Neoliberalism, Creative Destruction and the Economic Reconstruction of Iraq, 2003-2010
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Neoliberalism, Creative Destruction and the Economic Reconstruction of Iraq, 2003-2010 Item Type Electronic Thesis; text Authors Flannes, Matthew William Publisher The University of Arizona. Rights Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. Download date 01/10/2021 02:20:49 Link to Item http://hdl.handle.net/10150/144372 NEOLIBERALISM, CREATIVE DESTRUCTION AND THE ECONOMIC RECONSTRUCTION OF IRAQ, 2003-2010 by Matthew William Flannes ________________________ Copyright © Matthew William Flannes 2011 A Thesis Submitted to the Faculty of the Department of Near Eastern Studies In Partial Fulfillment of the Requirements For the Degree of Masters of Arts In the Graduate College THE UNIVERSITY OF ARIZONA 2011 2 STATEMENT BY AUTHOR This thesis has been submitted in partial fulfillment of requirements for an advanced degree at The University of Arizona and is deposited in the University Library to be made available to borrowers under rules of the Library. Brief quotations from this thesis are allowable without special permission, provided that accurate acknowledgment of source is made. Requests for permission for extended quotation from or reproduction of this manuscript in whole or in part may be granted by the copyright holder. SIGNED: ______________________________ Matthew W. Flannes APPROVAL BY THESIS DIRECTOR This thesis has been approved on the date shown below: __________________________________ __May 2, 2011_____ Leila O. Hudson Date Associate Professor of Near Eastern Studies 3 ACKNOWLEDGEMENTS I would first like to thank the members of my thesis advisory committee: Dr. Leila Hudson, David Dunford and Dr. Maha Nassar. This thesis would not have been possible without your guidance throughout the past year. Your advice, patience and consistent availability helped me turn this project from a series of ideas into a finished product that I am proud to call my own. I would also like to thank the following friends and colleagues for your support, both of me personally and my work, throughout the past year: Dylan Baun, Colin Owens, Tia Maitra and Nicole Zaleski. You were all integral to this process, whether for your valuable recommendations and criticisms, or simply providing an ear to listen after a long night of researching and writing. I could not have been able to get through this process without you all. Finally, to my family: Mom, Dad and Jon. Without your love and support I would not be where I am today. You never stopped encouraging me to learn, explore and question. For this I am forever indebted to you. 4 TABLE OF CONTENTS ABSTRACT……….………………………………………………………………………6 INTRODUCTION.............................................................................................................7 CHAPTER ONE: POST-WAR ECONOMIC MODELS: THE CREATION OF WEALTH AND THE DESTRUCTION OF INEFFICIENCY……………….…………13 The Marshall Plan and the Role of the State in Nation (Re)building............................15 Neoliberalism: Removing the Shackles of Statism………………………………...….23 Joseph Schumpeter and the Lure of Creative Destruction………….…………………29 CHAPTER TWO: IRAQ DURING THE BIPOLAR ORDER OF THE COLD WAR……………………………………………………….…37 US-Iraqi Relations Amidst the Cold War......................................................................38 The Iranian Revolution and its Enduring Economic and Political Shock Waves..........42 The First War of the New World Order…………………………………………….…45 Containment: Cold War Historical Model in a Time of American Hegemony?...........49 Sanctions: A Poor Example of US Power?....................................................................51 New Calls for the Overthrow of Saddam Emerge………………...…………………..54 George W. Bush Administration: A New Approach………………………..……...…56 CHAPTER THREE: POST-2003 IRAQ: THE FIRST CONVERGENCE OF NEOLIBERALISM AND CREATIVE DESTRUCTION?..............................................59 September 11th and its Ideological Implications………………………………………60 Post-9/11 Planning of the Iraq War……………………...……………………………63 The Public Push for War and Nascent Plan for Post-Hostilities….…………………...66 Justifications, War and its Aftermath……………………………………………….…70 The Creative Destruction of Iraq: CPA Orders One and Two………….……………..75 5 TABLE OF CONTENTS-CONTINUED Iraq’s Shock Therapy: the CPA and Neoliberal Economic Reforms...……………...…77 CHAPTER FOUR: THE LEGACY OF NEOLIBERALISM IN IRAQ AND BEYOND, 2004-2011………………………………………………………………………………..85 Iraqi and American Retreat From the Neoliberal CPA Orders………….…………….86 The Legacy of the CPA……………………………………………………………..…90 The Insurgency as a Response to Neoliberalism?..........................................................92 Contractors and the Privatization of War………………………………………..…….94 A New Way Forward: Counterinsurgency and the Resurgence of the State……….…98 Arab Response to Neoliberalism…...……………………………………………..…101 The Rebirth of History?...............................................................................................102 REFERENCES…..………..……………………………………………………………109 6 ABSTRACT The Marshall Plan and post-2003 Iraq represent the two largest US-led, post-war reconstruction projects in history, yet the two cases embody the implementation of two nearly opposite political ideologies. Whereas proponents of the Marshall Plan emphasized the supremacy of the state in reconstruction, Bush administration officials felt that neoliberal market reforms, aided by the opportunistic nature of Schumpetarian creative destruction, were the only legitimate steps required in post-war Iraq. Such discrepancies were largely due to the changing role of the US in the international arena; by the end of the Cold War, Washington was able to take a unilateral approach abroad and more actively push for political and free market reforms. Yet the sectarian chaos that quickly engulfed Iraq and the economic rise of China have all but delegitimized neoliberalism and effectively reopened the issue of the role of the marketplace versus the state in the 21st century. 7 “Great powers do not just mind their own business.” ~Condoleezza Rice “Promoting the National Interest,” Foreign Policy, 2000 “We would rather roll up our sleeves and move heaven and earth to make a workable system of cooperative free enterprise triumph in Iraq in its hour of tremendous need.” ~Future of Iraq Project “History will judge the war against Iraq not by the brilliance of its military execution, but by the effectiveness of its post-hostilities activities.” ~Jay Garner “A Unified Mission Plan for Post-Hostilities Iraq” Introduction The economic reconstruction of Iraq following the collapse of the Ba‘athist regime in 2003 has been called the largest United States-led reconstruction effort since the Second World War.1 Indeed, in terms of capital investment, such an assertion would be apt. Between Fiscal Years 2003-2008, the United States provided $28.9 billion in total assistance for Iraq, whereas it is estimated that $29.3 billion was allocated for West German assistance between 1945-1952 (adjusted for inflation).2 However, despite similar levels of financial support, these two examples of massive American-led reconstruction efforts were motivated by economic philosophies 1 Tim Jacoby. "Hegemony, Modernisation and Post-War Reconstruction." Global Society: Journal Of Interdisciplinary International Relations. 21, no. 4 (2007): 522. 2 Nina Serafino, Curt Tarnoff, and Dick K. Nanto. U.S. Occupation Assistance Iraq, Germany and Japan Compared. Washington, D.C.: Congressional Research Service, Library of Congress (2006). West Germany will be subsequently referred to as Germany for the remainder of this thesis unless differentiated from its eastern counterpart. 8 that were nearly diametrically opposed: officials guiding the Marshall Plan argued that the centralized powers of the state were the most effective in bringing Europe out of economic and political crisis in the post-war era by pushing back on the influences of communism through state-sponsored development and employment programs. On the other hand, neoconservative authors of the 2003 Iraq war believed that an overly burdensome public sector had stymied economic growth in Iraq for decades, and the sole mechanism needed to unleash the forces of productivity and wealth production in the oil- rich nation was a strong private sector, one that could only be achieved through neoliberal reforms.3 These reforms, and the opportunities they would provide for the Iraqi economy and its foreign investors, were catalyzed by the phenomenon of Schumpeterian creative destruction, typified by the looting that decimated Baghdad after the fall of Saddam Hussein, as well as the massive layoffs of Iraqis by the Coalition Provisional Authority (CPA) as part of its policies of economic reform. Indeed, the lack of a concrete plan and adequate preparation for post-war reconstruction allowed for the implementation of the ideologies of creative destruction and neoliberalism, both of which thrive in cases of little state planning. Whereas the architects of the Marshall Plan saw the free market as the desired end to economic and social reform, economic liberalization was seen as both the means and 3 Neoliberalism can loosely be defined as a set of economic principles and policies that promote the privatization, trade liberalization and the opening of