The Lincoln Plawg - the blog with footnotes

Politics and law from a British perspective (hence Politics LAW BloG): ''People who like this sort of thing...'' as the Great Man said

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Sunday, October 12, 2003

Voodoo economics at Bremer's Five O'Clock Follies?

I've been deliberately staying away from the Quagmire Question .

(It seems to me that the blogger can really only get on terms with a question when it's something documentary - a speech, an article, a judicial opinion, a government report: where he's getting the same evidence as the highly paid hack who can be on the spot with a fat Rolodex (or electronic equivalent) of contacts.

To use an analogy I suspect I've used before, a blogger is in the position of an appellate judge: in some matters he can reasonably substitute his own judgement for that of the trial judge (and jury, if any) on the basis of the papers before him; in others - turning on the credibility of witnesses, for instance - he must defer, failing patent absurdity.)

The Q question, it seems to me, falls into this latter category.

But, lo, Reichsprotektor Paul Bremer steps in with a nugget I think one can legitimately analyse at several thousand miles' distance.

From Andrew Sullivan, Bremer's rousing repost to the moaning minnies and dismal jimmies at a press conference on October 9, an enumeration of the striking achievements of the Coalition Provisional Authority (CPA) since it took over.

(Strangely, Sullivan fails to mention Bremer's opening graf:
Six months ago today Coalition Forces liberated Baghdad. I am sure that many of you were as thrilled as I was to see Saddam's statue and his regime fall.

The great thing about the classic Rummygram was that you knew the guy didn't give a flying one: sounds to me like Bremer is pouting.)

A flavour:
  • Six months ago there were no police on duty in Iraq.

  • Today there are over 40,000 police on duty, nearly 7,000 here in Baghdad alone.

  • Last night Coalition Forces and Iraqi police conducted 1,731 joint patrols.

  • Six months ago those elements of Saddam's military that had not been destroyed in combat had buried their airplanes and melted away.

  • Today the first battalion of the new Iraqi Army has graduated and is on active duty.

  • Across the country over 60,000 Iraqis now provide security to their fellow citizens.

I have a strange feeling Bremer has been practising his rhetorical skills: I half expected him to end with Ich bin ein Baghdader [1].

Perhaps the most striking claims he makes are these:
  • Six months ago teachers were paid as little as $5.33 per month.

  • Today teachers earn from 12 to 25 times their former salaries.
Today we have increased public health spending to over 26 times what it was under Saddam.

To have done that in six months beggars belief. By way of comparison, take the increase in US defence spending over the years 1939-43 (the numbers from a Harvard course handout (DOC)): the calendar year numbers for the defence budget as a percentage of GDP were (on one basis) 2, 3, 14, 40 and 53.

By my calculation, this is also an increase by a factor of 25. But over ten times the period the CPA has been in charge in Iraq; achieved with an increase in GDP over the period of around 50%; and with a technologically advanced industrial base and infrastructure with enormous, but quickly accessible, overcapacity.

(There were also certain strategic imperatives involved...)

Is there any way of corroborating Bremer's single source story? As it so happens, yes (up to a point): resort to the World Bank's Iraq page comes up with the UN/World Bank Joint Iraq Needs Assessment [2], which was issued also on October 9.

The World Bank report also refers (para 2.16, p17a) to public sector pay in Iraq:
A new wage scale was introduced in September 2003.Together with a 25 percent increase of civil servants registered on the payroll, this has resulted in a doubling of the wage bill compared with pre-conflict levels.

Startling enough - but an increase by a factor of 1 is, perhaps, a little less Barnum & Bailey than Bremer wanted for his big splash.

I'm no expert: but the danger to be considered (which Bremer does not even hint at) is surely that, in an economy which has no non-oil economy to speak of, an increase in wages will simply suck in imports, and lead to inflation.

The parlous state of the Iraqi economy may be judged from the section of the World Bank report headed Macroeconomic Framework (para 2.14ff) and Annex 1: Macroeconomic Assumptions (p71a). For 2003, it assumes annual growth of -22%, GDP of $12-14bn and per capita GDP of $450-610; for 2004, the corresponding numbers are +30%, $15-20bn and $570-760. In para 2.15, it puts inflation for the year to July 2003 at 23%.

Just how little there is to the Iraqi economy appears from the assumption (para 2.20) in the draft 2004 budget of oil revenue of $12bn. Which leaves non-oil GDP for 2004 at perhaps as low as $3bn - or just over a hundred bucks a head!

Now, as a layman, I'm perfectly prepared to be convinced, by evidence and argument, that there are other factors which square the economic circle: I'm not, for instance, clear where purchasing power considerations enter into the equation (one usually uses purchasing power parity (PPP) adjusted GDP numbers, to take account of the fact that a kilo of rice in Geneva is a tad pricier than it is in Dacca). Perhaps the Iraqi economy is so shot-up that the normal rules of economics simply don't apply, and that wages really can go up by 25 times without producing hyperinflation.

But to be fed soundbite pap in a tone that yells at me to believe or be condemned as a dirty Saddam-lover? There are still a few Marines in Baghdad - let Bremer tell them!

  1. The original.

  2. A 400KB PDF file of 90 pages.


Currently, the link on the CPA transcripts page to Bremer's October 9 presscon is duff. FYI...

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