Monday, September 27, 2004

Privatization produces poverty. 

The three P's: Privatization produces poverty. This is a rule of thumb that ought not to be forgotten. This very excellent Guardian article on the subject reveals that like America, Britain holds the carrot stick of monetary aid, so that countries will agree to privatize their industries. The results are disastrous:

In Kyrgyzstan, Arthur Andersen acted as advisers and the electricity prices were increased to make the state company more attractive to potential foreign buyers. This led to more than half of the residents of the capital, Bishkek, being unable to pay their bills.
· In China, PricewaterhouseCoopers led a consortium of advisers to the Chengdu city government on its water supply service, the contract for which was eventually awarded to the French water giant Vivendi, and the Japanese Marubeni Corporation for $106.5m. PricewaterhouseCoopers then acted as adviser to Vivendi and Marubeni in their bid for a water treatment plant in Beijing.
· In Malaysia, PricewaterhouseCoopers advised the government on privatisation of the sewerage system, completed in 1993. After complaints over rising charges and falling services, the government took the system back into public ownership in 2001
· In South Africa, KwaZulu Natal department of health entered into a 15-year public private partnership for the Inkosi Albert Luthuli hospital in a deal worth $75m in 2001.
"There is now a substantial body of evidence to show that privatisation of public services threatens to expose millions of people in developing countries to increased poverty," concludes the report.

Riverbend of Baghdad Burning comments on the newly privatized electricity in her country, Iraq:

You know things are really going downhill in Iraq, when the Bush speech-writers have to recycle his old speeches. Listening to him yesterday, one might think he was simply copying and pasting bits and pieces from the older stuff. My favorite part was when he claimed, "Electricity has been restored above pre-war levels..." Even E. had to laugh at that one. A few days ago, most of Baghdad was in the dark for over 24 hours and lately, on our better days, we get about 12 hours of electricity. Bush got it wrong (or Allawi explained it to incorrectly)- the electricity is drastically less than pre-war levels, but the electricity BILL is way above pre-war levels. Congratulations Iraqis on THAT!! Our electricity bill was painful last month. Before the war, Iraqis might pay an average of around 5,000 Iraqi Dinars a month for electricity (the equivalent back then of $2.50) - summer or winter. Now, it's quite common to get bills above 70,000 Iraqi Dinars... for half-time electricity.

Then there is the very excellent Naomi Klein article recently published in Harper's, and reprinted on Common
Dreams.org: Klein's article is brilliant. She lays out the evidence regarding the privatization of Iraq. Indeed, she puts forth the argument that what Bremer did, on behalf of the U.S., was to introduce a radical, reactionary privatization agenda in Iraq, more radical than any ever seen in the history of civilization as we know it:

L. Paul Bremer, who led the U.S. occupation of Iraq from May 2, 2003, until he caught an early flight out of Baghdad on June 28, admits that when he arrived, “Baghdad was on fire, literally, as I drove in from the airport.” But before the fires from the “shock and awe” military onslaught were even extinguished, Bremer unleashed his shock therapy, pushing through more wrenching changes in one sweltering summer than the International Monetary Fund has managed to enact over three decades in Latin America. Joseph Stiglitz, Nobel laureate and former chief economist at the World Bank, describes Bremer’s reforms as “an even more radical form of shock therapy than pursued in the former Soviet world.”
The tone of Bremer’s tenure was set with his first major act on the job: he fired 500,000 state workers, most of them soldiers, but also doctors, nurses, teachers, publishers, and printers. Next, he flung open the country’s borders to absolutely unrestricted imports: no tariffs, no duties, no inspections, no taxes. Iraq, Bremer declared two weeks after he arrived, was “open for business.”
One month later, Bremer unveiled the centerpiece of his reforms. Before the invasion, Iraq’s non-oil-related economy had been dominated by 200 state-owned companies, which produced everything from cement to paper to washing machines. In June, Bremer flew to an economic summit in Jordan and announced that these firms would be privatized immediately. “Getting inefficient state enterprises into private hands,” he said, “is essential for Iraq’s economic recovery.” It would be the largest state liquidation sale since the collapse of the Soviet Union.
But Bremer’s economic engineering had only just begun. In September, to entice foreign investors to come to Iraq, he enacted a radical set of laws unprecedented in their generosity to multinational corporations. There was Order 37, which lowered Iraq’s corporate tax rate from roughly 40 percent to a flat 15 percent. There was Order 39, which allowed foreign companies to own 100 percent of Iraqi assets outside of the natural-resource sector. Even better, investors could take 100 percent of the profits they made in Iraq out of the country; they would not be required to reinvest and they would not be taxed. Under Order 39, they could sign leases and contracts that would last for forty years. Order 40 welcomed foreign banks to Iraq under the same favorable terms. All that remained of Saddam Hussein’s economic policies was a law restricting trade unions and collective bargaining.
If these policies sound familiar, it’s because they are the same ones multinationals around the world lobby for from national governments and in international trade agreements. But while these reforms are only ever enacted in part, or in fits and starts, Bremer delivered them all, all at once. Overnight, Iraq went from being the most isolated country in the world to being, on paper, its widest-open market.