Hybrid New Deal-Military Keynesianism for Iraq?

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

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