The NewStandard ceased publishing on April 27, 2007.

Economy Has Deteriorated, Turned Against Iraqis Since U.S. Invasion

by Chris Shumway

International human rights and labor groups say the US is directly responsible for Iraq's increasingly troubled economy, favoring Western companies and laborers over Iraq's domestic industries and workforce.

July 9, 2004 – Iraq is suffering an acute economic crisis marked by widespread poverty, catastrophic levels of unemployment and deteriorating work conditions for those fortunate enough to have jobs. Yet according to reports by international labor and human rights groups, a series of policies enacted by US administrators and large Western contractors, who promised to bring economic recovery, have only worsened the situation.

Email to a Friend
Print-friendly Version
Add to My Morning Paper

Despite official rhetoric about Iraqi "sovereignty," the reports also suggest that the country’s interim government lacks the authority and the money to enact the type of sweeping jobs programs and labor reforms needed to lift the country out of economic peril and ensure basic workers’ rights.

A recent study by the Education for Peace in Iraq Center (EPIC), a US-based human rights organization, puts the combined rate of unemployment and underemployment in Iraq at 50 percent. The unemployment rate itself is highest among Iraq’s young males, running at an estimated 70 percent, nearly double the national average of 30-40 percent, EPIC reports.

To put Iraq’s high unemployment level into context for Americans, the EPIC study points out that during the Great Depression of the 1930s, unemployment in the US peaked at 25 percent. "Once that level is reached where every fourth economically active adult is searching unsuccessfully for work, then we have a social catastrophe," the report said.

Given this standard, even an Iraqi unemployment rate estimated to be 28 percent - as reported by the Iraqi Ministry of Labor in December 2003 and the Brookings Institution, a centrist Washington DC think-tank, in May 2004 -- would still indicate that the country’s economy is in disastrous condition, EPIC reported.

EPIC, along with the British-based Trades Union Conference (TUC), says the high unemployment in Iraq is not due to lack of skill or knowledge among the country’s available workforce but to the system for awarding contracts developed by US occupation administrators and the hiring practices of the largest contractors. TUC issued its report on Iraq’s labor force and economy in April.

For several decades Iraq hosted one of the most educated, skilled populations in the Middle East. Recent years of authoritarian rule by Saddam Hussein, a massive war with Iran in which the US armed both sides, plus two wars with the US and nearly 13 years of severe UN-imposed sanctions all took a heavy toll on the country’s educational system and infrastructure. Many Iraqi workers nevertheless managed to avoid catastrophe through skill and determination as well the availability of government jobs and food rationing programs.

Further, according to the EPIC and TUC reports, a large number of skilled Iraqi workers, many of whom were members of trade unions outlawed by Saddam, returned from exile after the US-led invasion ready to rebuild their country and organize independent labor unions. This repatriated labor has swelled the skilled workforce, negatively affecting Iraqi wages.

Iraqis need not apply

US administrators have awarded the vast number of contracts for Iraqi reconstruction projects to Western, mostly US-based corporations, granting contracts of only $50,000 or less to private sector Iraqi firms, effectively denying them participation in major reconstruction efforts.

By contrast, US-based Bechtel Group, Inc. was awarded contracts valued at $2.8 billion to rebuild Iraqi electrical plants, water and sewage facilities, airports, hospitals, schools and government buildings, according to the Center for Public Integrity, a non-profit watchdog group.

The Coalition authority also refused to award contracts to any state-owned companies in Iraq, which in many cases are the only firms qualified to do local reconstruction work, according to EPIC’s study. "Qualified Iraqi water-system engineers familiar with their own infrastructure sit idle while Bechtel engineers struggle to repair the water systems," the study reports.

Refusal to work with Iraq’s state-run companies was part of a privatization strategy -- economic "shock therapy" as the EPIC report calls it -- imposed by the top US administrator, Paul Bremer, who last year authorized the selling of several state-owned industries to private interests and established a fifteen percent flat tax on corporate and personal incomes.

Bremer also dissolved the Iraqi army last spring, instantly adding nearly half a million men to the ranks of the unemployed. Seizing the opportunity to build their own forces, Iraqi militia groups resisting the occupation have heavily recruited former soldiers, according to British military and intelligence sources quoted by the Guardian.

Anthony Cordesman, a military analyst for the pro-war Center for Strategic and International Studies, says policies favoring foreign companies over Iraqi firms, along with the presence of tens of thousands of private mercenaries hired to protect corporate contractors, render "everyone involved in aid and reconstruction a natural target" of armed Iraqi resistance fighters.

Cordesman, and other critics of US policy believe that US administrators and contractors have helped create the very security crisis they frequently cite as a major reason for the agonizingly slow pace of reconstruction in Iraq.

Importing and abusing poor, foreign laborers

Although they have been the beneficiaries of reconstruction contracts, many US-based contractors have been reluctant to hire Iraqi workers. Before dissolving on June 28, the Coalition Provisional Authority (CPA) reported that only about 20,000 Iraqis, out of a potential workforce of 7 million, were working on newly funded reconstruction projects. In March, CPA administrator Bremer had promised that at least 50,000 Iraqis would be working on such projects by the end of June.

Instead of hiring locals, many contractors have opted to hire American engineers and managers for high-ranking positions, while importing tens of thousands of unemployed or low-wage workers, many of them from India, Pakistan, and the Philippines, to perform hard labor and menial tasks, according to the Washington Post.

The Post reports that while American workers typically earn salaries equivalent to, or higher than, those paid for similar jobs in the US, many foreign workers toil up to 16 hours a day for wages one-tenth or less of what their American counterparts receive.

Dharmapalan Ajayakumar, a kitchen worker from India, told the Post he earned $7 a day working in military kitchens in Iraq. He also says he was tricked into working in Iraq by a recruiting agent hired by a subcontractor for Kellogg Brown & Root, a subsidiary of Halliburton contracted to provide support services for the US military.

Ajayakumar and his companions say they were forced against their will to work twelve to sixteen hour days cleaning kitchens, often while suffering from nausea due to lack of clean drinking water and food. The workers also say they were not provided with adequate security in an area where attacks on US forces were common, and that bosses seized control of their passports, according to the Post.

Government authorities from India and Pakistan are investigating the claims of dozens of workers who, like Ajayakumar, say they were illegally recruited to Iraq and mistreated while working for private contractors. Despite the fact that numerous workers have filed formal complaints containing similar stories, a Kellogg Brown & Root spokesperson told the Post that, for its part, there is no "substantiated proof" on which the company can take action.

Emerging union movement struggles for change

Working conditions and wages for Iraqis lucky enough to have jobs are better than those of some foreign laborers, though they show signs of declining. EPIC reports that Iraqi workers, most of whom are employed in government departments and state-run industries, are still paid according to the low wage scale that was imposed by Saddam Hussein as part of a sweeping 1987 labor code. Although most public sector workers have steady incomes, actual take-home pay for some workers has been cut in half since the beginning of the US-led occupation due to lost bonuses, benefits, and profit-sharing payments, according to EPIC’s study.

In addition to declining wages, workers have also been at the mercy of other provisions in the old labor code. The law essentially forbids most public sector workers from forming independent unions or from striking.

But instead of repealing Saddam’s harsh labor code after the invasion, coalition authorities began vigorously enforcing it.

Last December, for example, US troops raided the Baghdad headquarters of the Iraqi Workers Federation of Trade Unions (IFTU), an organization led by many Iraqi workers forced underground by Saddam. The IFTU had launched an aggressive organizing campaign after the dictator’s regime collapsed. US soldiers arrested eight IFTU members, who were released the following day, and confiscated documents containing minutes of union meetings, the Pacific News Service reports.

According to the Labor Party Press, a periodical published by the Labor Party in the US, Iraqi workers have also faced threats from both Iraqi security forces and members of Shi’ite cleric Muqtada Al-Sadr’s Mehdi militia, the latter of whom reportedly wanted to use factories in Nasiriya as staging areas in their fight against occupation forces.

Despite these hardships, Iraqi workers have pressed on, organizing new unions and labor associations such as the Federation of Workers Councils and Unions in Iraq (FWCUI), a group that strongly opposes the ongoing military occupation, and the Union of the Unemployed in Iraq (UUI), whose platform includes the "unconditional freedom to strike" and "equal pay and equal work for women."

"We are trying to establish an authentic workers’ movement that will play a major role in promoting secularism, the rights of women, workers’ rights -- against all forms of discrimination and division," Falah Alwan, president of the FWCUI, remarked while addressing a meeting of international labor representatives in April.

In Kurdish regions of northern Iraq, areas that enjoyed political autonomy for nearly a decade before the US invasion, unions linked to regional political movements have continued to expand, although relations between Kurdish unions and other Iraqi labor groups are strained. According to Alwan, Kurdish union leaders have resisted efforts to merge with national unions or join umbrella labor associations consisting of Iraqis from different ethnic groups.

Iraqi workers have also reached out to international labor organizations for help in pressuring the US-led Coalition and Iraqi ministers to draw up new labor laws that recognize and protect workers’ basic right to join independent unions.

Such efforts have had mixed results. In January, for example, the former Iraqi Governing Council recognized the IFTU as "the legitimate and legal representative of the labor movement in Iraq," a move condemned by Alwan’s union because it failed to recognize the right of workers to organize themselves independently of government approved unions.

In March the Governing Council, with Coalition approval, passed the Transitional Administrative Law (TAL), or interim constitution, which guaranteed workers "the right to form and join unions and political parties freely" and the right "to demonstrate and strike peaceably." It also outlawed the slave trade, forced labor, and involuntary servitude.

Many Iraqi unionists welcomed the new administrative law as a step toward undoing Saddam’s labor policies. However, the status of the law is unclear now that the governing council has been dissolved and partial sovereignty transferred from US administrators to Iraq’s new interim government. The UN Security Council resolution setting conditions for the transfer, and laying out a timetable for general elections in Iraq, failed to endorse, or even mention, the interim constitution.

Complicating matters further is the fact that the severely anti-labor code from 1987 remains the only formal labor law on the books, and Iraqi workers have largely been excluded from the process of drafting new labor laws that might replace it. While some religious, military and business leaders have had a small hand in creating Iraq’s new laws, EPIC reports that US administrators have consistently ignored Iraqi union representatives.

Before leaving office, administrator Bremer signed only one major revision to Saddam’s labor law, an order outlawing child labor. He did, however, approve several binding measures that grant significant authority to foreign contractors and private investors, including an order that gives US and other foreign civilian contractors immunity from Iraqi law while performing their jobs in Iraq.

EPIC concludes its economic study by calling for substantive labor law reform and economic restructuring that is "designed and implemented with an emphasis on increasing employment levels, reducing poverty, and promoting democratic governance."

But EPIC also acknowledges that meaningful labor reform is unlikely to occur in the short-term, given the interim government’s structure as a US-appointed body and the severe limits placed on its sovereignty by coalition administrators and the UN.

Send to Friends Respond to Editors or Reporter

The NewStandard ceased publishing on April 27, 2007.

Chris Shumway is a contributing journalist.

Recent contributions by Chris Shumway: