SYNOPSIS: So far the Bush administration has done a disastrous job on Iraq's reconstruction, rife with crony capitalism and unnecessary delay. Paul Krugman has provided a correction regarding Churchill's "most unsordid act" quote at the end of his 10.3.03 New York Times article. Churchill was speaking about Lend-Lease, not the Marshall Plan

It's official: the administration that once scorned nation-building now says that it's engaged in a modern version of the Marshall Plan. But Iraq isn't postwar Europe, and George W. Bush definitely isn't Harry Truman. Indeed, while Truman led this country in what Churchill called the "most unsordid act in history," the stories about Iraqi reconstruction keep getting more sordid. And the sordidness isn't, as some would have you believe, a minor blemish on an otherwise noble enterprise.

Cronyism is an important factor in our Iraqi debacle. It's not just that reconstruction is much more expensive than it should be. The really important thing is that cronyism is warping policy: by treating contracts as prizes to be handed to their friends, administration officials are delaying Iraq's recovery, with potentially catastrophic consequences.

It's rarely mentioned nowadays, but at the time of the Marshall Plan, Americans were very concerned about profiteering in the name of patriotism. To get Congressional approval, Truman had to provide assurances that the plan would not become a boondoggle. Funds were administered by an agency independent of the White House, and Marshall promised that priorities would be determined by Europeans, not Americans.

Fortunately, Truman's assurances were credible. Although he is now honored for his postwar leadership, Truman initially rose to prominence as a fierce crusader against war profiteering, which he considered treason.

Iraq's reconstruction, by contrast, remains firmly under White House control. And this is an administration of, by and for crony capitalists; to match this White House's blithe lack of concern about conflicts of interest, you have to go back to the Harding administration. That giant, no-bid contract given to Halliburton, the company that made Dick Cheney rich, was just what you'd expect.

And even as the situation in Iraq slides downhill, and the Iraqi Governing Council demands more autonomy and control, American officials continue to block local initiatives, and are still trying to keep the big contracts in the hands of you-know-who.

For example, in July two enterprising Middle Eastern firms started offering cellphone service in Baghdad, setting up jury-rigged systems compatible with those of neighboring countries. Since the collapse of Baghdad's phone system has been a major source of postwar problems, coalition authorities should have been pleased.

But no: the authorities promptly shut down the services. Cell service, they said, could be offered only by the winners in a bidding process — one whose rules, revealed on July 31, seemed carefully designed to shut out any non-American companies. (In the face of strenuous protests the rules were revised, but still seem to favor the usual suspects.) Oddly, the announcement of the winners, originally scheduled for Sept. 5, keeps being delayed. Meanwhile, only Paul Bremer and his people have cellphones — and, thanks to the baffling decision to give that contract to MCI, even those phones don't work very well. (Aside from the fact that its management perpetrated history's biggest accounting fraud, MCI has no experience in building cell networks.)

Then there's electricity. One reason Iraq still faces blackouts is that local experts and institutions were excluded from the repair business. Instead, the exclusive contract was given to Bechtel, whose Republican ties are almost as strong as Halliburton's. And if a recent story in The Washington Post is accurate, Bechtel continues to ignore pleas by Iraqi engineers for essential spare parts.

Meanwhile, several companies with close personal ties to top administration officials have begun brazenly offering their services as facilitators for companies seeking Iraqi business. The former law firm of Douglas Feith, the Pentagon under secretary who oversees Iraq reconstruction, has hung out its shingle. So has another company headed by Joe Allbaugh, who ran the Bush-Cheney campaign in 2000 and ran FEMA until a few months ago. And a third entrant is run by Ahmad Chalabi's nephew.

There's a moral here: optimists who expect the administration to get its Iraq policy on track are kidding themselves. Think about it: the cost of the occupation is exploding, and military experts warn that our army is dangerously overcommitted. Yet officials are still allowing Iraqi reconstruction to languish, and the disaffection of the Iraqi public to grow, while they steer choice contracts to their friends. What makes you think they will ever change their ways?

Originally published in The New York Times, 9.30.03