Newsweek: Surprise! Iraq is booming

[shrike]

No, this is not the Onion.

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


By Silvia Spring
Newsweek International
Dec. 25, 2006 - Jan. 1, 2007 issue - It may sound unreal, given the daily images of carnage and chaos. But for a certain plucky breed of businessmen, there's good money to be made in Iraq. Consider Iraqna, the leading mobile-phone company. For sure, its quarterly reports seldom make for dull reading. Despite employees kidnapped, cell-phone towers bombed, storefronts shot up and a huge security budget—up to four guards for each employee—the company posted revenues of $333 million in 2005. This year, it's on track to take in $520 million. The U.S. State Department reports that there are now 7.1 million mobile-phone subscribers in Iraq, up from just 1.4 million two years ago. Says Wael Ziada, an analyst in Cairo who tracks Iraqna: "There will always be pockets of money and wealth, no matter how bad the situation gets."

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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.

Not too shabby, all things considered. Yes, Iraq's problems are daunting, to say the least. Unemployment runs between 30 and 50 percent. Many former state industries have all but ceased to function. As for all that money flowing in, much of it has gone to things that do little to advance the country's future. Security, for instance, gobbles up as much as a third of most companies' operating budgets, whereas what Iraq really needs are hospitals, highways and power-generating plants.

Even so, there'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."

http://www.msnbc.msn.com/id/16241340/site/newsweek/

A few thoughts: wonder why a cell phone company's booming?

Sounds like someone's trying to save face. And finally, the last line makes me think of "Baghdad Year Zero."

[ixion]

1. with all the chaos there, I seriously doubt there is any real expansion

really. you cannot grow an enconomy with an unstable food chain, etc.

[jobycom]

9. True, but some people prosper greatly. That's the scam of the article.

An unstable food supply leads to higher prices for those who control the food chain, and sadly, that's not the farmers or producers. The farmers and producers want a reliable income, so they sell to merchants, sometimes in advance of the harvest. The merchants then control a large chunk of the food produced. If the rest of the food supply becomes unstable (sometimes with the help of the merchants--think protection racket and Godfather tactics), the merchants can set their own prices. Voila! A booming, prosperous economy with economic growth--all towards a few merchants who control the food. The rest of the people suffer more and receive less wealth. Although, to be fair, in dire situations sometimes it is the best way to ensure a steady food supply.

[Webster Green]

2. Sales on cordless drills are way up!

Simply wonderful.....all the good things that are happening.

[Nite Owl]

3. It sure makes *s statement that we

are winning more logical since winning to him means business is doing well! The way that the cons think that is all that really matters, it's the same way here who cares about life or death it's all about business.

[Norquist Nemesis]

4. Sylvia "Spring" the propaganda

I dunno. When I first saw this, it just hit me as some of that "good news" the RW has been desperately shouting never gets covered. :shrug: But, saying that the economy is "booming" where bombs are going off seems kind of tongue in cheek to me.

[Ron Green]

5. I know there's lots of booming from IED's and RPG's.

I thought that's what the headline referred to.

[bluedeminredstate]

6. This is sick

The chirpy, upbeat tone of this piece is gross. Cell phone service and earnings are just terrific is you don't mind the fact that employees are being kidnapped, stores blown up (with innocent civilians in them, no doubt), towers knocked down with explosives,etc., etc..
Maybe the dire need for cell phones is because the invasion in '03 took out the country's phone system and electricity is only available about 4-6 hours a day in Baghdad - maybe that has something to do with it. Of course having a cell phone is a necessity and is just more money the average Iraqi has to spend in order to stay in touch with family when they venture out into the choas.

[jobycom]

10. The tone is what bothered me, too.

The article is informative as far as it goes, and it is a side of the situation we need to understand, but the exuberance of the article doesn't fit the situation of most people. Even the article points out that only certain pockets are prospering, and that the unemployment rate is 30- 50%. The article would have been more trustworthy if the tone had been more sober, and the picture more complete. IMHO.

[USA_1]

17. High Unemployment - That's the Key ...

True, certain capitalists are profiting -- in war they always do. But the unemployment rate remains 50 % or higher. Thus, the poor continue to suffer while the rich rejoice.

Naturally, the article fails to emphasize that truth.

[aquart]

7. Celebrating war profiteering. Oh, goody.

[jobycom]

8. The exuberance of this article isn't born out by the details in it.

I'm not doubting that there is money to be made in Iraq, and that many businessfolk are investing heavily. And with as much money as we've pumped in--through our own troops, through government assistance, through our businessfolk spending money over there, etc--there's certainly money going to Iraq. And that's a good sign, as the article rightly points out. Circulating wealth begins to create the backbone on which the country can be rebuilt.

But the article mentions that unemployment is 30 - 50 percent, that the wealth is only concentrated in pockets, that much of the money being spent by average people come from either their life's savings or from trickle-down corruption, and that the constant warfare prevents businesses from any long-term planning or commitments. The whole article, despite its exuberance (and at times almost taunting of those who see Iraq as a nation in trouble), portrays a business climate that isn't sure of itself. Each business spends more on security than advertising, and from the sound of it has no idea whether it will exist next week.

That's a dangerous economy. The image created is positive, in that it indicates that there could be a future if some form of peace is obtained. It's negative in that there is no sense that peace is coming, and that half or nearly half of the population isn't involved in this "boom."

One also wonders how much of that new money is created by the chaos itself (security firms, for instance). People who are profiting from the chaos may find that a profitable use of their money is furthering the violence.

And the article really gives no idea of what the economy before the invasion was like. It mentions the sanctions resulting in understocked shelves. But, for instance, the construction firms it mentions (more industry that can benefit from a little turmoil), either acquired a lot of equipment and skill quickly, or existed before the invasion, maybe as a state run industry. Is their new boom a new economic situation, or a return to the era before the invasion? The article doesn't delve into that.

All through history, invasions and occupations have always brought prosperity. Greece, Macedonia, Rome, Mecca, Baghdad, Spain, England, the US... Occupation of a nation always brigns more money into a country, and changes the business environment dramatically. Old companies disappear, and new companies (new government favorites) thrive on the hole left by the old company. This is a normal economic reaction. So there's no reason to think that our occupation won't benefit some people in Iraq.

The real question is how many benefit. With such a large unemployment number, and complete chaos in the streets, it seems that only a small percentage is truly prospering. A new, Iraqi, stable government can change this situation for the better of all, with a thriving economy based on a strong middle class. Our continued occupation, though, seems like it will do the same thing in Iraq that the Republicans are trying to do in America: destroy the middle class and create a typical nobility/plebian style economy, as in Saudi Arabia, Kuwait, UAE... Exactly what Bush pretended he wanted to avoid when he invaded.

[MidwestTransplant]

11. Cellphones are booming because they are triggers for IEDs

[shrike]

14. I knew that. I just forgot to put the "sarcasm" alert on

This article just floored me in so many ways. The absolute disgust of celebrating money and profits in a situation such as this.

It also forgot to mention who is enjoying the lion's share of the spoils: Dynacorp, Halliburton and all other contractors whose profits have gone boffo.

[MidwestTransplant]

15. While unemployment is near 50%

[OnionPatch]

12. Unemployment 30-50% = Good Economy?

:wtf: This is the sickest article...they just assume that because a handful of opportunists are getting rich from the corrupt system, that the economy is fine. But 30-50% unemployment sounds to me like a depression. Isn't it something how economic reports don't even bother reflecting the economic state of "the people" anymore. Let's hear what these 30-5 percent have to say about their economy.

[bluerum]

13. Now where is that bridge Sylvia sold me,,,,, nt

[AnnieBW]

16. Yeah, Cellphones Are Hot Merchandise

Especially when they're used to remotely detonate IEDs. :mad:

[Barrett808]

18. "There's even a positive spin to be put on corruption."

There's even a positive spin to be put on corruption. Money stolen from government coffers or siphoned from U.S. aid projects does not just disappear. Again, says Farid Abolfathi, a Global Insight analyst, it's the "trickledown" effect. Such "underground activity" is the most dynamic part of Iraq's economy, he says. "It might not be viewed as respectable. But in reality, that's what puts money in the hands of the little people."

Wow, now that's turning lemons into lemonade.

[Barrett808]

19. She saves the pitch for the last para: Withdrawal will reduce the money flow

In a business climate that is inhospitable, to say the least, companies like Iraqna are thriving. The withdrawal of a certain great power could drastically reduce the foreign money flow, and knock the crippled economy flat.

How ruthlessly cynical is that?