Ambassador Ryan Crocker made a couple of claims of burgeoning economic progress in Iraq, including a 6 percent GDP growth rate and a burgeoning cell phone industry. Brian Beutler notes that there's not much too this:
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. [...]
t 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.
One also suspects that macroeconomic aggregates in Iraq are going to be tainted by the broken windows fallacy. If a stray American bomb wrecks your house, and then you pay some guys to help rebuild your house, that shows up as GDP growth in the accounts. Similarly, if insurgents wreck huge swathes of the oil infrastructure and then the Americans put a lot of funds into trying to rebuilt it, that counts as growth. This kind of quirk doesn't normally ruin the utility of GDP as an indicator, but it's not something that was designed to be a welfare metric for war zones.
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Heads in the Sand
Aren't cell phones often used to set off IEDs requiring insurgents to buy a new one for each bomb. Thus more cell phones sold could be a bad sign.
Posted by Jeff | September 14, 2007 9:42 AM