Iraq Needs Free Press, Free Markets

I am shocked and awed. The Iraq war seems as good as over in just three weeks, half the length of the 1991 Gulf War.

The US says it wants to set up a democracy in Iraq. That cannot be achieved by elections alone. It also requires a free press and a competitive corporate sector.

These two are essential to en-sure that elected governments do not have excessive power that degenerates into another form of autocracy.

Democracy is a concept that cannot easily be grasped by people for whom the slightest dissent has long meant torture and death. Can people even think, let alone act, freely in countries where dissent has been equated with treason?

The US should and will hold elections in Iraq. But for years to come, Iraqis will tend to vote for those who look like winners, and sense great danger in siding with losers.

Remember that for three decades after independence in India, people in former princely states voted in droves for princes. Not because the princes had made citizens prosperous, but because dissent had been so dangerous for so long that safety lay in a mind-set that regarded princes as benefactors, regardless of the evidence.

The main difference between democracies and autocracies is not elections. Most autocracies hold elections, which the autocrats win. The real mark of a democracy is that dissent is given a place of honour, not regarded as treason. Elections once in five years cannot ensure such a revolution in mind-set. A free press and competitive markets are also needed.

Despots demand loyalty from subjects. But a free press demands results and accountability from the ruler. It does so every day, not just at election time. The first democratic institution Iraq needs, even before elections, is a free press.

In theory, the US will agree. But large parts of a free press in Iraq will be anti-US. That has already been shown by the only free Arab TV station, Al Jazeera. The US has long preferred pro-American despots to anti-American democracies. But in Iraq it must insist on a free press despite the anti-American consequences.

Less obvious, perhaps, is the need for a competitive corporate sector. Big joint stock companies represent rival power centres rooted in civil society, and this has never been liked by autocrats. Socialist Arab rulers like Nasser and Saddam wanted giant government monopolies that controlled all big money. So too did sheikhs and kings.

Autocrats of all stripes knew that power flows not only from political but economic control. Indira Gandhi used socialism to justify nationalisation and sky-high income tax. Her unstated aim was to ensure that big money could flow only to her, not the Swatantra Party, which she crushed.

For centuries, kings the world over favoured enterprises representing royal privilege (like the East India Company). They also allowed small family businesses that could not become rival power centres.

This was one reason why capital was poorly used for millennia, and living standards hardly rose.

A breakthrough came in Victorian Britain, when a series of Companies Acts facilitated the creation of limited liability companies that could harness the savings of households. For the first time, entities other than kings and aristocrats were able to become economic power centres. This transformed the world.

Joint stock companies set out to make money, just as royal monopolies did. But competition ensured that the higher productivity of companies was passed on to consumers.

Living standards rose dizzily. Competitive markets empowered citizens in the market for material goods, just as democracy empowered them in the market for political goods.

Micklethwait and Wooldridge, authors of The Company, say it is no accident that a liberal society like the US has 5.5 million companies while Iraq and North Korea have none.

Monopoly can be as odious in economic as in political power. Iraqis needs multiplicity of choice in both. They emphatically do not need a giant government oil company controlling most of the whole economy. They need a competitive market economy that other Arab states envy and imitate.

Iraq also does not need an economy controlled by hand-picked western companies. The way American and European companies are lining up to grab reconstruction contracts is disgusting. What about promoting Iraqi companies? At the very least, foreign contractors should use Iraqi subcontractors, who can later grow.

It will take time to create a truly fear-free democracy. But a fear-free commercial system can be built more quickly, bringing in modern commercial laws and practices. The oil industry needs to be broken up into separate, competing oil companies. Some upstream and downstream activities can be hived off from the existing government monopoly, while guarding against the emergence of Russian-style oligarchs.

No Arab country today has a truly competitive market. Attribute this to autocracy, not Islam.

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