A lesson from the Senior Vice President for Solutions

by Ben Van Heuvelen

(A street in Basra, March 2011.)

The distance between capital and labor is on my mind these days. Last week I was biking through lower Manhattan and I heard the chanting of Occupy Wall Street protesters, who had just marched out of Zuccotti Park. As I rounded the corner I saw them walking in a thin line towards some common destination. I didn’t follow; I had somewhere else to be. But I do share some of their anxiety about capitalism. A world of material concern can erode your soul if you’re not careful.

I’m writing this from Istanbul, where I’ve been covering the “Iraq Mega Projects Conference” at the Ritz Carlton. The most prominent features on the published schedule are keynote lectures and panel discussions with Iraqi government and oil industry players. But the most important events are the “networking coffee” and “networking lunch” breaks. They’re like speed dating sessions for capitalists. You make eye contact with someone, you reach into your coat pocket, and you shake hands with your right while exchanging business cards with your left. Your overt goal is to find out how this person can help you, and vice versa. State your business and they state theirs. Ask a few smart questions that show you know what’s up. At the end of the conversation, maybe scribble down a thumbnail description on the back of their business card so that you can file them in the right part of your contact list. Each person is interesting to the extent that he is useful.

This activity is arguably vital to the future of Iraq. I’ve traveled from Baghdad to Basra and can vouch that things are in a terrible state. Iraq needs schools, hospitals, housing, roads, and electricity — the very basics. Most discouraging of all, the country lacks what development economists and diplomats euphemistically call “capacity.” In other words, many government officials are not very competent. This is perhaps true in all countries, but after decades of war and dictatorship the problem is partiuclarly acute in Iraq because such a high proportion of well educated Iraqis have emigrated. Looking at these realities, you don’t have to be a free-market fundamentalist to believe that Iraq’s success depends on some help from foreign, private investment. And how does capital find its way into Iraq? Two men in an Istanbul luxury hotel exchange business cards.

With these thoughts in mind, I walked from a networking coffee break over to a conference room to hear a lecture by the Senior Vice President for Solutions of a private security company. His presentation turned out to be a PowerPoint marketing pitch. I began to tune out, scribbling a few notes merely out of habit. But then I reflected on my notebook, where I had recorded his company’s menu of services:

– Biometrics
– Asset tracking: where your employees are; how they are behaving
– Linear asset surveillence
– Covert unattended ground sensors
– Fiber optic intrustion detection
– Ground surveillance radar: detects people at 12 km
– Unmanned Aerial Vehicles (UAVs): for use where no radar is possible; vehicle software tracks targets automatically
– Securing intellectual assets: like big-game hunting & “we are the animals in this process”

These are exactly the services I’d expect a security company to provide. But on another level, the menu gave a remarkably candid view of how Iraq looks through the eyes of foreign capitalists. Neighbors become “targets” to be tracked and employees become “assets” to be scanned and surveilled. Trust no one.

These fears are justified, of course. A foreign company in Iraq would be foolish not to anticipate violence, theft, and corruption. And there’s the rub. If they are wise to suspect that almost anyone might want to steal from them or blow them up, then this strikes me as a prime indicator that the situation is totally fucked up.

If we are looking for someone to blame for this mess, then let us start with Saddam Hussein and proceed to the disastrous incompetence of the early American occupation. I wouldn’t even begin to suggest that foreign companies are responsible for Iraq’s problems. But looking at the country through a private security contractor’s eyes gave me pause. It punctured the noble rhetoric of economic development that tends to buoy these investment conferences.

The investors basically say: sure we’re making a buck, but we’re also boosting Iraq’s standard of living. A rising tide lifts all boats. If you’re a little queasy about the aesthetics of the enterprise — the whiff of war profiteering, the soupcon of western condescension — then your bleeding heart should be considerably more troubled by the alternatives. This is how the world works. To be idealistic in the face of suffering without any concern for pragmatic solutions is to be sentimental rather than compassionate.

On each of these individual points, they are right. But in order to combine those points into an argument for a free-market investment bonanza, they have to ignore a lot of other relevant evidence. One way to bring the rest of the picture into focus is to look at a capitalist looking at Iraq through the window of an armored SUV. How much good can he possibly be doing for people he regards as threats, targets and, at best, assets? At this level of remove, investors and political leaders alike can point to something like GDP growth and mistake it for progress.

Thoughtful development economists, on the other hand, have tried to see how an oil boom looks to an average person. The statistics that come closer to measuring their quality of life are things like unemployment rates and median incomes. Those numbers tell a different story. They reveal that a massive influx of revenue can actually harm a country’s economy and governance. To wit: an oil sector might earn a hundred billion dollars, but it also employs only a tiny fraction of the population, removes any revenue incentive for the government to develop the rest of its economy, and for many reasons makes it harder to create jobs that rely on exporting anything other than oil. The rich get really rich; the poor, to the extent their lives get better, depend on the largesse of the rich.

This is a boilerplate summary of what is commonly called the “resource curse.” I’m not going to take this line of thought too much further, because I would need more than a blog post to explore with any intelligence whether the resource curse is an inevitable result of capitalism plus oil.

My smaller thought is about why powerful people routinely fail to understand the resource curse. At investment conferences you often hear someone utter the phrase “turn the curse of oil into a blessing” — they have heard of the problem — but they offer solutions in the form of corporate social responsibility projects that use a sliver of oil revenues to build schools and hospitals; they are not addressing a macroeconomic phenomenon that indicts the structure of their industry. This blinkered view is not just a product of self-interest. Much of the time, people with very good intentions are simply failing to see the world through the eyes of the people they’re nominally helping. They lack empathy. After all, effective capitalists see things — including one another — in terms of risk and utility.

Such an attitude is unquestionably useful, especially in a violent place. But I wonder if it can play any role in making a place less violent. I am reminded of a time when I got in line behind an armed private security contractor in a coffee shop on a military base in Basra: looking up, I saw an enormous patch sewn onto the back of his flak jacket that said in English and Arabic, “STAY BACK 100 METERS OR YOU WILL BE SHOT.” This practical advice is meant to prevent misunderstandings and save lives. But even though I was pretty sure the message didn’t apply to me, I found myself taking it personally. “What an asshole,” I thought. I could only imagine how an Iraqi would feel! I could also imagine the dirty look this hired gun would get from an Iraqi. And how that look might bring his hand to his sidearm. And so on, until they both start seeing each other as targets.

Update 11/19/11: I just came across this article from 2005, “The Ethical Economist,” by Joseph Stiglitz. It’s a review of Benjamin Friedman’s book The Moral Consequences of Economic Growth, which spurredĀ a pretty interesting public discussion among economists who are critiquing both free-market fundamentalism and anti-growth populism. They aren’t writing directly about the resource curse, but they do talk about similar themes of growth that helps people vs. growth that is unmoored from non-economic ethical commitments.