The Army wins the battles- but the economy will win the war
One of our Division's most important missions is to rebuild the Iraqi economy. A healthy Iraqi economy is crucial to our success in Iraq. The Iraqi economy was devastated under the regime of Saddam Hussein, particularly during the past twelve years. Despite the insurgency, the Iraqi economy has begun re-bounding and will likely continue to recover. Within a relatively short amount of time (over the next two to three years) Iraq will likely experience an economic boom that will be unprecedented in the Middle East. With increased prosperity, the number of people interested and willing to join the insurgency will hopefully decline. A healthy economy will reduce unemployment and improve the quality of life for all Iraqis.
The security situation is something we all are well aware of and will not be addressed here as this is an update on the economy. The economy certainly cannot re-bound if the security situation does not improve. All economic recovery is dependent upon a relatively secure situation. As of late, the world's attention is focused on our recapturing Fallujah. There is some danger throughout all of Iraq, but it is wrong to think Fallujah is representative of the entire country. Every day, the majority of the Iraqi population wakes up and goes to work. This country of 25 million has several attacks throughout the country every day, but the underlying economy continues to rumble along. This is not to underscore the recent short term security changes and the increased casualties suffered by US and coalition forces. However, despite the short and long term security challenges and a war against an insurgency, the underlying Iraqi economy has continued to improve.
Since the fall of Baghdad there have been many successes in re-building the Iraqi economy but receive little press. Arguably, economies are like slow moving, large ships, and turning them around is like watching paint dry- they do not make great headline news. However, in hindsight, with the benefit of an extended period of time, we can see many positive developments as the Iraqi people have welcomed their new-found freedom and capitalism- despite the obvious challenges of the insurgency.
Unemployment has declined from March 2003 from 50% to its current 20%. Oil production has begun to increase and will help fund many of the Iraqi people's reconstruction efforts. Agriculture is the second largest industry after oil- and productivity has increased by 30%. The new Iraqi currency has remained stable. Consumer sales have exploded in air conditioners, cell phones and other electronic devices. These are positive macro-economic signs that the economy is moving in the right direction.
The US Congress has approved $18 billion in aid to re-build the infrastructure within Iraq. This is a very large amount for an economy the size of Iraq’s. The average Iraqi citizen earns approximately $1,600 per year. This $18 billion cash infusion from the US is equivalent to roughly $800 per person. Therefore this cash infusion is a tremendous boost to an otherwise stagnant economy. These funds have and will continue to put Iraqi’s to work and most importantly will build the necessary infrastructure for the next several decades of growth.
Enormous projects funded from this $18 billion have begun that will not bear fruit for several years. The building of a power plant takes years. While building that power plant there is no noticeable change for the local population until the project is fully completed, when suddenly, the change is tremendous: millions of people with power in their homes.
There have been hundreds of projects like these started that will not bear fruit until completed. Therefore, much of the investment thus far in long term projects, has yet to show any results, but will make a major difference when completed. Water, sewage, and power projects are all long term projects that will modernize Iraq and change the quality of life significantly for all Iraqis. Despite the delay in the impact of many of these long term projects- there has been significant short term progress that can be documented.
Foreign businesses have begun doing business in Iraq. Many of the largest companies in the world now have operations underway within Iraq. These include HP, AIG, Pepsi. GE, Siemens, Nestle and dozens of other top companies. Over 8,000 companies have registered to do business in Iraq and over 1,000 per month are now registering! While companies have been skeptical to invest major capital into Iraq, they have begun doing business and will likely begin significant investments as economic progress continues- and dependent upon the security situation.
Consumer goods, such as cell phones and air conditioners, have been seeing record sales month after month as Iraqi’s learn to enjoy the benefits and opportunities of capitalism. After forty years of oppression, the people of Iraq are enjoying the ability to buy new products and an entire consumer market has been opened.
However, it would be irresponsible to paint too rosy of a picture for soldiers entering Iraq. The challenges are many and will be obvious. For most of our soldiers- fighting the insurgency and providing security to the Iraqi people will be their main focus as it should be. The insurgency is our most obvious challenge, but beyond the insurgency and even without the insurgency, we face major economic challenges.
We face not only an insurgency intent on de-stabilizing the economy, but we face the challenges of privatizing a state run economy, citizens who often place their loyalties to their tribe rather than to their country, a culture that often accepts corruption as a governmental business practice, and the challenges of implementing the rule of law in a country unfamiliar with international law. These are not insurmountable challenges, but yet they will not likely change during our tour.
Transitioning from a state-run economy to an entrepreneurial, capitalist economy will take generations. Business leaders have been ingrained with a state run mentality, and teaching entrepreneurial methods will take years. This is not easy and would be challenging even if there was no insurgency. There are countless examples of both the success of countries transitioning from state run economies, but also to the length of time to realistically expect change.
The East German economy after the fall of the Berlin Wall in 1989 is a good example. Even though the East German population did not have to overcome any insurgency, they are still significantly under-performing compared to their brethren in West Germany- fifteen years after the fall of the Berlin Wall! It will likely take several generations to create a culture within Iraq that is comprised of entrepreneurs instead of government bureaucrats. This is not unique to Iraq- it is a challenge being faced throughout the countries that were previously run by Soviet-style governments.
This $18 billion aid package from the US to Iraq is the largest aid given by the US since just after the end of World War II. The US provided approximately $150 billion (in current US dollars) to 23 countries in Europe. These funds gave hope to 290 million people in Europe and helped to Europe to re-join the world community as productive nations. But it did not happen immediately. The Marshall Plan lasted until 1951- six years after the war ended. The West Germans did not vote in democratic elections until 1949- four years after the war ended. We need to keep the success in Europe in perspective as we compare the current situation in Iraq.
To the soldier arriving in Iraq, economic progress will not likely appear as being as robust as this article might suggest so it must be kept in perspective. The average Iraqi only makes approximately $1,600 per year. The population is very poor compared to what we are used to in America. A 30% growth rate in income for the average Iraqi will be very noticeable to the people of Iraq, but will be hardly noticeable for many of our troops. An E-1 Private makes more in a month than the average Iraqi makes in a year! If the average Iraqi income increases from $1,600 per year to $2,000 per year from the time we enter Iraq until the time we leave Iraq, the Iraqis will have achieved tremendous growth. But this growth will likely be imperceptable to us. We must keep this perspective in mind as we observe the changes during our tour.
Keep in mind during the last year the Iraqi economy improved significantly. Unemployment is down from 50% to 20%. The Iraqi Dinar is stable. 8,000 companies have registered to do business in Iraq. Cell phone, stereos, and air conditioner sales have exploded. The major industry of oil has begun to increase production. Agriculture has boomed and increased production by 30%. These statistics alone would probably surprise the average American. Progress is being made.
When we leave Iraq we hope that these growth rates have continued or even increased. But as stated earlier- keep this growth rate in perspective. We are used to living conditions that are far better than those we’ll observe in Iraq. The US economy is the most robust in the world. We are all very fortunate. No matter what job our soldiers have in Iraq, they are all contributing to this goal of re-building Iraq so that the Iraqi people can be prosperous and free.
Be confident that you, the soldiers of our Army, will win the battles, but the “dollar” will win the war!
The security situation is something we all are well aware of and will not be addressed here as this is an update on the economy. The economy certainly cannot re-bound if the security situation does not improve. All economic recovery is dependent upon a relatively secure situation. As of late, the world's attention is focused on our recapturing Fallujah. There is some danger throughout all of Iraq, but it is wrong to think Fallujah is representative of the entire country. Every day, the majority of the Iraqi population wakes up and goes to work. This country of 25 million has several attacks throughout the country every day, but the underlying economy continues to rumble along. This is not to underscore the recent short term security changes and the increased casualties suffered by US and coalition forces. However, despite the short and long term security challenges and a war against an insurgency, the underlying Iraqi economy has continued to improve.
Since the fall of Baghdad there have been many successes in re-building the Iraqi economy but receive little press. Arguably, economies are like slow moving, large ships, and turning them around is like watching paint dry- they do not make great headline news. However, in hindsight, with the benefit of an extended period of time, we can see many positive developments as the Iraqi people have welcomed their new-found freedom and capitalism- despite the obvious challenges of the insurgency.
Unemployment has declined from March 2003 from 50% to its current 20%. Oil production has begun to increase and will help fund many of the Iraqi people's reconstruction efforts. Agriculture is the second largest industry after oil- and productivity has increased by 30%. The new Iraqi currency has remained stable. Consumer sales have exploded in air conditioners, cell phones and other electronic devices. These are positive macro-economic signs that the economy is moving in the right direction.
The US Congress has approved $18 billion in aid to re-build the infrastructure within Iraq. This is a very large amount for an economy the size of Iraq’s. The average Iraqi citizen earns approximately $1,600 per year. This $18 billion cash infusion from the US is equivalent to roughly $800 per person. Therefore this cash infusion is a tremendous boost to an otherwise stagnant economy. These funds have and will continue to put Iraqi’s to work and most importantly will build the necessary infrastructure for the next several decades of growth.
Enormous projects funded from this $18 billion have begun that will not bear fruit for several years. The building of a power plant takes years. While building that power plant there is no noticeable change for the local population until the project is fully completed, when suddenly, the change is tremendous: millions of people with power in their homes.
There have been hundreds of projects like these started that will not bear fruit until completed. Therefore, much of the investment thus far in long term projects, has yet to show any results, but will make a major difference when completed. Water, sewage, and power projects are all long term projects that will modernize Iraq and change the quality of life significantly for all Iraqis. Despite the delay in the impact of many of these long term projects- there has been significant short term progress that can be documented.
Foreign businesses have begun doing business in Iraq. Many of the largest companies in the world now have operations underway within Iraq. These include HP, AIG, Pepsi. GE, Siemens, Nestle and dozens of other top companies. Over 8,000 companies have registered to do business in Iraq and over 1,000 per month are now registering! While companies have been skeptical to invest major capital into Iraq, they have begun doing business and will likely begin significant investments as economic progress continues- and dependent upon the security situation.
Consumer goods, such as cell phones and air conditioners, have been seeing record sales month after month as Iraqi’s learn to enjoy the benefits and opportunities of capitalism. After forty years of oppression, the people of Iraq are enjoying the ability to buy new products and an entire consumer market has been opened.
However, it would be irresponsible to paint too rosy of a picture for soldiers entering Iraq. The challenges are many and will be obvious. For most of our soldiers- fighting the insurgency and providing security to the Iraqi people will be their main focus as it should be. The insurgency is our most obvious challenge, but beyond the insurgency and even without the insurgency, we face major economic challenges.
We face not only an insurgency intent on de-stabilizing the economy, but we face the challenges of privatizing a state run economy, citizens who often place their loyalties to their tribe rather than to their country, a culture that often accepts corruption as a governmental business practice, and the challenges of implementing the rule of law in a country unfamiliar with international law. These are not insurmountable challenges, but yet they will not likely change during our tour.
Transitioning from a state-run economy to an entrepreneurial, capitalist economy will take generations. Business leaders have been ingrained with a state run mentality, and teaching entrepreneurial methods will take years. This is not easy and would be challenging even if there was no insurgency. There are countless examples of both the success of countries transitioning from state run economies, but also to the length of time to realistically expect change.
The East German economy after the fall of the Berlin Wall in 1989 is a good example. Even though the East German population did not have to overcome any insurgency, they are still significantly under-performing compared to their brethren in West Germany- fifteen years after the fall of the Berlin Wall! It will likely take several generations to create a culture within Iraq that is comprised of entrepreneurs instead of government bureaucrats. This is not unique to Iraq- it is a challenge being faced throughout the countries that were previously run by Soviet-style governments.
This $18 billion aid package from the US to Iraq is the largest aid given by the US since just after the end of World War II. The US provided approximately $150 billion (in current US dollars) to 23 countries in Europe. These funds gave hope to 290 million people in Europe and helped to Europe to re-join the world community as productive nations. But it did not happen immediately. The Marshall Plan lasted until 1951- six years after the war ended. The West Germans did not vote in democratic elections until 1949- four years after the war ended. We need to keep the success in Europe in perspective as we compare the current situation in Iraq.
To the soldier arriving in Iraq, economic progress will not likely appear as being as robust as this article might suggest so it must be kept in perspective. The average Iraqi only makes approximately $1,600 per year. The population is very poor compared to what we are used to in America. A 30% growth rate in income for the average Iraqi will be very noticeable to the people of Iraq, but will be hardly noticeable for many of our troops. An E-1 Private makes more in a month than the average Iraqi makes in a year! If the average Iraqi income increases from $1,600 per year to $2,000 per year from the time we enter Iraq until the time we leave Iraq, the Iraqis will have achieved tremendous growth. But this growth will likely be imperceptable to us. We must keep this perspective in mind as we observe the changes during our tour.
Keep in mind during the last year the Iraqi economy improved significantly. Unemployment is down from 50% to 20%. The Iraqi Dinar is stable. 8,000 companies have registered to do business in Iraq. Cell phone, stereos, and air conditioner sales have exploded. The major industry of oil has begun to increase production. Agriculture has boomed and increased production by 30%. These statistics alone would probably surprise the average American. Progress is being made.
When we leave Iraq we hope that these growth rates have continued or even increased. But as stated earlier- keep this growth rate in perspective. We are used to living conditions that are far better than those we’ll observe in Iraq. The US economy is the most robust in the world. We are all very fortunate. No matter what job our soldiers have in Iraq, they are all contributing to this goal of re-building Iraq so that the Iraqi people can be prosperous and free.
Be confident that you, the soldiers of our Army, will win the battles, but the “dollar” will win the war!
posted by Dan at 1:20 AM
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