Naomi Klein on Iraq’s “Shock Therapy”

There’s an article by Naomi Klein in Britain’s Guardian entitled Iraq is not America’s to Sell, taking a look at the illegal move by the CPA (“Coalition Provisional Authority”) to make Iraq’s economy, except for oil, 100% foreign owned. Well, I should say they’re allowing for this to happen, but there’s nothing stopping Iraqis from buying up what foreigners would want to buy up. Except lack of money, perhaps. From what I hear, it’s not something many Iraqis have at the moment. It reminds me of a scathing article I read back in August called Shock the Monkey by Matt Taibi. The article was written in response to the CPAs hiring of Yegor Gaidar as a consultant to the CPA in the development of Iraq’s post-war transition economy. Taibi’s says:

“Gaidar, former Prime Minister under Boris Yeltsin, is not the most despised man in Russia. That title belongs to the man who succeeded him as the chief architect of the Russian privatization effort, Anatoly Chubais. There is no way to talk about the meaning of this decision to invite Gaidar to Iraq without mentioning Chubais, because in inviting Gaidar, what the U.S. almost certainly was trying to say to the world was: At least we didn’t invite Chubais.”.

He goes on to describe a method of plunder they called “Shock Therapy”, a policy probably directly responsible for the creation of the new Russian oligarchy. Here’s how it goes:

“First, stealing money from people’s pockets. In 1992, Gaidar began implementing a program known as “Shock Therapy” (yet another cruel irony of this business: first Shock and Awe, now Shock Therapy?). Shock Therapy was the brainchild of another Harvard villain, Jeffrey Sachs. In the early phase, this took the form of Gaidar’s move to free the ruble before the end of state-controlled prices. This resulted-as even a child could have predicted it would-in hyperinflation. By the end of 1992, prices in Russia had increased by a factor of 26. Money from 1991 became worthless overnight. Families that had been stuffing mattresses since the siege of Stalingrad saw their life savings disappear in a few weeks.”

By making the ruble worthless overnight, there were only a few people around who could take advantage of the privatisation phase of shock therapy – “the banks that had been licensed by the state to handle currency exchange operations”. The end result was the “…crown jewels of the Russian economy were handed over to a small group of thugs and gangsters at fractions of their actual cost..

This is an incisive and possibly prophetic article (though I understand it was probably not a huge leap on Taibi’s part), written before it was announced by the CPA that Iraq’s entire economy except for oil would be open to 100% foreign ownership. Now, Naomi Klein discusses how this is actually an illegal act under International Law, and that because of this, companies who would like to take part in this plunder cannot be insured because if a duly elected government did come in power in Iraq, there would be nothing stopping them from taking back what was rightfully Iraq’s to begin with. The Haliburton’s of the world need not worry, however, since this is where the US Export-Import Bank comes into play. They’ll insure companies like Haliburton at the expense of the US taxpayer, and if Haliburton loses what it buys in Iraq, it’ll be at the cost of the US taxpayer. She points this out in an depth discussion at Democracy Now!.

A revolution has been taking place over the past 10 years, and its got nothing to do with workers and everything to do with a kind of capitalism that regards theft as a right. As Taibi puts it, “Lenin preached communism but created a dictatorship: This crew preached laissez-faire economics but created a corporate oligarchy in which the state replaced the market.”.

While the Russian oligarchs got away with their version of plunder, it isn’t likely the US-led CPA will get away with their actions, so long as Iraqis manage to live in the democracy they were promised (I know, fat chance that will materialize). They have obligations under the Geneva conventions and Hague regulations as occupying powers. Lets hope Iraqis will eventually get back what is being stolen from them….

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One thought on “Naomi Klein on Iraq’s “Shock Therapy””

  1. Yup. It was prophetic. The only thing they didn’t anticipate was that they’d try going 1 step further this time around, namely by destroying all top-down governance systems and basically expecting the iraqis to regulate their behavior ‘in the marketplace that would automatically emerge’ (where unfairness would be impossible due to perfect information, etc. You name the neoliberal dogma, they assumed it.)
    After all, who cares that the country might turn out (=has turned out) a mess, they just wanted to run an experiment to see if the idea of the unregulated market would indeed emerge out of chaos. Immoral science on the level of the German experiments on prisoner behavior during the Shoah if you ask me.

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