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Hybrid New Deal-Military Keynesianism for Iraq?

Steve DeAngelis of ERMB had an excellent post on Iraq that I believe has a lot of resonance for historians:

Dealing with Iraq’s Great Depression

“When Americans think about the Great Depression of the 1930s, they think about soup kitchens, unemployment, and Franklin Delano Roosevelt’s New Deal. Those people who managed to remain employed during the depression were considered fortunate. To some extent that is the situation facing people in southern Iraq (the northern Kurdish sector is booming in comparison). The U.S. just announced a new approach for dealing with the lack of jobs and the lack of security in the south. It is a mixture of Roosevelt’s New Deal and Lyndon Baines Johnson’s Great Society programs [“U.S. Plans to Form Job Corps For Iraqi Security Volunteers,” by Karen DeYoung and Amit R. Paley, Washington Post, 7 December 2007]. Once again it is the U.S. military leading the way.

“The U.S. military plans to establish a civilian jobs corps to absorb tens of thousands of mostly Sunni security volunteers whom Iraq’s Shiite-dominated government has balked at hiring into local police forces. The new jobs program marks a sharp departure from one of the most highly touted goals of the so-called Sunni awakening, which was to funnel the U.S.-paid volunteers, many of them former insurgents, into Iraq’s police and military.”

The program aims at alleviating two of the most crucial challenges facing southern Iraq — jobs and security. As DeYoung and Paley report, the program is aimed primarily at Sunni citizens who have been unable to find work under the Shi’ite regime. The program has raised questions, however.

“President Bush and Gen. David H. Patraeus, the U.S. commander in Iraq, have said the volunteers have played a major role in the recent downturn in violence and would provide a key element of local security as U.S. forces draw down. Plans to reconfigure the program raise new questions about the permanence of security and political structures the United States has sought to impose on Iraq.”

The Bush administration’s program seems to be based on three assumptions. First, people need jobs so they can once again feel good about themselves and support their families. Second, jobs help the security situation by eliminating many unhappy and unemployed people from the list of potential insurgent supporters and, by giving them a stake in the future, Sunnis will get involved in the war against the insurgents. And third, the job program reduces sectarian violence by getting Sunni and Shi’ites working side by side.

Read the whole thing here.

The period of the Great Depression and the later postwar occupation is rich with potential lessons and analogies for exercises in state-building in Iraq or elsewhere. Steve mentioned the Civilian Conservation Corps as a model, probably one of the most popular public memories of the New Deal. a program where adolescents and young men of all backgrounds did public works and environmental projects under the supervision of active and retired U.S. Army NCO’s .

Iraq certainly does not lack for oportunities to repair or improve infrastructure, something that would both create jobs and future platforms to facilitate economic growth as well as enmeshing local elites in positive partnerships with coalition forces. My suggestion here, to build on Steve’s New Deal paradigm, would be to complement any physical construction -jobs effort with one of the New Deal’s least appreciated major programs which would be even more appropriate for Iraq today than it was for the United States in the 1930’s, the Reconstruction Finance Corporation.

What makes the RFC, originally created by the Hoover administration but given expanded powers under FDR, different from other New Deal agencies was the focus on reestablishing liquidity and the extension of lines of credit to private banks and businesses on a sound financial basis but one with a realistic adaptation to the conditions of the Depression. This was made possible by the astute judgment of the imposing Texas financial wizard who headed the RFC, Jesse H. Jones. Chairman Jones, historian Jordan Schwarz wrote:

“He could be an expedient lender; frequently he accomodated schemes of dubious creditworthiness, and New Dealers remained suspicious of Jones’ personal coziness with bankers and big business. Ironically, RFC-financed programs such as rural electrification were dear to their hearts and made possible profounder consequences for American society than those of almost any other New Deal program” [1]

Jones’ discernment  of  a borrower’s viability was such that out of the $ 2 billion 1930’s gold dollars in credit extended to banks, local governments, corporations and small business concerns during the Depression, nearly every loan was repaid. More remarkably, Jones disproportionately targeted the relatively undeveloped South and West for the RFC assistance in building networks of finance capitalism that made possible the later Sunbelt Boom of the 1960’s.  In his person, Jones combined a wealth of experience in entrepreneurial capitalism and banking with an intimate “local knowledge” of the political, social and economic conditions giving him a degree of success that made him irreplaceable to FDR.

A RFC on the Euphrates could only work in close collaboration with Iraqis who possess the prized “local knowledge” that we lack – mostly former Iraqi central bank types leavened with key Kurdish and Shiite equivalents with an American holding the pursetrings but the Iraqis vetting borrowers for viability rather than collateral, much the way Jones himself did in the cash-poor South and West. The effort could be enhanced by a separate microloan program, perhaps funded by NGO’s, attached to coalition commands to get smaller enterprises off the ground and help revive local economies.

If great care is exercised, state capitalism in Iraq can become a catalyst for the growth of the liberal markets of actual capitalism.

1. Schwarz, Jordan  The New Dealers:Power Politics in the Age of Roosevelt.  Alfred A. Knopf. New York 1993

7 Responses to “Hybrid New Deal-Military Keynesianism for Iraq?”

  1. Dan tdaxp Says:

    My assumption was that this was a case to buy off Sheiks with jobs in a way that didn’t turn police training into a welfare office.  

  2. zen Says:

    That’s the short term solution :o)

  3. Lexington Green Says:

    I picked up Jesse Jones’ memoirs out of a junk bin, either for $1 or for free I can’t remember which.  I only picked at it.  Gripping stuff.  He is one of those "second tier" figures who really make things go, whom the historians usually do not give enough credit to.  

  4. Lexington Green Says:

    <a href="http://www.amazon.com/Fifty-Billion-Dollars-Thirteen-1932-1945/dp/B000OKY462/ref=sr_1_6?ie=UTF8&s=books&qid=1197849654&sr=8-6">Here's the book</a>. 

  5. zen Says:

    Hi Lex

    You’re right – Jones was not simply capable, he was much feared, even by enterprising political fixers like Tommy "the Cork" Corcoran and a younger LBJ. Some of the guys who stand in the shadows know how to use brass knuckles deftly. Tom mentioned James A. Baker III the other day, who is a great example of this kind of figure on the GOP side. Baker knew how to move things in the worlds of finance, business and politics and he was a quietly ruthless insider.  I’m not so high on him as Secstate as Tom is – Baker never thought geopolitically, just politically and parlayed his relationship with Bush sr. , kind of like James F. Byrnes and Truman – but a very capable statesmen in a broad sense ( and…to tie everything together…Baker’s grandfather James A. Baker was a business partner of Jesse Jones  ).

  6. Lexington Green Says:

    On the related point of "events that did not happen", which is often the work of "people who are not remembered", Baker has to get some credit for the winding up of the most dangerous part of the Cold War — the division of Germany — without a shot being fired. 

  7. Matt Burns Says:

    Education consists mainly of what we have unlearned.

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