of the Iraqis' traditional talent for entrepreneurial activity. The demobilization and collapse of the Republican Guard and other forces will require re-engineering of the workforce, especially the military skill base, for private enterprise.
The vast sums spent for military funding and weapons development and the consequent crushing external debt have skewed Iraq's economy and now will require similar sums for rehabilitation and job creation. Unless the thousands formerly employed in the military are given sufficient opportunity for economic survival, they will become a field of the disaffected, producing a harvest of gangs, goons, mobsters and even coup plotters. Rahim says that it is not enough just to set up political and administrative institutions. A stable society will require a legal infrastructure to make businessmen and investors confident of their investments. For the last three decades, Iraq has not been governed by a constitution; rather it has been operating by Revolutionary Command Council fiat.
In addition to a new constitution, Iraq needs a foundation of basic law: a Companies Act (to govern the incorporation and operation of private enterprises); a Banking and Financial Services Act (to ensure transparency and accountability); a Property Act (to prohibit arbitrary seizure or trespass); a Privatization and State Assets Act (which might include widespread distribution of state assets through employee-stock ownership plans); a Free Zones Act (to encourage value-added trade); a Telecommunications Act (to provide a road map to bring Iraq into the information age); and a system of reasonable and enforceable taxation. Rahim urges that the models used in Eastern Europe be examined and assessed as avenues to empower, enrich and invigorate the private sector.
The example offered by the Czech Republic has been highlighted by former Delaware governor Pete du Pont, now policy chairman of the National Center for Policy Analysis. Du Pont hailed the Czech Republic's new president, just sworn in last month. The new president is the former finance and later prime minister, Vaclav Klaus, who with then-president Vaclav Havel restored his country's fortunes after the fall of the communist regime.
Writing in Insight's sister publication, the Washington Times, du Pont draws the contrast between the one-time Marxist agitator who now is the dyspeptic German foreign minister opposed to coalition disarmament activities: "While Joschka Fischer bullied policemen in Frankfurt, Mr. Klaus read Milton Friedman and F.A. Hayek." But more important, Klaus had the courage to put his free-market ideas into action. "His policies - first as finance minister and later as prime minister - brought about a period of strong economic growth," du Pont writes. "In 1989, only 3 percent of Czech GDP was in the private sector. Under Mr. Klaus, the country discarded its massive government structure and quickly outstripped its neighbors. By the end of his term, the country repaid its IMF [International Monetary Funds] loans two years ahead of schedule, gained admission to the Organization of Economic Cooperation and Development and earned an "A" rating from Standard & Poor's. ... As a result of Mr. Klaus' legacy, Czech GDP doubled. The country now has one of the highest per capita income figures in Central Europe, and attracts $5 billion annually in foreign investment." It is a healthy model indeed for the rehabilitation of Iraq.
The Czech Republic was one of eight Eastern European countries that signed a letter supporting U.S. efforts to disarm Saddam. The letter infuriated Chirac and Schroeder, who hinted that the signers might have trouble getting into the EU after all. The French and German leaders were even more infuriated when Secretary of Defense Donald Rumsfeld referred to them as "Old Europe" in an off-the-cuff remark to reporters, contrasting them with the "new Europe" that was supporting the United States. But it is more than politics, say foreign-policy insiders, it is a different concept of the social order. For Old Europe, the threat of a New Europe-style government and society arising in Iraq - and, worse yet, prospering in a free-market economy - without falling under the governance of U.N. experts, is a blow to the foundations of their political systems that they do not want to stand.