Iraq Economy Muddles Along

In recent days, top administration officials have spoken often of good trends in Iraq. They are basically right. Depending on the metric chosen, violence is down by one-third to two-thirds since the surge began, with a 50 percent reduction in most categories of fatalities a reasonable average estimate of progress to date.

Iraq is of course still a war zone; it is still very violent compared to its recent past under Saddam and to any other country in the region. And its security situation remains dependent on large numbers of American troops who cannot by themselves contain Iraq’s sectarian tensions indefinitely.

For these reasons, Defense Secretary Robert Gates had the right tone last week, when he spoke of “making progress” and avoided using words like victory or success. Moreover, Bush administration officials need to avoid any hint of triumphalism: Iraq has still had four bad years countered by only one good year since the 2003 invasion, and the progress this year makes one wonder what might have happened if we had “surged” much earlier — as everyone from Eric Shinseki to John McCain to Hillary Clinton, but alas not Donald Rumsfeld or Dick Cheney or George Bush, favored at the time. The Bush administration’s record on Iraq overall has still not been good by any measure. But the trendlines this year are positive, and real, and very significant, nonetheless.

Rather than assume these trends are enduring, we need to take a page of the book of Mr. Gates, as well as Gen. David Petraeus, who remind us at every opportunity how potentially fragile the improved situation may be. And we need therefore to use every tool at our disposal to build on these trends.

A great deal of effort has rightly gone into fostering Iraqi political reconciliation. This effort has been less than fruitful within Baghdad, as the president acknowledged in his Nov. 2 speech. It has produced some results at the local level, not only in ethnically homogeneous Anbar Province but in places such as Ninewa province up north as well, where heavily mixed populations are governing effectively together, and with at least some growing support (in the form of financial resources) from Baghdad. Yet clearly a great deal more needs to be done, and in the end some measure of national-level reconciliation will be needed.

But often forgotten in our policy toolkit is the economic side of things. Students of counterinsurgency and nation building know that a country’s economy, as much as its security situation and political environment, is one of three key pillars to successful stabilization efforts. In fairness to the Bush administration, we have pumped a good deal of money into Iraq as a result. We have also worked hard to beef up American provincial reconstruction teams and to encourage other countries to support Iraq’s economy as well.

Yet the situation remains mediocre. Fortunately, electricity 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. Supply has not increased as fast as demand, but progress is quite real and significant. 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.

It is not clear, however, that there is comparable progress in any other major sector of the economy. Data from both U.S. and Iraqi governments on water and sewerage is undecipherable and unencouraging. As best I can tell, there has been no net progress nationwide since the invasion. Anecdotes are starting to be heard about children returning to school in light of the improved security environment, but no systematic data source I am aware of tracks the progress. The health-care system remains largely broken, and again, any progress is invisible in the mess of piecemeal statistics put out by authorities in Iraq. Job creation remains weak and unemployment is in the 30 percent to 40 percent range.

These statistics are not horrible compared with Saddam’s era or for that matter other Mideast countries. But they do reveal that, on balance, Iraq’s economy is not providing any boost to our overall mission in that country. It may be a slight drag on progress, contributing to people’s unhappiness and sense that America has not done right by the Iraqi people (whether this is fair or not, the charge is frequently heard).

At best the economy is a wash, neither helping nor hurting our overall efforts to contain the violence and help construct a working political system.

To redress this situation at least partially we need to take several steps promptly:

• Collect better data on major utilities so we can see where there is progress and where new ideas are needed.

• If hard data are hard to come by, combine the information with more systematic polling on Iraqi views about the economy and about key issues such as water availability, educational opportunity and job-creation trends. The polling data will be inaccurate, but over time should at least help us see trends.

• Make much greater efforts to create jobs, even if we need to encourage New Deal-style “make work” employment for a time, until the security situation further improves and the free market can really take over. One place to start is with the giant dam north of Mosul, recently revealed to be a major danger to that city. Building a backup dam would be a good way to create jobs up north. By my estimates, $3 billion a year would go a long ways toward funding the kind of temporary work-creation program needed nationwide

• Continue efforts to build up smaller-scale utility infrastructure, since such systems are less vulnerable to single-point failure from sabotage than is massive infrastructure.

• Improve incentives for U.S. Foreign Service officers to move to Iraq, starting with much more generous survivor benefits for their families to mitigate their worries about the physical danger there. My view is that, whether you are in uniform or not, if you are killed working for the U.S. government abroad, your family should receive at least $1 million, meaning that troops’ survivor benefits need to double again as well.

• Keep up the pressure on Iraqi politicians to reduce corruption, in part by trying to fund provincial reconstruction efforts more generously in parts of the country where local governments are serious about fighting corruption themselves.

These steps are just a start. But as things begin to go better in Iraq in one sense, we need to look for every opportunity to make the trends more durable and more comprehensive. The Iraqi economy, the forgotten leg on the nation-building stool, is overdue for more attention.