John Judis, Blood for Oil
New Republic, 00286583, 3/31/2003, Vol. 228, Issue 12
[ This seems to be the referenced Judis article. It's not exactly a secret that oil-based development is problematic; outside the middle east, Nigeria, Mexico, and Venezuela come to mind. Not that any of that could possibly dissuade the PNACers in their grandiose dreams. ]
Will black gold stymie democracy in Iraq?
ASK PESSIMISTS WHY Iraq will never be a democracy, and they most often cite its ethnic and religious divisions. A post-Saddam Hussein Iraq, they warn, could devolve into an Arab Yugoslavia, with open warfare between the Sunnis, Shia, and Kurds, and with Iran, Turkey, and Saudi Arabia taking sides. Optimists like The New Republic's Lawrence F. Kaplan respond that a federation could manage these divisions. Except that federations don't work well in countries where mineral wealth is concentrated in potentially secessionist regions, as the experiences of Nigeria, Sierra Leone, and the former Belgian Congo attest. And most of Iraq's oil lies away from Baghdad, near the Kurdish North and in the Shia South.
But there's another--potentially greater--obstacle to democracy that gets much less attention, perhaps because American policymakers mistakenly see it as an advantage rather than a serious problem. And that is oil itself. As Vice President Dick Cheney put it last weekend, "This is not a nation without resources, and, when it comes time to rebuild and to make the kinds of investments that are going to be required to give them a shot at achieving a truly representative government, ... Iraq starts with significant advantages." On its face, Cheney's statement simply echoes Seymour Martin Lipset's famous adage: "The more well-to-do a nation, the greater its chances to sustain democracy." But, according to political scientists and economic historians, oil states are the exception that prove Lipset's rule: Oil wealth actually hinders, rather than helps, a country's transition to democracy. Newsweek columnist Fareed Zakaria makes this argument in his important new book, The Future of Freedom. If he and the academics are correct, American postwar planners are naive in thinking that oil will facilitate democracy in Iraq. Rather, they will have to figure out how to avoid the authoritarian fate that has befallen almost every other nation that has become dependent on oil.
DEMOCRACY IS BASED, above all, on the separation of civil society from the state. It depends on the existence of an independent realm of social and economic power, protected from arbitrary state power by the rule of law. The components of civil society include what Tocqueville called "civil and political associations"--social clubs, churches, charitable organizations, and political parties--but the most important are private businesses and unions organized in a competitive, capitalist marketplace. It is these institutions--not the formal apparatus of elections--that guarantee popular self-rule by erecting a barrier against lawless government. Without these underpinnings, individuals and groups are absorbed into the all-powerful state, as they were under communist and fascist rule, and still are under many of today's authoritarian regimes. Elections become merely staged rituals.
In the United States, democracy arose largely through the spread of entrepreneurial capitalism in the early nineteenth century, the product of the small farmers and urban craftsmen whom Thomas Jefferson and Andrew Jackson celebrated. In Great Britain, democracy grew out of the millennial struggles among the king, landed aristocracy, business, and, finally, labor--from the Magna Carta to the Glorious Revolution to the electoral-reform laws of the nineteenth and early twentieth century. The struggle for liberty, as Zakaria puts it, preceded democracy. In continental Europe, labor's rise spurred an initial move toward democracy, but it took World War II to sever the link between big business and the state and military that had made fascism possible. In countries such as South Korea and Taiwan today, independent labor, business, and professional organizations are allowing democracy to emerge tentatively from what were once command economies.
It is no coincidence that this transition has not happened in countries with massive oil wealth. Today, Norway is the only full-fledged democracy that depends primarily on oil for its export income. But Norway was already a democracy with an independent civil society when it found oil in the North Sea in the 1960s. The rest of the world's oil nations had authoritarian regimes before they struck black gold. Many of them, including Iraq, Kuwait, and Algeria, were colonial possessions. Some, such as Iraq and Libya, were arbitrarily created by their European conquerors out of separate provinces. Most either already had monarchical traditions of rule or had them imposed on tribal, patrimonial systems by their colonial overseers. The British, for instance, imposed a king on the newly created Iraq in 1921.
Oil wealth didn't undermine these authoritarian structures; it strengthened them. After the colonial powers departed at the end of World War II, oil provided the newly independent governments of the Middle East a veritable windfall--either through concessions or later through outright ownership of their country's oil facilities. With their new income, the states' kings, emirs, and sheiks were no longer dependent on their countries' merchants or workers for tax income. They could finance their governments entirely out of oil revenues. They could also use these oil revenues to buy off the citizenry through social-welfare systems, state jobs, land grants, and lucrative contracts. Their citizens became passive recipients of government largesse--paying no taxes and receiving no representation.
Empowered through oil wealth, Arab governments destroyed what had existed of civil society. The classic case is Kuwait. Kuwait has been ruled by the Al Sabah family since the eighteenth century. In 1899, it became a British protectorate. Kuwait's main export industry in the early twentieth century was pearls, and its most powerful class comprised the merchants who owned the pearl-fishing boats and who transported the jewels to and from Kuwait. The Al Sabah rulers depended on taxes from this merchant class and their boats, giving the merchants considerable power. In her history of Kuwait, Kuwait: The Transformation of an Oil State, Auburn University political scientist Jill Crystal recounts how, when Sheik Mubarak Al Lahab ibn Sabah Al Sabah tried to impose new taxes in 1909, the merchants exited for Bahrain, returning only after the Sheik retracted the tax increase and apologized.
Eventually, an independent civil society might have evolved among the merchants and the sailors they employed. Trade might have nourished an independent business and professional class as it did in Southeast Asia. But, in 1938, the British-American Kuwait Oil Company discovered a massive oil field. That same year, fearing political extinction, the merchants began to organize, choosing a legislative assembly from their ranks and demanding that it have control over how the new oil revenues were disposed. But Sheik Ahmad Al Jaber Al Sabah, buoyed by the prospect of no longer depending on the merchants for state revenue, dissolved the assembly and used his augmented police force--hired with new oil wealth--to arrest the merchants who continued to protest. That was the end of the pearl merchants as an independent force in Kuwaiti politics.
Over the following decades, Kuwait's pearl industry disappeared. Investors found they could make a higher return in oil, and sailors sought lucrative government jobs. The merchants might have disappeared too, but, in the spirit of co-optation that characterizes much of Gulf politics, Kuwaiti rulers retained them by giving them state contracts and by demanding that foreign firms trading with Kuwait employ them as partners. And so, the once feisty, independent merchants became clients of the state.
Kuwait also used its oil wealth to create one of the Arab world's first welfare states. (Unlike in Western Europe, Kuwait's new social protections were motivated by co-optation from above rather than agitation from below. They were premised not on the idea that citizens had rights to the pursuit of happiness that the state must uphold but rather that a happy citizenry would not disturb the state's autocratic rulers.) Kuwait's citizens did not have to pay taxes. The state provided free health care and education, including university education. The government even paid for Kuwaitis to attend universities abroad, and it guaranteed a state job to any Kuwaiti citizen who wanted one. The same thing happened in the other Middle East oil states. As many as 75 percent of Libya's citizens had become state employees by the late '80s. In Saudi Arabia, the government used its oil revenues to buy off potential critics in the fundamentalist Wahhabi clergy. They built mosques and schools and paid the wages of the clerics themselves. University of Vermont political scientist F. Gregory Gause III writes, "Everyone in the religious sector, from the grand mufti through the members of the Higher Council of Ulama and the officials in the religious ministries to the teachers in the religious colleges and the prayer leaders of the local mosques, is an employee of the Saudi state." Whatever opposition could not be bought off has been brutally repressed by oil-funded security services. Iran's Shah, Mohammed Reza Pahlavi, became notorious for his secret police, savak, but his clerical successors merely replaced savak with savama.
In the Middle East, oil wealth provided a shortcut around the centuries-old transition from feudalism to capitalism and from absolutism to democracy that had taken place in Western Europe. The oil states did not have to endure the privations of what Karl Marx called the "primitive accumulation of capital." They didn't have to coerce peasants to leave their land to become impoverished wage-laborers in order to provide profit margins for fledgling entrepreneurs. They didn't have to extract taxes from a reluctant population. And they didn't have to grant democratic rights to a citizenry that grew increasingly restive under these demands. Because of its oil wealth, Libya could go from one of the poorest countries in the world, with a per capita income of $50 in 1960, to one of the well-to-do, with a per capita income of $2000 just a decade later, without exacting sacrifice from its people. Lost in this developmental shortcut, however, was the creation of an active citizenry, a thriving civil society, and a democratic political system.
Today, all of the world's oil nations, except Norway, have either authoritarian governments, such as those in Saudi Arabia and Iraq, or what Carnegie Endowment for International Peace political scientist Marina Ottaway calls "semi-authoritarian" governments. Some of the latter, such as Algeria, Indonesia, and Nigeria, have embraced aspects of democracy only to fall back onto authoritarianism and one-party domination as oil revenues have provided the means for repression and corruption as well as co-optation.
ONE MIGHT ASSUME that, as these oil nations grew wealthier and their surplus profits spilled over into the population and fueled new investments, they would eventually create an independent business class not directly dependent on the state or its oil revenues. That class would in turn provide the basis for an independent civil society and for democracy. That could still happen, but it has not so far, and the reason lies in the peculiar influence that oil wealth exerts.
Oil wealth has not inspired but rather stifled the development of an autonomous bourgeoisie. It has increased citizen incomes, but it has not led to economic growth outside the oil industry. In most oil-rich countries, agriculture and non-oil industries have shrunk or disappeared entirely. Iraq became a net food importer in the early '70s. The Shah of Iran's hopes of creating an industrial giant were dashed. Kuwait invested much of its surplus overseas in other countries' industries rather than trying to develop its own. The reason? Oil wealth creates what economists call the "Dutch disease," after what happened to Dutch industry during the '60s with the discovery of North Sea oil. In oil states, oil revenues boost exports and therefore tend to increase a country's exchange rate. By 1982-1983, after a decade-long oil boom, exchange rates in seven oil countries were 40 percent higher than in 1970-1972. That made these countries' exports more expensive to purchase and therefore undermined any incentive for entrepreneurs to start non-oil industries. Oil wealth also boosts average wages for skilled workers, pricing many fledgling industries out of the world market. Why work on a pearl boat when you can take home ten times as much sitting behind a desk in a government office? Why start a risky new business when you can live off government contracts?
Several Arab governments, facing declining oil revenues, have sought to develop more diversified and independent industries, but they have been constrained by the nature of the states they created. Oil states, which depend on free trade to ensure their export revenues, can't start using tariffs to protect fledgling manufacturing industries. And, when governments in the Gulf states and Libya, like governments in other underdeveloped countries, have tried to privatize government businesses, they have run into popular resistance and resistance from within their own ranks. Gause writes of the Gulf states, "First and foremost, privatization means a loss of at least some measure of control over the economy. [These] regimes, having spent the last three decades consolidating their dominance of their economies, are reluctant to give that up. ... [P]rivatization also means higher prices for consumers used to subsidized goods and services."
As oil revenues have declined since the booms of the '70s, many oil states have been forced to cut back their welfare expenditures. Unemployment has also risen, causing considerable popular unrest, even in the Gulf. But the opposition to authoritarian rule has not come, as it did in the early Western democracies, from an organized bourgeoisie or working class or even from political parties. The business class in these societies remains tied to the state; and the working class is either employed by the state or, as in Kuwait or Saudi Arabia, composed of foreigners with no political rights. Instead, in the Middle East oil states, the realms of potential independence from state power are occupied by the military, the Islamic clergy, and some urban professionals and students. The military has led or attempted coups in Algeria, Libya, and Iraq. And, in Iran and the Gulf states, secular professionals exerted some influence. But, in most of the oil states, the political opposition is rooted in radical or conservative Islam.
As a result, when oil-state governments have opened the door to legal opposition, Islamic radicals have most often taken the lead. In 1977, Ayatollah Ruhollah Khomeini's Islamists took advantage of the Shah's liberalization measures (strongly urged on him by the Carter administration) to launch a movement that toppled him. In 1991, when Algeria held its first multiparty elections since independence, the radical Islamic Salvation Front (FIS) won an overwhelming victory. When Kuwait held elections to a new parliament in 1992, Islamists won the largest bloc of seats. By contrast, the liberal Democratic Forum won only two of 50 seats. One Kuwaiti cleric boasted to The Washington Post last month, "Whenever there is true democracy, the Islamists will prevail."
These radical Islamic movements may have demanded democratic reforms, but, for the most part, they don't believe in democracy. The Islamic movement led by Ayatollah Khomeini that overthrew the Shah in the late '70s proved no less autocratic. After the Algerian military had ousted the Islamic party in a coup, a female Algerian intellectual described the choice between the FIS and the military as being between "the plague or cholera." In the Gulf states today, many of the clerics calling for elected national assemblies remain deeply hostile to the West and to democracy.
Bush administration officials who think they can take the countries of the Middle East directly from oil autocracies to democracies are repeating historic mistakes. Vladimir Lenin and Leon Trotsky thought they could take Russia directly from peasant feudalism to proletarian socialism. Mao Zedong wanted to leap past socialism directly to communism. And Libya's Muammar Qaddafi imagined a stateless utopia on the desert sands. But the history of the Arab oil states shows the difficulty of building democracy in countries that have not yet developed full-fledged capitalist economies. When democratic reforms are introduced in a society that lacks a thriving civil society sustained by independent business- and working-class organizations, reform can create despotic reaction rather than freedom. In the Middle East, monarchy has given way to Libya's neo-communist tyranny and to Iran's theocracy.
IRAQ IS NOT an exception to this sorry history of reform-turned-despotism. After World War I, the British assembled Iraq out of three Ottoman-controlled provinces and installed King Faisal on the throne. In 1958, a military coup toppled King Faisal II. The overthrow of the Hashemite monarchy led to a tyranny--a mix of Stalinism and tribal warlordism--in which, according to historian Charles Tripp, "exclusivity, communal mistrust, patronage, and the exemplary use of violence constitute the main elements." In 1968, Saddam's Baath Party seized power.
Oil played a leading role in this continuing drama. In fact, it has mixed with ethnic infighting to make despotism even nastier in Iraq than in its neighboring oil states. Oil was first discovered in 1927, but it was not until the mid-'50s that oil revenues, based on concessions from the Anglo-American Iraqi Petroleum Company (IPC), furnished most of state revenues. The military, led by General Abd Al Karim Qasim, seized power in 1958 partly on the grounds that the monarchy was too subservient to British oil. The United States helped Saddam and the Baath Party temporarily seize power in 1963 because they feared Qasim would nationalize the IPC ; but, in 1972, after the Baath Party and Saddam had regained power, they turned around and nationalized the IPC themselves, which contributed to a dramatic increase in oil revenues in the '70s.
During the oil boom of the '70s, the Baath Party and Saddam (who consolidated his power in 1979) used their newfound oil wealth to establish patronage networks and buy off the populace with generous social welfare expenditures on health, education, food, and housing. Like other oil states, Iraq created an enormous government bureaucracy that swallowed any hint of independent civil society. From 1958 to 1977 to 1991 the number of Iraqis employed by the state ballooned from 20,000 to 580,000 to 822,000. And these figures don't include the armed forces and pensioners who received all their income from the state. By 1991, according to University of Amsterdam political scientist Isam Al Khafaji, about 40 percent of Iraqi households were directly dependent on the state for their livelihood. But Iraq also devoted almost half of its oil revenue to building an extensive army and police force to fight the Kurds--who in 1969 had attacked the Kirkuk oil fields--and neighboring Iran, which backed the regime's Shia and Kurd opponents.
Iraq's oil income began to decline in the '80s because of the drop in world prices. Iraq also faced huge expenditures from its eight-year war with Iran and later its attempt to annex Kuwait. The decline in Iraq's standard of living, along with the massive death toll exacted by two wars, inspired opposition to Saddam's rule. But, rather than coming from merchants, manufacturers, labor unions, or political parties--the building blocks of a future democracy--it came from dissident Shia networks, secessionist Kurds, and the military. Unlike Iran or the Gulf states, Iraq doesn't have a noticeable, potentially dissident intelligentsia inside the country. Much of its professional class fled during the '80s, and the regime's attempt to diversify Iraqi industry in the late '80s fell flat. On the eve of war, much of the opposition inside Iraq still appears to consist of the Kurds, whose demand for autonomy could fracture the regime, and the Shia, who take their leadership from conservative Islamic clerics. Saddam may also have his critics in the military and in the Sunni-dominated bureaucracy, but they are not the kind of people who are well-suited to lead a democratic transformation.
None of this suggests that the Bush administration, aided by returning Iraqi professionals and Ahmed Chalabi's Iraqi National Congress, could not begin to reconstitute an Iraqi state. But it will not likely be a democratic one. Given the political history of oil states, America's primary objective should not be to immediately hold nominal elections but to gradually create a social and economic infrastructure that can sustain elected governments over the coming decades.
In The Future of Freedom, Zakaria argues that fledgling democracies have been best off with liberal authoritarian regimes like those that initially ruled South Korea and Taiwan and still govern Singapore. These regimes established not only order but also the rule of law and the market. They created the underpinnings for the rise of stable democracy. But, while South Korea and Taiwan had to survive treacherous transitions to democracy, they had the odd benefit of having to fall back on their own entrepreneurs and citizenry for the creation of wealth. A new regime in Baghdad will not only have to overcome a fractious citizenry and potentially hostile neighbors but also what political scientists call the "resource curse." A post-Saddam Iraq will have to do what no other Middle Eastern or African oil state has yet succeeded in doing: building a viable, independent civil society on the economic foundation of black gold. If Cheney doesn't understand the difficulties of doing that now, he will soon. |
