The Ruse of Reconstruction

T he June 28 transfer of sovereignty from the Coalition Provisional Authority (CPA) and the Iraqi Governing Council to the newly formed, interim Iraqi government is political prestidigitation: it cedes no real political or economic power to the Iraqis. It acquired virtual, but not actual control of its economy. That, too, for the foreseeable future, will remain under U.S. control. 

While the U.S. shadow government, buttressed by the presence of 140,000 U.S. troops, has been much discussed, the U.S. stranglehold on Iraq’s economic reconstruction has received less attention. 

To date, the $18.6 billion economic reconstruction of Iraq has been marred by its crass design, modeled on simplistic neoliberal precepts, and its implementation, corrupted by cronyism, secretiveness, and CPA-imposed economic reforms. These aspects of the reconstruction not only undermine the effectiveness of the rebuilding, but they evince that, like the war itself, the reconstruction is a ruse. It primarily serves the private financial interests of a handful of elite, U.S. corporations—and the government officials with personal ties to those corporations—at the expense of the U.S. taxpayer and the economic sovereignty, health, and security of Iraq. 

Nearly all of the rebuilding is being done by a handful of U.S. corporations with close personal and business ties to the Bush administration—receiving contracts from the Pentagon, the CPA, the Army Corps of Engineers, and the U.S. Agency for International Development. In the words of Peter Singer of the Brookings Institute, the reconstruction has become the “biggest market for private military services—ever.” Private military services include all nation-building activities, from contracted security personnel to prison interrogators to engineers to cooks. 

From the Administration’s perspective, the privatization of military services and the reconstruction of Iraq promise cost savings through a competitive bidding process. Vice President Cheney, after all, was one of the chief architects of the privatization of military services in the late 1980s—as secretary of defense in the first Bush administration. 

Based on the most recent figures provided by the Brookings Institute Iraq Index, Baghdad still suffers from daily power shortages, telephone services are inadequate, and the rebuilding of schools and hospitals has been slow, expensive, and not particularly successful. While the salaries of teachers and police have surpassed what they earned before the occupation, unemployment ranges from 45 to 70 percent. 

While the disappointing results of the reconstruction are no doubt due in part to the volatile security situation, cronyism has undermined U.S. credibility, systematically relegated Iraqis to subcontractors, and inflated the costs of the reconstruction. A series of reports by the Center for Corporate Policy and the Center for Public Integrity and articles in Newsweek , the New Yorker , and the Nation have exposed the central nodes in the institutionalized network of favoritism and influence peddling that run directly from the deep, government-financed pockets of Vice President Cheney and Undersecretary for Policy Douglas Feith to the overfed corporate bank accounts of Halliburton and its subsidiary, Kellogg, Root and Brown (KRB); Science Applications International Group (SAIC); and Bechtel, among others. 

Prior to becoming vice president, Cheney, as is well known, headed Halliburton from 1995 to 2000. Currently, he still receives more than $150,000 a year in deferred compensation (last year he earned $178,437) and holds $18 million in stock options. Since the start of the reconstruction, Halliburton has been awarded $17 billion in contracts to repair and upgrade oil fields and power plants, supply oil and gasoline to Iraq, and provide meals and laundry services to U.S. troops. As a result, Halliburton stock has increased by 50 percent. According to Stephen Pizzo, writing for the Center for Corporate Policy, the company reported a net profit of $26 million in the second quarter of 2003, in contrast to a $498 million loss in the same period in 2002. In a decision that will only enhance Halliburton’s influence in post-Saddam Iraq, President Bush signed Executive Order 13303 in May 2003. EO 13303 grants sweeping legal immunity to U.S. corporations that gain possession or control of Iraqi oil or oil products. 

Through its connection to Feith, SAIC has won more than $50 million in contracts. Christopher “Ryan” Henry, Feith’s top deputy at the Pentagon, worked as a senior vice president at SAIC until October 2002. In addition, retired Army General Wayne Downing, who commanded the Special Forces in the first Gulf War, sits as a current SAIC board member and formerly worked as an unpaid adviser to Ahmed Chalabi and the Iraqi National Congress. Perhaps the biggest payoff for SAIC comes from its financing of the Iraqi Reconstruction and Development Council (IRDC). Formed as a predecessor to the Iraqi Governing Council two months before the U.S. invasion, SAIC put every member of the IRDC on its payroll. Today, IRDC members hold key positions at each of Iraq’s two dozen ministries.