Ambassador Crocker's wacky economics

We have been paying a lot of attention to General Petreaus and his loony

definition of success -- that is, he told us about these terrific Iraq Army

battalions we've trained -- then today we learn that US troops arrested one

of the battalion commanders because he was helping local thug identify

people to kill.

While everyone was focused on Petreaus, Ambassador Crocker was laying down

some truly screwy economics.

Our Iraq Ambassador's Kooky Economics

By Brian Beutler, Media Consortium

Posted on September 13, 2007, Printed on September 13, 2007

http://www.alternet.org/story/62505/

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 a true statement 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 explains. "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 a largely new thing 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." But 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 AlterNet.

We have been paying a lot of attention to General Petreaus and his loony

definition of success -- that is, he told us about these terrific Iraq Army

battalions we've trained -- then today we learn that US troops arrested one

of the battalion commanders because he was helping local thug identify

people to kill.

While everyone was focused on Petreaus, Ambassador Crocker was laying down

some truly screwy economics.

Our Iraq Ambassador's Kooky Economics

By Brian Beutler, Media Consortium

Posted on September 13, 2007, Printed on September 13, 2007

http://www.alternet.org/story/62505/

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 a true statement 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 explains. "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 a largely new thing 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." But 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 AlterNet.