Iraq's Odious Debts

Up against the past

David Waldner
January 23, 2005

In his inaugural address last week, President George W. Bush told Americans never to underestimate “the power of our ideals” and pledged that “one day this untamed fire of freedom will reach the darkest corners of our world.” Surprisingly, the president made no mention of the Iraqi elections, which will have a great deal to say about America’s capacity to transform the world.

Some signs are ominous. Insurgents seeking to derail the elections have engaged in a rapidly escalating campaign of intimidation. Candidates avoid the public campaign trail, and poll watchers have learned to watch their backs.

Election Day next Sunday promises even worse violence. Security measures controlling traffic likely will impede access to the polls; anticipating a wave of car bombs, neighbors of polling stations plan to move away. The indelible blank ink stamped on voters’ thumbs to prevent double-voting could easily mark them for retribution.

Yet Iraqis are expected to vote in large numbers. This requires a courage that inspires hope. But Americans need more than hope to justify the sacrifices that U.S. troops are making: Do the elections suggest that Iraq really is heading to freedom and prosperity?

We might answer that question in part by looking to the past, for this is not the first time that Iraqis have participated in parliamentary politics.

Much of the American public is unaware that from the early 1920s until the revolution of 1958, constitutions, parliaments, political parties, elections, a free press and an active civil society were prominent elements of Iraqi politics.

It all ended, of course, in collosal failure. And some of the same forces that led to the collapse of that system appear to be looming over Iraq today.

To begin with, the first parliamentary elections also occurred after an occupation. A broad-based uprising greeted British occupying authorities in 1920. After putting down the violence at great cost, the British – who had been given a mandate under the League of Nations after World War I – were trapped between the obvious need to prepare Iraq for democracy and their own interest in maintaining influence there at costs acceptable to the British public. Their solution was to create formal institutions of democracy while ensuring that their hand-picked rulers of Iraq would not be constrained by popular will.

The Iraqi king, foreign born and placed on the throne by the British, was surrounded by expatriate military officers who had spent most of their adult lives elsewhere. Having no local constituency and few ties to the countryside, they allied with local elites, especially tribal leaders – who complemented their control in the countryside with seats in parliament.

The parliament was neither accountable to the electorate nor a responsible check on other branches of government. An indirect system of balloting – primary electors voted for secondary electors who then met to choose parliamentary deputies – reduced popular control over the Chamber of Deputies, and the king retained the right to appoint the Senate.

The king also could dissolve parliament, veto legislation and issue ordinances with the force of law. Government ministers were responsible to the king, not to parliament. But still the king was unable to use this crippled parliament as balance to the rising political heft of the army.

The expatriate-tribal leader alliance that dominated parliament enjoyed a monopoly of economic wealth – they owned the lion’s share of the most productive farmland – and weakened that body’s authority with ordinary Iraqis by passing legislation mostly to extend their own interests.

The British, finally, continued to undermine the parliamentary system even after granting Iraq formal independence in 1932. Seeking to maintain control over both Iraq’s foreign policy and its oil, they exercised considerable influence over the king and his cronies, and then re-established direct rule during World War II. British intervention delegitimized constitutional rule in the eyes of Iraqi nationalists.

Between a parliament of landlords and foreign-controlled oil, ordinary Iraqis had no constitutional means to alter their economic status. Yet by the 1930s, they were forming opposition parties, from communists to liberal democrats, that advocated political and economic reform, in a relatively free press and in contentious street politics.

But these elements of civil society, seen by many today as the bulwark of democracy, provoked repression, not accommodation: The political and economic oligarchy was unwilling to permit genuine reform. Over time, Iraqi politics became increasingly less civil until the parliamentary system was replaced by a series of coups and bloody struggles for power that culminated with the dictatorship of Saddam Hussein.

How does this compare with the situation in Iraq today?

The net effect of Hussein’s dictatorship was to further concentrate political and economic power, fragment Iraqi civil society and create an expatriate class of oppositional political elites with foreign backing – the United States in some cases, Iran in others. The current insurgency is, in part, a struggle for power among groups hoping to capture state power and control the disposition of Iraq’s economic wealth.

The profile of the emergent political elite is familiar. Many of the most prominent politicians are expatriates. And even as they broker deals amongst themselves, they seek to win the support of tribal leaders with local influence.

And, as before, the parliament will be compromised in several ways. Given the strength of the insurgency in Sunni-dominated provinces, where many people will not vote, the likely result will be to artificially inflate Shia and Kurdish representation.

The National Assembly then will select a presidential council – one president and two deputies. Sunni representation on the council is likely guaranteed, an arrangement that while pragmatic in spirit, means that the council will not faithfully reflect electoral results. The same is likely to be true of the committee drafting the constitution. Neither is then truly representative.

Accountability is also imperiled. Iraqis will vote for lists, not individual candidates (many of whose names have not even been revealed). The lists themselves reflect bargaining among leaders of the diverse parties. Deputies will thus be highly dependent on party leaders, who will likely become cabinet ministers.

Unless the new Iraqi constitution creates entirely new arrangements – which would require elected deputies to alter the procedures by which they gained office – parliament seems destined to be a rubber stamp, one that will neither check the power of the political elite nor balance the growing political weight of the army and bureaucracy.

Despite exercising the right to vote, the Iraqi public will have little input into issues of great importance to them, for when it come to the status of the Iraqi economy key decisions have already been made.

With remarkably little fanfare, L. Paul Bremer, the former administrator of the occupation, skirted international law prohibiting occupying powers from making major social and economic transformation and signed into law measures that called for the privatization of state-owned enterprises, opened the Iraqi economy to foreign investment, imposed an essentially flat-tax system with rates capped at 15 percent, and suspended almost all tariffs, duties and taxes on international trade, leading to a massive inflow of consumer products that crippled local producers.

Left to their own devices, ordinary Iraqis would not have voted for these measures that are almost guaranteed to recreate long-past inequalities of economic power; indeed, there is good reason to believe that the measures themselves have motivated insurgents and provided them with popular support.

Ceding control over economic policy to foreign interests is all too reminiscent of how British intervention undermined the authority of the earlier parliamentary system.

In principle, of course, an elected Iraqi government can reverse these measures. The prime minister of the interim Iraqi government, Iyad Allawi, has signaled that he will not do so. And if he is not the next prime minister, the United States still will have tremendous influence with subsequent governments.

And if U.S. influence is not sufficient, then Iraq’s many foreign creditors can neatly step in. Major creditors already have made clear that they will forgive portions of Iraq’s enormous external debt only as Iraq signs and adheres to agreements with the International Monetary Fund, the terms of which neatly mirror many of the laws already imposed by Bremer.

Sound familiar? An electoral system that produces a parliament that is neither accountable to the people nor a counter-weight to other government bodies. A political elite of expatriates and tribal leaders. The creation of a new economic oligarchy. Ongoing foreign intervention. We know how all this turned out the first time around.

Can anything be done?

The lesson of the past is that ordinary Iraqis can hold their government accountable and enjoy rights of political equality only in the absence of enormous economic inequality. A new economic and political oligarchy will otherwise be free to use patronage and selective repression to deflect demands from Iraqis distracted by their struggle for daily existence.

Along with security from violence, ordinary Iraqis need security from economic deprivation. That means a massive effort to employ Iraqis and Iraqi companies in reconstruction efforts. That means the erection of social-welfare policies that citizens of wealthy democracies enjoy. And measures to ensure that if privatization occurs, Iraqi wealth – from oil, state industries and agriculture – will be broadly distributed.

Bremer’s orders restructuring the Iraqi economy should be revoked; only sovereign and unconstrained Iraqi governments should decide Iraq’s economic future.

Iraqi debts should be unconditionally forgiven under the doctrine of odious debt. A fledgling Iraqi democracy should not be held responsible for the debts of the dictatorship it replaces; nor should creditors exercise leverage over policy making that nullifies the preferences of the Iraqi electorate.

Caught between an American administration ideologically committed to free markets and foreign contractors wasting reconstruction funds at a prodigious rate while employing few Iraqis, ordinary Iraqis will bravely go to the polls armed mostly with our hopes and our best wishes. We owe them far more than that.

David Waldner is director of Middle East studies and associate professor of government at the University of Virginia and author of “State Building and Late Development.”

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