Madrid Help Illusory

Ivo H. Daalder and
Ivo H. Daalder, President, Chicago Council on Global Affairs
Ivo H. Daalder Former Brookings Expert, President - Chicago Council on Global Affairs, Former U.S. Ambassador to NATO
Susan E. Rice
Susan E. Rice Former Brookings Expert, Distinguished Visiting Research Fellow - School of International Service, American University

October 28, 2003

At first blush, the American attempt to secure foreign funding last week for the reconstruction of Iraq appears to have succeeded. Seventy countries showed up at Madrid, pledging a combined total of at least $13 billion—nearly three times what a similar pledging conference secured for Afghanistan two years ago.

But a look at the details shows a different and more disturbing picture. Even at $13 billion, funding for Iraq’s reconstruction still falls tens of billions of dollars short of what is required—leaving U.S. taxpayers or the Iraqis to fill the gap. Moreover, with three-quarters of the pledges coming in the form of loans rather than outright grants, the administration will have difficulty heading off congressional attempts to turn part of its $20-billion request into a loan, as the Senate has now demanded.

Current estimates by the World Bank and the coalition authorities in Iraq suggest it will cost at least $55 billion, and possibly as much as $75 billion, over the next four years to reconstruct Iraq. Assuming Congress will approve the president’s $20-billion request, foreign funds will have to cover between $35- and $55 billion over the next four years. The $13 billion pledged last week falls far short of that. Part of the gap may be bridged by income from Iraqi oil exports, but even under the best-case scenario, we will need well more than $10 billion—$20- to $30 billion may be more realistic—to fully fund the reconstruction of Iraq between now and 2007. The difficulty of that effort was underscored by the bombings and heavy casualties of the last few days.

Who will bridge the funding gap? The answer, unfortunately, is we, the taxpayers. And, if we again borrow the money rather than fund it through forgoing some of the more outlandish tax cuts, the real cost will fall on America’s future taxpayers.

Alternatively the gap will not be bridged, and the Iraqis will be the ones to suffer. In that case, we may be forced to leave Iraq without finishing the job we started—a possibility that would call into question the wisdom of having started the job in the first place at huge expense.

Neither outcome was inevitable. In other recent post-conflict situations, like Kosovo, when the United States bore the brunt of military operations, other donors picked up 90 percent of the reconstruction tab and contributed 85 percent of the peacekeeping troops. In Iraq, we are bearing this burden disproportionately.

Before the war, the administration dismissed warnings that the difficulties of postwar reconstruction required the active involvement of other countries and their commitment to deploy troops, financial resources and expertise to get the job done. We would be greeted as liberators by a country that we presumed would be largely intact once Saddam Hussein and his Baathist supporters had been ousted. America’s contribution to reconstruction, the head of the U.S. Agency of International Development assured the public in April, would be $1.7 billion. Iraq’s vast oil resources would finance its reconstruction.

None of these projections, of course, turned out to have any basis in reality. The needs in Iraq are vast and its resources are small.

Confronted with this reality, one would have thought that the Bush administration would have exerted every effort to repair the damage in our relations with key allies and to obtain their even reluctant commitment to help in the postwar rebuilding. Had we acknowledged that the Pentagon has no practical experience with nation-building and agreed to cede significant political control to an organization that does—the United Nations—we might have obtained more generous support from other countries who had money, troops and plenty of expertise to give to the effort. Instead, after great effort to Secretary of State Colin Powell’s credit, we managed to pass unanimously a UN Security Council resolution that had symbolic utility but was practically insignificant. To date, it has produced no new troops and far from enough new dollars.

To get even the limited commitments made at the Madrid conference, the administration had to agree to let other donors contribute money for Iraq through UN and World Bank trust funds—so as not to contribute directly to the occupation effort. So now there will be two pots of money—an American pot controlled by the coalition authorities and a non-American pot controlled by international authorities. There will be two plans, each with their own list of reconstruction priorities, two budgets to fund the priorities, and two sets of decision makers on how to spend the money. This is a recipe for inefficiency, if not worse.

Now we know the true cost of unilateralism. While America gets its way, it also has to pay for that victory by providing about 80 percent of the troops, suffering 90 percent of the casualties and paying possibly as much as 66 percent of the bill. It is a cost that our men and women in uniform—and future generations of American taxpayers—will have to bear unnecessarily.