Great, great, Article!
Rebuilding Iraq Is ... Nothing a Few Middle-Class Guys Couldn't Solve
By JOHN TIERNEY
John Tierney, who spent several months reporting in Iraq, is a correspondent in the Times's Washington bureau.
Before getting into the many reasons freedom is doomed in Iraq, consider a cheery counterexample. If you believe the political-science dictum that the bourgeoisie is the essential first ingredient for democracy, then there is at least one bit of good news in Baghdad today. Nader Hindo has come back to do business.
Never mind the car bombs, the missile attacks, the kidnappings, the blackouts, the ransacked buildings and bombed-out phone system. To Hindo these are minor obstacles compared with what he saw growing up in Baghdad under Saddam Hussein. His mother, Nidhal, the owner of a document-translation service, was regularly harassed and shaken down by the ''economic security'' police. His father, Wathiq, who tried importing liquor and cigarettes, was muscled out of business by Uday Hussein and nearly executed for being ''an economic saboteur.'' When Hindo finished high school in 1992, he left his family in Baghdad for the University of Illinois with no intention of returning. After studying computer science, he became a partner in a dot-com selling mortgage software to banks. When American troops entered Baghdad, he was 29 years old and living in a Miami condo with a swimming pool and a view of the ocean -- bourgeois bliss in South Beach.
Now Hindo is back in Baghdad, which starts to look like capitalism's promised land when he takes you around in his S.U.V. to show his projects. He is running an Internet service, supplying computers and satellite telephone service to three dozen hotels and businesses, plus he's negotiating to rebuild part of the national phone system. These are just his sideline businesses. He has got several bigger ventures going with his father. Together they're selling power generators to the United States Army, building materials to contractors and drilling equipment to the oil industry. They're overseeing 250 workers busy on the reconstruction of a dozen mansions, ministries and other buildings. On weekends, they scout the mountains and lakes of Kurdistan, where they're planning to build resort hotels.
Yes, resort hotels in Iraq. The country is not yet a tourist destination, but the Hindos figure it's just a matter of time. They'll start with low-budget weekend getaway hotels for American soldiers and Iraqis. (Wathiq's market research, which consists of interviewing cabdrivers, convinces him that a working-class Iraqi can afford to spend $100 for a once-a-year vacation.) Then they'll work up to luxury resorts for foreign tourists once there's improved security -- which, of course, is another business of theirs. They are supplying nearly 500 security guards and personal bodyguards to government ministries, foreign companies, embassies, museums and theaters.
''We can definitely solve the security problems,'' Hindo says. ''We
just need to have more police and security guards on the streets -- mainly guards, because nobody wants to create a huge armed force under the control of any one political entity. It's safer to have the work done by multiple private security companies.''
The Hindos, who use profits from existing ventures to finance new ones, are so confident in Iraq's new private sector that they've published trial issues of a journal covering business. It may be a while before their publication has a broad readership -- most foreign companies are still reluctant to invest in Iraq -- but the Hindos are not as crazy as you might think. News reports of car bombs and missile attacks give Americans the sense that Iraq is steadily descending into chaos, but these attacks don't affect most Iraqis, especially outside Baghdad and the ''Sunni triangle.'' With more police on the streets, people have been returning to Baghdad's bazaars and restaurants. Most Iraqis are still unemployed and poor, but a certain segment of the population -- those working on American-bankrolled reconstruction projects or public employees who have received American-financed salary increases -- suddenly have a lot more disposable income. The opening of the borders and slashing of tariffs has set off a run on the emblems of middle-class materialism: cars, stoves, refrigerators, televisions and satellite dishes. Pollsters have repeatedly found that most Iraqis expect better times ahead. In a national survey of nearly 400 small- and medium-size businesses conducted in August by the Iraqi American Chamber of Commerce and Industry, a majority of business owners said they expected their own companies to expand along with the national economy.
''There are so many opportunities here,'' Nader says. ''We're still dealing with a sleeping class of people. After Saddam, Iraqis aren't used to getting things done quickly. The concept of a business appointment still has no meaning here. Because the phones have been so bad, people just show up and expect you to talk to them whenever they arrive. But they'll learn. We can have a resurgence of the middle class. Iraqis have a work ethic. They're businessmen by nature.''
You hear similar optimism from the American business czar George Wolfe, director of economic policy for the occupation authority. ''Before Saddam's reign, this appears to have been a well-educated, professional, entrepreneurial economy,'' he says. ''Although a generation has been damaged by Saddam's reign, the culture is relatively entrepreneurial. That will manifest itself again as we move forward.''
It's comforting to think that entrepreneurs like Nader Hindo will succeed, because if the bourgeoisie can become free and prosperous, so should Iraq. Even Karl Marx admired capitalists' revolutionary powers. In ''The Communist Manifesto,'' he wrote that within barely a century the bourgeoisie had ''created more massive and more colossal productive forces than have all preceding generations together.'' The rise of a burgher class to counterbalance the power of the state was the essential precursor to freedom. As Barrington Moore Jr. put it ''Social Origins of Dictatorship and Democracy,'' his 1966 poli-sci classic: ''No bourgeois, no democracy.''
The precise correlation between wealth and democracy was made nearly half a century ago by the political scientist Seymour Lipset, who concluded that the ''more well-to-do a nation, the greater the chance it will sustain democracy.'' This was recently confirmed by Adam Przeworski, a professor of politics at New York University. After surveying five decades of democratic experiments around the world, he and other political scientists found that democracy has a good chance of surviving if a country's per-capita annual income exceeds $3,000. Once income reaches $6,000 the odds of survival are better than 99 percent.
Iraq, unfortunately, is well below those levels, with a per-capita income of between $1,500 and $2,400. And the odds of democracy look worse still when you consider its location. While the merchant middle class has been spreading freedom in the rest of the world, the Arab sphere in the Middle East and North Africa remains the only region without a single democracy. Middle Easterners don't lack commercial instincts: they created the Ur trading center near Baghdad 6,000 years ago, and their bazaars are legendary. A thousand years ago, without the protection of international law, Middle Eastern traders operated from one end of the Mediterranean to the other. Muhammad was himself a merchant. But instead of evolving into free societies with an entrepreneurial middle class, the countries of the Middle East became despotic regimes with moribund economies exporting little besides carpets and oil (and emigrants who ran businesses abroad). In international comparative surveys, Middle Eastern countries score high in illiteracy and perceptions of corruption, low in economic growth and freedom.
Some scholars have taken to blaming Islam -- or, more precisely, a current fundamentalist interpretation of Islam. While Muhammad and the Koran were not hostile to business enterprise, this theory goes, clerics have interpreted Islamic theology to exclude foreign ideas and outlaw innovation.
Other scholars say the problem is not so much Islam as Arab culture, in particular what sociologists call ''amoral familism.'' The term was coined in the 1950's to describe the moral code in southern Italy: paramount loyalty to your own family at the expense of the rest of society. The resulting lack of trust in strangers was blamed for the economic gap between northern and southern Italy. In the prosperous north, large companies could expect loyalty from their employees and fair treatment from judges and other public officials, but in the south family loyalties led to nepotism, corruption and an economy dominated by old-fashioned family businesses instead of by modern corporations -- the Mafia instead of Fiat.
Clan loyalties are even more intense in Iraq than in Sicily, since nearly half of Iraqis are married to a first or a second cousin, and each of these tightly knit families belongs to a tribe with further demands for loyalty. The success stories in Iraqi business are family companies, like the ones run by the Hindos. Putting your family and tribe first doesn't make it impossible to do deals. Capitalism, after all, is built on the premise that selfish strangers can cooperate for mutual advantage. But tribal allegiances leave everyone insecure, since there is always a chance that another clan with more political power will demand a cut of the profits or simply take over the business for its own members.
''In the Middle East, the family is a fortress against the rest of the society and a massive obstacle to democratic politics and economic efficiency,'' says Lawrence E. Harrison of the Fletcher School at Tufts University and co-editor of an anthology, ''Culture Matters: How Values Shape Human Progress.'' In Harrison's view, the plans to quickly transform postwar Iraq into another Germany or Japan are unrealistic. ''Iraq is much more like Bolivia or Venezuela or Haiti in 1961 than Germany or Japan in 1945,'' says Harrison, a veteran of the frustrating efforts of the United States government to export democracy to Latin America in the 60's. ''Germany and Japan were modern, cohesive societies with literate men and women and cultures that valued innovation and entrepreneurship. Relative to today's Iraq, a cup of tea.''
raq's oil reserves might seem to be its economic salvation, creating the kind of per-capita wealth necessary to support democracy. But oil has a perverse effect on politics and economic development. Easy money corrupts. As oil royalties flow to the capital, politicians use the money to consolidate power. They build armies and secret police forces and dispense favors. Courtiers displace the bourgeoisie. You can see the effect of this ''resource curse,'' as researchers call it, in studies correlating mineral wealth with authoritarianism, corruption and economic stagnation. If its oil money is allowed to flow directly into the hands of a new ruling elite, Iraq might well become another Nigeria or Saudi Arabia.
Yet in spite of all these obstacles, a few bourgeois Iraqis have somehow survived. The Hindos' business sense may have something to do with their training in America -- Nader's father got an M.B.A. at Loyola University in Chicago -- and their being part of the tiny Christian minority in Iraq. (''The Christians are called the Jews of Iraq because we're the merchant and professional class,'' Nader says.) But they see plenty of entrepreneurial zeal among their Muslim business partners who have never been to the West. The Hindos primarily blame politics, not culture, for Iraq's economic backwardness, and so do many experts.
''Culture matters, but culture can change if the right political institutions are in place,'' says Fareed Zakaria, whose new book, ''The Future of Freedom,'' analyzes democratic successes and failures around the world. ''Social scientists once thought Catholic and Confucian countries couldn't modernize. The key to democracy in Iraq is reducing the state's role in the economy and establishing the rule of law. If you guarantee basic freedoms and property rights and enable a bourgeoisie to create wealth, genuine democracy will follow.''
But if those rights are not guaranteed, if the new government retains control of oil and remains what Zakaria calls a ''trust-fund state,'' the bourgeoisie could become vulnerable again. It's hard to imagine any new rulers (or warlords) being as bad as Saddam Hussein, but then again, it was hard to imagine what Baathism would become in the 1970's, when oil money started flowing. That was when Wathiq Hindo returned to Iraq from business school in Chicago for a job in the oil ministry.
''Iraq was suddenly given an immense amount of wealth, and I felt that economics would solve our problems,'' Wathiq recalls. ''The regime would maintain law and order, and prosperity would prevail. But instead the regime started expanding the army. In 1982, after we went to war with Iran, I knew this was not a very good place, and I got out of the government so I could leave the country.'' Hussein's growing police state, though, wouldn't let him leave, so he stayed through the first gulf war, supporting himself by importing the few items still permitted under the international trade embargo -- food, cigarettes, liquor. One day in 1991, shortly after Iraq's defeat, the economic security police appeared at his door and took him to jail.
They offered no explanation for his arrest, but he detected a pattern when he saw more than three dozen prisoners crowded into the 20-by-20-foot cell. ''These were the Rockefellers and Heinzes of Iraq,'' he says. ''Big, big wholesale merchants.'' Wathiq could guess why they were there. The gulf war and international sanctions had devastated the economy, creating widespread shortages and driving up prices of basic goods. Saddam Hussein needed cash and wanted to make merchants the scapegoats for high prices. After three days in the cell without being told the charges against him, Wathiq told the guard he wanted to confess.
He was brought before a judge who finally revealed his crime: importing a truckload of whiskey from Jordan without paying a newly enacted tariff. Wathiq, like his cellmates accused of the same tariff evasion, had no idea the tariff even existed. ''The government hadn't announced it or tried to collect it at the border crossing,'' he says. ''But there was no point in arguing. That was how Saddam maintained control. He had so many rules you couldn't follow them all.'' To get out of jail, Wathiq agreed to pay not just the tariff but the entire value of his whiskey shipment, $60,000, plus another $180,000 as a penalty, all in cash, which a friend delivered to the jail. On Wathiq's way out, he offered to fetch more cash so his cellmates could get out, but the other merchants refused to pay up.
''A friend of mine there said I was paying way too much and the charges would never hold up in court,'' Wathiq recalls. ''I said: 'Don't be silly. It's not about these minor violations. They're after our assets. Don't mess with them.' Four days later my friend and the other merchants were sentenced to death for being economic saboteurs. Saddam had 41 of them shot. If I'd stayed in that cell, there would have been 42.''
Now that Saddam Hussein is gone, capitalists no longer fear those sorts of official reprisals, but they worry about the remnants of the regime, and not merely ones who are kidnapping executives and shooting at ''collaborators.'' A number of the old regime's bureaucrats are still in place. The American occupying forces have taken a few steps to encourage capitalism -- opening the borders, issuing a currency, starting a banking system -- but they haven't dismantled the state-run industries, labyrinthine ministries and other legacies of Baathism. Even in the most capitalist-friendly part of Iraq, the Kurdish region that enjoyed autonomy from Baghdad for more than a decade, the economy is still dominated by two politically powerful clans, the Talabanis and Barzanis, and legions of bureaucrats.
''We still have a bad habit of government encroaching on business,'' says Barham Salih, the prime minister of one Kurdish region. ''It's very hard to change the culture after decades of authoritarian rule.'' Simply selling off the state-owned enterprises is politically risky, because it could provoke a popular backlash and lead to new kinds of crony capitalism favoring either rich Iraqi families with ties to the old regime or large American companies with ties to the Bush administration.
''If you were to privatize state-owned industries tomorrow,'' Salih says, ''the only Iraqis with the money to buy them would be the former partners of Saddam Hussein. Privatization has to be done carefully so as not to sustain the power of a corrupt elite.''
The American occupiers and Iraqi leaders have endorsed the concept of diverting future oil revenues into a special trust fund that would go directly to citizens, but the Americans haven't forced the issue, and Iraqi politicians have shown little inclination to forgo control. The idea of quickly transferring sovereignty to Iraq and scheduling elections may please the United Nations and Republican campaign strategists, but it dismays scholars who have watched other new democracies degenerate into autocracies or split along ethnic lines. Given the religious and tribal divisions in Iraq, an election campaign could easily resemble the recent one in Kenya in which tribal leaders exhorted their followers to vote with the rallying cry: ''It's our turn to eat.''
''Iraq's civil society is so weak and decimated that there's a great danger of a new state abusing its power,'' says Larry Diamond, a political scientist at the Hoover Institution and co-editor of the journal Democracy. He, Zakaria and other experts say it would be better to wait at least two or three years, or ideally as long as five, before holding national elections. Such a delay is probably impractical, but it would suit at least one bourgeois family in Baghdad.
During a rare moment off from their many enterprises, Nader and his parents sit around the conference table at their office debating when Iraq should hold national elections.
''Maybe in a couple of years,'' Nader says. ''We need Iraqi administrators to guarantee stability and contracts and property rights, but until we develop parties that are based on ideas instead of religion or ethnicity, we should hold off on elections.''
''Five years,'' his father says. ''That's enough time for a new generation to go through college.''
''Never,'' Nader's mother says, and it's hard at first to tell if she's kidding.
''Well, someday,'' Nidhal says, ''but I can't imagine when. People here have been through so much turmoil they're just not ready to vote.''
What Iraq needs most, Wathiq says, is a respite from politics. ''Focus on economics,'' he says. ''Politics divides people because you compete for dominance. You please the Shiites, the Sunnis won't like it. You please the Kurds, the Arabs won't like it. But business unites people. If you're a Sunni and I'm a Christian, we can always make a deal. When we make money together, everybody gets a dividend. It's like a dinner with enough food for everyone.''
He and Nader would like to expound further on the topic, but this talk of a deal reminds them of a potential customer waiting to talk to them about power generators. They head out to their S.U.V. ''We'll talk more about this later,'' Nader says as they pull away, and there is a certain logic to his priorities. Talk of democracy can wait. Business comes first.
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