Day By Day

Monday, December 18, 2006

What A Difference An Election Makes -- The Iraq Economic Miracle

Now that the Democrats have safely won control of Congress, wonderful things are happening in Iraq.

Newsweek reports:

In what might be called the mother of all surprises, Iraq’s economy is growing strong, even booming in places.


Civil war or not, Iraq has an economy, and—mother of all surprises—it’s doing remarkably well. Real estate is booming. Construction, retail and wholesale trade sectors are healthy, too, according to a report by Global Insight in London. The U.S. Chamber of Commerce reports 34,000 registered companies in Iraq, up from 8,000 three years ago. Sales of secondhand cars, televisions and mobile phones have all risen sharply. Estimates vary, but one from Global Insight puts GDP growth at 17 percent last year and projects 13 percent for 2006. The World Bank has it lower: at 4 percent this year. But, given all the attention paid to deteriorating security, the startling fact is that Iraq is growing at all.


[T]here's a vibrancy at the grass roots that is invisible in most international coverage of Iraq. Partly it's the trickle-down effect. However it's spent, whether on security or something else, money circulates. Nor are ordinary Iraqis themselves short on cash. After so many years of living under sanctions, with little to consume, many built up considerable nest eggs—which they are now spending. That's boosted economic activity, particularly in retail. Imported goods have grown increasingly affordable, thanks to the elimination of tariffs and trade barriers. Salaries have gone up more than 100 percent since the fall of Saddam, and income-tax cuts (from 45 percent to just 15 percent) have put more cash in Iraqi pockets. "The U.S. wanted to create the conditions in which small-scale private enterprise could blossom," says Jan Randolph, head of sovereign risk at Global Insight. "In a sense, they've succeeded."

Consider some less formal indicators. Perhaps the most pervasive is the horrendous Iraqi traffic jams. Roadside bombs account for fewer backups than the sheer number of secondhand cars that have crowded onto the nation's roads—five times as many in Baghdad as before the war. Cheap Chinese goods overflow from shop shelves, and store owners report quick turnover. Real-estate prices have risen several hundred percent, suggesting that Iraqis are more optimistic about the future than most Americans are.


The withdrawal of a certain great power could drastically reduce the foreign money flow, and knock the crippled economy flat.

Read it here. [emphases mine]

Funny how they didn’t notice all that wonderfulness before the election.

This unreported activity is far more important than the explosions that dominate the news. Economic prosperity has real social and political consequences that the bombers cannot prevent from happening. I suspect that things are going to turn out well in Iraq over the long-term, but by the time that realization sinks in, Bush will be just a distant memory.

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