Friday, June 10, 2005

 

4. Creating a Haven for Investment


Possible Undeclared Motives for the Invasion of Iraq

There was certainly no shortage of legislation introduced almost immediately after the invasion to create a haven for foreign (primarily American) investment in Iraq. Almost unrestricted free trade was encouraged by regulations and a negligible amount of rules to regulate investment, to the extent that they were described by The Economist as "the wish list of foreign investors."

Privatization to an unprecedented extent was initiated (but failed). Anyone who was familiar with the extent of state ownership of enterprises in Iraq would have realized the magnitude of ‘economic shock’ that those measures constituted.

[Even to generally ‘right’-leaning people in Iraq, privatizing the ‘ownership’ of the country’s oil is almost unthinkable. Traditionally, oil and (for the past 6000 years) other underground minerals are universally believed to be public property. It makes sense to most people for the government to have revenue from oil for public spending instead of taxing people. This may explain why so many people in Iraq found Bremer’s decrees and the talk to ‘privatize’ oil so offensive… and reacted so violently to them.]

The creation of that haven for foreign investment can be viewed by many well-meaning people as a legitimate means of efficiently rebuilding a ravaged country. Indeed quite a number of sovereign countries go out of their way to lure foreign investment. Russia comes to mind. Dubai is a country being built along these lines.

But this essay is not about the rights or wrongs of such a policy; there is a wide range of well-debated opinions regarding those issues. It is about undeclared motives for the invasion of Iraq.

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No doubt having priority access to a new market in a rich country in need of almost total renovation (oil drilling, refining infrastructure, power generation, roads, hospitals, schools, houses, etc… … ) and a long-deprived consumer sector with an enormous appetite for almost everything (from cars to consumables, computers, children’s toys etc… …) would certainly be quite appealing to numerous American corporations. A potential market size of some 50 billion dollars annually is quite a significant trophy even for the larger American multinationals.

It would be a strong incentive for most US corporations to support such a venture… but to assume that this was a main motive for the invasion is a different thing. It would depend on the influence these groups have on US foreign policy. People of differing political / economic convictions have sharply contrasting views on this.

But, yet again, instability and chaos are definitely not very encouraging for foreign investment. So, if this was a major motive, it is not compatible with the decisions made at the beginning of the occupation that led to chaos and violence… and cannot be seen by any stretch of the imagination to justify so much disruption and antagonism in the region, in the Muslim world and in the world at large, not to mention heightened feelings of mistrust and hatred towards America… unless, again, total incompetence is assumed!

Therefore, this can only be seen either as a failed objective… or as a long-term desirability. In either case it must have been taken into account as yet another beneficial by-product of the intended campaign. How crucial it was as a factor, remains an open question. The question also remains of how influential those various business and industry corporations are on US foreign policy.

In conclusion: Even if the economic benefits (of creating a new market and a safe haven for investment by American corporations) resulting from the invasion of Iraq were not the prime motive for the invasion… they must have been an important factor in favor of the invasion and ensured the support of most large and small US corporations for that invasion.


Comments:

You left out the entire Military_Industrial Complex. $50 bill. is chicken feed to these people.
 
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Madtom,

In this post, I am addressing US corporations’ investment in Iraq. Please bear with me a little. I will be coming round to those people soon!
 
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" A potential market size of some 50 billion dollars annually"

Just out of curiosity, how did you arrive at that number?
 
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"ensured the support of most large and small US corporations for that invasion"

Maybe some large corporations. I would say that the smaller the US corporation, the closer it is to the average US citizen.

CEOs and leadership of a lot of smaller corporations were motivated more by fear and an association between Iraq and 9/11 (that you discussed earlier) than by Iraqi potential economic policy. Very few US corporations actually consider trade outside of the US - even fewer consider trade outside of North America, Europe and East Asia.

If you are putting the reasons in order of least to most important, this has to come below fear of 9/11 and revenge against Muslims and Arabs.

I didn't write this there, but for those around Bush whose primary concern was Bush's political position - which is an unusually strong contingent - the fact that "war presidents" are popular was a very important reason in itself.

Reconstruction of Iraq along ideological lines was more a bonus than a reason. Since they had destroyed the country anyway, they tried to rebuild Iraq in the way that fit their worldview.

To MadTom:

I would guess that $50 billion is about what Iraq's GDP would be now if not for the Kuwait invasion and the following sanctions if it had grown at it previous rate.

At some point after reconstruction Iraq will fully recover and $50 billion is a close enough round estimate to the size of the Iraqi economy.
 
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"I would guess that $50 billion is about what Iraq's GDP would be now if not for the Kuwait invasion and the following sanctions if it had grown at it previous rate."

That sounds resonable, but the host said:
"A potential market size of some 50 billion dollars annually"

How is a potential market a GDP, surly the host was not suggesting that we would take complete control of Iraq's pubic and private investments including all exports. He seem to suggest that there was $5o bill. available as disposable income that US corporations could target.
 
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I would say that once trade barriers are removed, China for example would have access to the $10 trillion US market.

That statement would not mean that China is positioned to sell everything the US consumes and invests in. It just gives an idea of the size of the whole pie from which China in this example is positioned to take a slice.

To the degree that you disagree with it, it strikes me as more of a nitpick than a substantive dispute. Because the host did not himself add the ideas that you have to add to the original statement to make the host's statement wrong.
 
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Well if we give the host the benefit of the doubt and accept his premise:
"Possible Undeclared Motives for the Invasion of Iraq"
Then the actual figures become important. So I'm just trying to find out how accurate those figure are.
 
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This doesn't seem like a serious motive. Liberalization and potential investment opportunities in the medium/long term will be a very positive thing for Iraq, and some brave investors, but they can hardly be considered a cause for war.

Until a secure legal framework is established that can create some expectations for investors, I don't think Iraq will see much of anything beyond high risk tolerant entrepreneurs from neighboring countries.
 
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All of you need to read the article by Thomas P.M. Barnett in Esquire Magazine June 1, 2004

http://www.esquire.com/features/articles/2004/040510_mfe_barnett_1.html
 
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Abu Khaleel,

I do not fully agree with your evaluation ("Even if the economic benefits resulting from the invasion of Iraq were not the prime motive for the invasion… they must have been an important factor in favor of the invasion and ensured the support of most large and small US corporations for that invasion") as far as the "important factor in favour of the invasion" goes.

Again, I suspect that these hoped-for hypothetical economic benefits were important only in securing the support for the invasion from the big economic players (like the big corporations) that back the Bush presidency, and to woo the most 'money driven' part of the American public (small corporations included).

A matter of 'selling' the Iraqi adventure, more than a factor for it.

Then, after the invasion, not just the big corporations, but all those who could and were adventurous enough started trying to get some money out of the situation, like scavenging dogs howling for a little scrap, and not all of them were Americans (think of the so-called 'contractors', i.e. mercenaries, at least twenty thousands of whom are in Iraq at present; and of all the small US -and other Western- firms trying to get some sub-contracts from the US Bremer Admin. and from the big corporations; down to those speculating on the Iraqi dinar!).

The worsening of security in Iraq from 2003 did anyway dampen the appetite of the smaller foreign 'entrepreneurs' or scavengers...
 
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Bottom line, if the US had wanted to make Saddam a friend, it could have. War was not necessary if all the US wanted was 'business.'
 
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The rationale for this seems seriously flawed; there is no sign or indication that American Corporations would urge war in order to create a market for their goods ten to fifteen years down the line, nor that this would ever come up or influence the Government. Certainly the anger of the American people, should anything of this sort come to light would be the ruination of any Corporations involved as well as the Administration.

Other veins of thought are much more productive and worthy of discussion, but this one goes nowhere for me. Costly mistakes have been made, but every well-planned operation in wartime has a chance of going awry, even seriously so. Unfortunate is a poor choice of words, and those living in the terror of the times in Iraq today certainly want to blame someone, but please, not for marketing goods. Hell, China, India and Pakistan can produce what you need a lot cheaper than we can!
 
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Hello Howarde,
"Hell, China, India and Pakistan can produce what you need a lot cheaper than we can!"
I am amazed at how much people outside of the West want Western 'brand' goods as the real thing and hate Third World knock-offs, despite the huge difference in cost. In the US it is somewhat reversed.
Iraq has developed as a welfare state leading to the 95% dependence on oil, so the idea of foreign investment is quite a good idea, if a bit strange to the natives. Yet there was a time when cunning traders from Basra (Sinbad?)connected Europe to Asian markets. A haven for investment is an excellent idea, stupidly mishandled by the neo-cons who had no idea how to properly 'package' it to the Iraqi people. Oops,this seems to be turning into another US mistake topic.
 
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"Oops,this seems to be turning into another US mistake topic."

US mistake? Another one? Oh no - please. And all along I thought it was the terrorists and insurgents creating instability, blasting locals and foreigners to bits, slitting their throats, destroying infrastructure, and in general creating an atmosphere less than ideal for foreign investment. Silly me.

Darn those yanks!
 
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Well, from today's news, it seems Iran is getting a taste of what is going on in Iraq. Perhaps now they'll clamp down on some of these "foreign" terrorists and help the U.S. Stranger things have happened.
 
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