Views > September 13, 2007

Crocker’s Kooky Economics

In his testimony to the House and Senate, even Ambassador Ryan Crocker’s limited claims of economic success in Iraq were laughable

By Brian Beutler, The Media Consortium

The long-anticipated joint congressional testimony of Gen. David Petraeus and Ambassador to Iraq Ryan Crocker is now history, and the event’s few fireworks have by now been widely documented. Of them, perhaps the most noted was the men’s relative dispositions—one cavalier, the other more so.

The conventional wisdom had been to expect kinder depictions of broad progress from the general than from the ambassador. What we saw instead was precisely the opposite. Both men were optimistic—more so than Democrats, moderate Republicans and many other critics thought reasonable. But it was Crocker, not Petraeus, who painted over his mission’s most pressing concerns.

Perhaps Crocker’s single biggest claim during his two days on Capitol Hill was this: “The IMF estimates that economic growth will exceed 6 percent for 2007.” It’s true enough as far as it goes, but the International Monetary Fund’s Executive Board reported the figure with less enthusiasm. “Economic growth has been slower than expected,” the IMF fretted, “mainly because the expected expansion of oil production has not materialized.”

Indeed, it’s typical for a country as damaged as Iraq to see its economy fluctuate wildly, resulting in spurts of growth much more substantial than 6 percent. In fact, Iraq’s GDP has varied greatly since the 2003 invasion. It climbed 46.5 percent from 2003 to 2004, after having fallen 41.4 percent between 2002 and 2003, according to the Brookings Institution’s Iraq Index. In other words, though 6 percent would constitute significant growth for a developed nation like the United States, it is nearly meaningless for a country that’s experienced as much turmoil as has Iraq.

And even if the figure had been more impressive—two or three times its reported value—it might still be irrelevant to the great majority of Iraqis, who don’t benefit from government salaries or oil industry profits.

“The IMF likes to use macroeconomic aggregates, but these are pretty irrelevant for today’s Iraq,” says Robert E. Looney, a professor of National Security Affairs at the Naval Postgraduate School who has written widely on developing economies. He cautions against putting too much stock in Crocker’s numbers. “The figures are all over the place.”

“These are just very rough approximations,” Looney says. “I believe the IMF is largely basing their estimates on oil revenues and government salaries. Clearly, for the man in the street these figures have little meaning. Unemployment is around 40 percent by most estimates. I think most experts feel average income levels in the country are about what they were in 1980.”

Ambassador Crocker pointed to other metrics as well. He nodded at increased employment in reconstruction zones, capital investment of oil revenues, and local business development in some provinces. He also pointed to the Iraqi cellular spectrum. “An auction of cell phone spectrum conducted by PricewaterhouseCoopers netted the government a better than expected sum of $3.75 billion,” Crocker boasted.

It’s another statement that doesn’t convey very much in real terms. The cell phone market in Iraq is indeed growing fast, and it’s that market that drove competition for the country’s wireless spectrum at last month’s auction. But a rapidly growing cellular market is both difficult to quantify and, ironically, can be a sign of economic weakness.

Alex Rossmiller worked in Iraq as an intelligence office for the Department of Defense. He says, “cell-phone use in Iraq is skyrocketing, primarily because the land-line infrastructure is so degraded, both from neglect during Saddam’s rule and from our military operations against communications facilities in 2003.”

“In the first couple years after the invasion,” he adds, “one of the ‘good news’ stories was always the number of cell towers built and phones sold.”

Telephones of any variety are largely a new device for Iraqis. Cell phones were almost nonexistent in Iraq before the war, and only about 1 million Iraqis had working landlines. Today it’s difficult to know how many Iraqis actively use cell phones—in part because of the frequency with which contracts lapse—but estimates range from about 7 to 12 million, a large number and sizable range in a poor country of 25 million; certainly greater than the number that use land-based telephones, which is still estimated to be about 1 million.

But Daniel Sudnick, who worked at the Coalition Provisional Authority as Paul Bremmer’s senior adviser for communications, described it as an “irony” that part of the reason the cell phone industry has flourished is that resistance fighters don’t often attack towers and other cell phone infrastructure, for a simple reason: They depend upon mobile phones, too. Moreover, Sudnick says the unstable monthly contracts are evidence of a broken system. “The economic reality in Iraq hasn’t changed fundamentally since I’ve been there. They don’t have a reliable, robust banking system over there. It’s still a cash economy. And the only way to retain payment is with a prepaid system.”

Crocker granted that the Iraqi economy is anything but healthy. “The Iraqi economy,” he conceded, “is performing significantly under potential. Insecurity in many parts of the countryside raises transport costs and especially affects manufacturing and agriculture. Electricity supply has improved in many parts of the country, but it remains woefully inadequate in Baghdad.”

He’d have been well served to stop there, because the lipstick he smeared on that pig only made it uglier.

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• Reader Comments

  I wonder about the economic statistics of Iraq. What of the American contractors (and other foreign firms) that are paid by the American government (and much of this involves corruption), is that part of Iraq’s economics? In other words, are we pumping the economics for our own gains?

  I also wonder at how economic statistics in a war zone could ever be really accurately collected anyway? I imagine the underground economics must be vast. Does Iraq have a tax system and if so does it collect it reliably?

  Posted by Jon B on Sep 15, 2007 at 6:16 AM

  An economy in the midst of a war zone can hardly be expected to thrive.

  I doubt that many of us would concern ourselves with getting to work, measuring productivity or even returning phone calls while dodging bullets and IEDs.

  This is whole issue absurd.

  ---------
  What most disturbs me is that we are broadcasting every move and disagreement to the world. This idiodic behavior directly endangers our troops and benefits the enemy.

  Never in history has such stupidity been carried on to this degree.

  Picture Ike during the D-Day planning telling Hitler when where and how many troops would be coming.

  We deserve to get creamed!

  Posted by whattheheck on Sep 16, 2007 at 11:03 AM

  Casting about desperately for any piece of good news, however uncontextual.

  It’s like being grateful that the wind storm has knocked the whole peach crop out of the trees, because now we won’t have to bring ladders to harvest them.

  (..."Surely this big f’n dark cloud has a silver lining somewhere… we just gotta find it...")

  Posted by Kuya on Sep 18, 2007 at 2:47 AM

  Whattheheck,

  Iraq is not WWII. This hasn’t been a war where the enemy has lines of tanks, artillery, infantry, etc. That’s what Ike planned against. This is a war of insurgency and the only way these are ever really won is to kill everyone, civilians and foes alike, because it is too hard to tell them apart. And we know that would be an insane way to wage this war considering we are suppose to be liberating the civilians and of course it’s inhumane. And even many of the wars of genocide of the past didn’t work out so well either.

  The insanity has always been Bush and his neocons with their insane ideology. Not to mention Bush’s propaganda. I laugh when he claims the surge is working. How can this be so if the pullout plan for next summer only brings the troop level back to before the surge? If the surge was working they’d be able to bring home lots of troops by then.

  What Bush won’t say is that he hopes that Iraqis will continue to flee the country (over 2 million from a country of 25 million pre-war), continue to die in sectarian violence, continue to die from terrorism from Al Qaeda-like groups, continue to die for health reasons, continue to move into neighborhoods of one religious sect...until the Iraqi population has been so decimated and segregated that our troop level can finally deal with the lower numbers of Iraqis. It’s a war of attrition against the Iraqi civilians.

  Iraq economic numbers probably are full of crap. What interests me is Iraqi birth rates. I’ve not heard whether anyone has looked into those numbers. I can’t imagine they are populating at even zero population growth. Who would want to bring an infant into that mess? But it’s probably another aspect of the war of attrition on the population. Less births, less Iraqis.

  Posted by Jon B on Sep 18, 2007 at 5:20 AM

  JonB,

  My alluding to Ike and WW2 had to do with the secrecy then and the blabbing now. Telling every move or even the debating of such is the most idiotic behavior ever, regardless of who is the enemy.

  A better comparison is Custer at the Little Big Horn — so confident that he left his Gattling guns behind — not only had too small a force to deal with the enemy, but arrogant enough to divide them.

  This same arrogant attitude led Rumsfeld to go in with a force one-fourth what the reluctant generals called for. In one of the books I’ve read, Cobra ll, it was stated that General Tommy Franks was given responsibility for post invasion occupation security just as he was beginning the actual entry. Not only that, but Rumsfeld was holding back delivering both some troops and supplies thinking he could economize further.

  The massive invasion was a massive wrong move — it was NOT what CENTCOM recommended — it was their third option. Anyone with any knowledge of the area would have avoided involing the U.S. in a project as dubious as the democratization of a people who have never even been truly a nation. While the surge may have been able to bring some improvement in the immediate area, the massive number needed to maintain order over the entire country is just not available.

  Rumsfeld relied on the Iraqi military coming over to our side — NOT!  No we are aiming to train Iraqis to do the job. The original major pre-invasion problem remains, however. We are never going to know for certain which are the “good” guys.

  I can’t say that Bush has such diabolical hopes as you believe. I still think he sees himself in a heroic role alone against the forces of evil.  The problem is he is not bright enough to handle so much power and is easily manipulated by appealing to his ego.

  Concern over Iraq’s economic numbers is a case of the pot calling the kettle black . Our own numbers have been so skewed and manipulated that the entire world economy is in dire straights.

  Our dollar has fallen for more than a year. Inflation is disguised by referring to “core inflation” (minus food and energy — two items which when measured in U.S. dollars are soaring).

  Wall St. plays up the effect of the Fed as if it could make a significant difference. Any effect is purely psychological.

  The fact is we have plundered the middle class — cutting jobs, cutting benefits and passing the benefits to the wealthy. We’ve ignored border security not just with people sneaking in, but with those who came in on visas and are unaccounted for. The 4.6 percent unemployment is a sick joke.

  And now WE criticize Iraq’s economy!

  ----------
  Kuya,

  For me, if there is a silver lining in all of this it is that our military has performed far better than some people (probably including our enemies) thought they would.

  Between military call-ups it is often said Americans are too soft due to easy living.  If our economy is half as bad as it appears to me, we will all learn to appreciate the simple things more. We can start by appreciating the men and women who willing risk their lives in the belief that our freedoms are worth it in spite of those who abuse their privileges.

  Posted by whattheheck on Sep 18, 2007 at 12:05 PM

• extended discussion >>>Continued...

  Discussions with more than 5 comments are continued on our special discussion page to encourage continuity and ease of use. There are currently 18 posts.

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