Imperial Life in the Emerald City (12 page)

Maintaining the pretense required vigilance. Corliss's e-mail account initially identified him to recipients as “Corliss, Glenn (E-4),” the code for specialist. When Jackson saw this, he ran over to the computer guys and ordered them to remove the E-4. Another time, a personnel roster listed Corliss as the driver for the CPA Ministry of Industry team. Most E-4s in the palace were drivers, so someone had assumed that Corliss was one, too. Again, Jackson got it changed.

Months later, when the top U.S. commander in Iraq ordered that all military personnel had to wear their uniforms, Corliss still bent the rules. He'd wear his desert camouflage—on the collar was an upside-down triangle with a curved top to identify him as an E-4 specialist—when eating or walking to his sleeping quarters. But when he had meetings in the palace, he would rush into the bathroom and change into a suit.

After an initial round of introductions in the palace, he got his first assignment. Peter McPherson, Jerry Bremer's economics czar, wanted an analysis of all 150 factories owned by the Ministry of Industry's forty-eight companies, in order to determine which were the most viable, and thus most deserving of financial assistance. The task fell to Corliss, the one guy with the skills to chew through lots of numbers and work up a big spreadsheet.

“This was the very first evidence that I knew that these guys had no idea what they were talking about or what they were in for,” he told me. “They said, okay, you have a hundred fifty factories. We want you to evaluate all of them.”

“I said, ‘Okay. Well, where's my staff?'”

“Well, it's you,” Jackson told Corliss.

“Okay. Where's the management of these companies?”

“Well, we fired most of the management because of de-Baathification.”

“Okay. Where are the financial statements?”

“There are no financials.”

“Okay. What do you know about the companies?”

“Nothing. We have a list of the names. Here are the names.”

“How much time do I have?”

“You have two weeks.”

Corliss was stunned. Jackson was sympathetic. “This is kind of silly,” he told Corliss. But he said it was useless to protest. “If you go and try to explain it to them, they won't care,” Jackson said. “They'll say, ‘You have what you have.'”

For the next two weeks, Corliss slept no more than a few hours a night. He begged ministry officials and factory directors for whatever records had not been looted. The documents he received, which had to be translated from Arabic to English, were so shoddy that he concluded that nobody at the ministry had ever taken an accounting class. Among other outlandish claims, the ministry's financial statements asserted that every one of the 150 factories was profitable. When Corliss learned about the Finance Ministry's policy of subsidizing imports for state-run businesses at the old exchange rate, he raised the issue with officials at the Ministry of Industry.

“I tried to explain to them that it was an apparition, that it was simply a faulty exchange rate that was funded by oil dollars,” Corliss recounted. “They didn't understand that, because these guys don't exactly have a background in understanding international currencies. They would constantly say to me, ‘I'm profitable. It's not my fault that you guys aren't valuing our dinar appropriately. Our dinar is worth three U.S. dollars. I am profitable.' When you say it now takes two thousand dinars to buy a dollar, they say, ‘No, it doesn't. A dinar is worth three dollars. You guys are just screwing up our currency. Adjust the currency back.' But you can't just adjust the currency back. And then you get into a back-and-forth, and you're trying to explain macroeconomics to someone who has never even heard anything about that. They were convinced, truly convinced, that they were all profitable. The only problem was the stupid currency, ‘which you Americans screwed up.'”

The exchange provided Corliss with an insight into the way ordinary Iraqis and even senior ministry officials viewed their economy. Bremer and McPherson had just begun to convene meetings on Monday evenings with a select group of Iraqis, many of them former exiles, to talk about economic reform. But what Bremer, McPherson, and much of the rest of the CPA's economic team failed to grasp was that the mostly Western-educated participants were by no means representative of Iraqi society. Their desire for a fundamental economic restructuring—abandoning Saddam's centrally planned, socialist welfare state for a globalized, free-market system—had little resonance on Iraqi streets. To most Iraqis, even those who would later become ardent critics of the American occupation, the political side of the equation was a no-brainer: Saddam was a brutal tyrant who had to go. When it came to economics, however, there was no such consensus.

         

Under Saddam's Baathist government, state-owned factories produced a plethora of goods including school notebooks (which were so substandard that the pages fell out), car batteries (which weren't much better), and leather coats (which were favored by members of the secret police). Government jobs, either in a factory or a ministry or in the security services, were plentiful and guaranteed you a salary for the rest of your life. Paychecks were low, but the cost of most goods and services was subsidized by the government. Gasoline was sold for less than a nickel a gallon. Nobody paid for electricity, not even the state-owned factories that guzzled hundreds of megawatts. Every family received monthly food rations from the state. Education, even college, was free. So was health care. The price of fertilizer was so heavily subsidized that Iraqi farmers would often sell their annual allotment in Jordan and Syria instead of using it to grow crops; doing so took a truck and a few days, and it netted more money than spending months toiling in the fields.

Iraqis experienced an unparalleled degree of affluence because of the country's plentiful oil revenue. Before the 1991 Gulf War bankrupted and isolated the country, government-run department stores managed by the Ministry of Trade sold Italian loafers, Pierre Cardin ties, and Breitling watches at a fraction of their retail price anywhere else in the world. International tickets on Iraqi Airways were subsidized, as were imported Volkswagens, Volvos, Mercedes-Benzes, and Chevrolets. In the 1970s and even into the early 1980s, before the apex of Iraq's eight-year war with neighboring Iran, Iraq's health-care and university systems were regarded as the best in the Arab world. Tens of thousands of Egyptians, Somalis, Pakistanis, and Indians moved to Iraq to work on massive infrastructure projects: the construction of a six-lane highway to Jordan, luxury hotels in Baghdad, bridges across the Tigris and Euphrates rivers. “We had a very, very good life,” Faez Ghani Aziz, the director of the vegetable oil factory, told me. “We were the richest country in the Middle East.”

Iraqis blamed their financial meltdown on Saddam and the West. Their leader drained the national coffers—and put the country tens of billions of dollars into debt—by waging war with Iran. Then he had the lunacy to invade Kuwait, which resulted in debilitating United Nations sanctions that cut off Iraq from the world. In the eyes of the Iraqis, America was also at fault because it refused to support lifting the sanctions, despite widespread reports that the sanctions were strengthening Saddam while impoverishing his people. But all along, there was little, if any, recognition among ordinary Iraqis that their economic system was rotten to the core. After all, it was the same system that had given them a good life a generation earlier. The thinking among those Iraqis was that if Saddam and the sanctions were gone, they'd be wealthy again.

“When I told them, ‘No, it's not just Saddam but your entire economic system that's screwed up,' they looked at me like I was from Mars,” Corliss said. “They must have been thinking to themselves,
Who is this crazy American?
”

Like Carney, Corliss believed that the Iraqi government should get out of the business of running factories. He, too, thought that Iraq didn't need a Ministry of Industry. But Iraq was still a volatile country. The three-week war to topple Saddam and its immediate aftermath had just ended, but the country was far from calm. American soldiers were being shot at. Thousands of former Iraqi soldiers had recently conducted their march across the Tigris to the Assassin's Gate to protest Bremer's decision to disband the Iraqi army. Corliss knew that privatization would have to wait. The sale of factories to private investors would certainly result in layoffs. Who would keep four thousand workers at the vegetable oil company when the director himself had admitted that it only needed a thousand? The last thing Corliss wanted to do was add to the ranks of the unemployed.

Corliss also worried that the state-owned enterprises would be undervalued if they went on the auction block right away. He compared the process to trying to sell an old house: investing in a new paint job and some renovations can increase the sale price well beyond the cost of the improvements. He outlined his views in an e-mail to Jackson:

         

Let me note that I am a FIRM believer that privatization is the best route for almost all enterprises. My issue is the pace at which this should happen. Back to wearing my investor cap: if I am going to invest today in a company that just went through all of those setbacks, I'm not going to be writing a very big check. The return I would demand for the risk I'm being asked to take would turn the net present value of future cash flows into a very small number. Using “public” money to get potentially viable entities back on their feet will allow us to get a much better price for the Iraqi people when the companies do privatize. In short, you shouldn't sell low.

         

The path forward seemed clear enough to Corliss. At the end of the two-week analysis, he concluded that thirteen of the ministry's forty-eight companies had the most promise of actually turning a profit and thus should receive immediate attention. They would need money and management consultants to help with restructuring. He wasn't as sure about the others. Some might be salvaged over time. Others were so grossly unprofitable, their equipment so antiquated, their products so terrible, that they would never find a buyer. Those companies would have to be shut down. A decision would have to be made about the workers. Corliss thought it would be cheaper to pay the employees of those companies in perpetuity than to plow money into failing enterprises.

The vegetable oil company was not among the thirteen with promise. Corliss wasn't sure if it could be saved. He wasn't willing to write it off, but if the company was to survive, Aziz, the director, would need to find a way to turn a profit without the lucrative import subsidies. Other firms had far more potential. Among them were companies that produced cement, fertilizer, phosphate, and petrochemical products. Also on Corliss's list was an outfit called the al-Faris Company.

The al-Faris Company was located on Baghdad's western fringe, near the now-infamous Abu Ghraib prison. The operation consisted of a modest, one-story office, which had been stripped bare by looters, and a cavernous assembly line housed in a giant structure the size of several jumbo jet hangars. When I visited al-Faris, the company's director, Abdulrahman Azzawi, greeted me in a conference room furnished with a white folding table and a dozen plastic chairs. “It's all we have now,” he said. As soon as I told him I was an American, he waxed on about his love of the United States. “If you have a good idea and you work hard, you can make a million dollars in America,” he said. “I like that.”

Although he had received his doctorate in Britain, Azzawi said he had been a member of the American Society of Mechanical Engineers until the 1991 UN embargo. “The American group is the best,” he said. He intended to renew his membership as soon as the Iraqi postal service resumed mail delivery. Unlike with the State Company for Vegetable Oils, it was not immediately clear what al-Faris made. When I asked, Azzawi glared at me. “You have not heard of us?” he said. When I replied that I had not, he explained how his company had been repeatedly searched by UN weapons inspectors. Somebody apparently thought the giant building might be a good place to hide Scud missiles. “We had nothing to do with the mass-destruction weapons,” he insisted. “Maybe other companies, but not us.” I told him I wasn't interested in hidden missiles but in what his factory produced. Water-purification systems, he said, and heavy equipment for the oil industry. “There is very high demand for our products,” he said.

The tap water in Baghdad had once been safe enough to drink, but years of sanctions had restricted Iraq's ability to import chlorine for treatment plants, which eventually shut down. The municipal water was now pumped directly from the foul Tigris. New purification systems would be a hot item.

But nothing was rolling off the al-Faris assembly line. Most of the 1,200 workers were at home, save for a few guards and factory managers. The problem was electricity and raw materials. There were none.

Azzawi had a solution. He had $1.5 million in the bank. If the banks opened and he got authorization from the Ministry of Industry to access the company's funds, he would order a one-megawatt generator. He'd also import raw materials directly—at the prevailing exchange rate. “I will talk to my suppliers and work out a deal with them,” he declared. “I just need my money.”

Corliss thought it was a great idea. It sounded simple enough. Jackson and Carney supported it too. The only problem was that neither Corliss nor Jackson nor Carney had the final say. That power rested with Peter McPherson.

         

I met Peter McPherson a few days after my trip to al-Faris. I was escorted to his office on the second floor of the palace by a perky young CPA press minder—someone from the public-relations office was supposed to accompany reporters in the palace at all times—but to my surprise she left as soon as McPherson began talking.
Not a good sign,
I thought. Either he's really on message or he's really, really boring.