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

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.

Bri­an Beut­ler is the Wash­ing­ton Cor­re­spon­dent for the Media Con­sor­tium, a net­work of pro­gres­sive media orga­ni­za­tions, includ­ing In These Times.
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