Iraq's Economy: Improving, But How Much?
I've always thought that Marx deserves credit for his emphasis on economic life, even though his knowledge of the economies of his time was virtually non-existent, he was wrong in nearly every detail of his economic analyses, and his prescriptions were the most catastrophically wrong-headed in world history. So I'm always interested in data on how Iraq's economy is doing.
For some time, the Brookings Institution has published regular reports on Iraq's economy, along with its security situation, and I checked the Brookings web site to see whether the surge's success is reflected in increased economic activity. Maybe Brookings has suspended those regular reports, or maybe I just couldn't find them, but I did run across this article by Michael O'Hanlon.
O'Hanlon is a liberal, so he begins with the Bush-bashing that is de rigueur in polite society. But he has been to Iraq and is an astute observer. He thinks that the economic side of things has been under-emphasized by the administration; the claim is plausible, but how effectively economic growth could have been promoted in a deteriorating security environment is another matter. Nevertheless, O'Hanlon identifies areas of significant improvement:
[E]lectricity production is finally up, roughly 20 percent over typical Saddam Hussein levels — not even counting the additional growth in the informal Iraqi electricity market, which probably adds another 20 to 30 percent. That makes for perhaps 50 percent overall growth in this sector since 2003.
That strikes me as a huge fact. Other sectors have also shown improvement:
In addition, as has been the case for years, telephone usage is way up. Inflation has been stabilized. Relatedly, gasoline prices have been partially rationalized, reducing the drain that gasoline subsidies impose on Iraq's national coffers and introducing at least a modicum of free-market discipline into how gasoline is consumed in Iraq.
Otherwise, though, O'Hanlon thinks Iraq's economy is "muddling along." Unemployment is around 30 to 40 percent, which is "not horrible compared with Saddam's era or for that matter other Mideast countries." Still, the net effect is that the Iraqi economy is "a wash," neither helping nor hurting our efforts there.
It does seem that we should do better than this, especially as security improves. O'Hanlon argues that we need better data and that a WPA-style dam-building program may be in order. Perhaps. But I would put more faith in small business. Micro loans or grants of as little as $10,000 would help to start any number of small businesses, which are generally more in keeping with the culture of the region, I think, than public works projects.
The more basic point, though, is that O'Hanlon, like Marx, is right to focus on the economic side of things. I hope our policy-makers are doing the same.
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