Iraqis feel weight of high prices, few jobs

Iraq's economy is weaker than at any point since the US invasion in 2003.

When the top Marine commander in Iraq addressed criticism that US forces appeared to be losing the political, if not the military, fight in Anbar Province recently, he said that success rests as much on restoring a measure of economic stability and basic services as it does on ending Iraq's sectarian bloodshed.

"Economic development and the establishment of social order and public services ... are the conditions which must be set that will result in the support of the local people, and ultimately cause the defeat of this terrorist-backed insurgency," Maj. Gen. Richard Zilmer said earlier this week.

But Iraq's economy is weaker than at any point since the US invasion. Some estimate joblessness at 60 percent (the CIA shows a 30 percent rate for 2005), and prices for foodstuffs and basic goods have doubled – and in some cases tripled – since 2003.

Earlier this month, Iraq's planning minister, Ali Baban, said the rise in the consumer price index (CPI) – the basket of goods and services used to measure inflation – increased by nearly 70 percent in July compared with 12 months earlier. In July 2005, the CPI rose by 30 percent.

While the daily death toll frightens Iraqis – it topped 100 in the past two days alone – the country's economic grind is eroding the standards of living of millions of Iraqis and leading to mounting frustration in a country where the average monthly wage is less than $200.

Take Ahmed Obeidi, who saw an improvement in his life immediately following the war but now says he goes to sleep at night terrified about his family's prospects. Until 2003, he was a mason whose tiny daily wage – about $2 – nevertheless was enough to keep his wife and three children clothed and fed.

After the war, he picked up construction work on US-funded projects. Prices rose that first year, but his daily wages had soared to $10, allowing him to save small amounts for the first time in his life. But as security in Baghdad collapsed starting in early 2004, opportunities to work dried up.

Soaring prices reflected the lack of security. Oil smugglers took advantage of rising corruption and distracted security services, and the cost of hauling goods rose to reflect the risks of ambush. Significant US reconstruction spending was deflected to security: Of more than $12 billion spent through the middle of this year, at least $4 billion went to security.

That doesn't take into account informal security arrangements. Long-haul truckers in Baghdad, food wholesalers, and even local retail shops say small weekly protection payments to corrupt cops and militias have become standard.

Now, Mr. Obeidi is happy to find five days of work a month. "I don't know what we'll do if the five days ... run out," he says. "The only jobs are [with] the police or the Army, but I can't join because of my age. I don't have a degree, so a government job isn't an option. I feel like my whole life is collapsing gradually with the country."

Yet, as Baghdad residents, the Obeidis are fortunate. While the price of bread has almost tripled, the price of meat has doubled, and prices for gas and electricity increased nearly four-fold, those in major cities are eating better than their rural counterparts.

A report sponsored by the UN's World Food Program late last year found that nationwide, 1 in 4 Iraqi children under age 5 suffered from either "acute or chronic malnutrition." The number was 1 in 3 in rural areas in the south.

Iraq's economic problems pose a great conundrum for policymakers. Usually when wages are flat and unemployment high, prices are stable, because consumption also stays flat. In developed economies like the US, inflation walks hand-in-hand with economic growth and job creation. But in Iraq, violence is driving the price increases, destroying jobs and testing a social net that was already weak before the fall of Saddam Hussein's regime. Economic despair, in turn, generates new recruits for the sectarian militias most responsible for the economic decline.

Falah Hassan works in a small grocery store in western Baghdad for about 7,000 dinars, or $5, a day. He says he asked his boss for higher wages to compensate for higher prices, but understood why he said no. "Our customers are dwindling, and they buy less when they do come in."

Trained as a butcher, he says he was recently offered $10 a day to work in a meat market near Baghdad's Adhamiyah neighborhood, a stronghold for Sunni Arab insurgents, but says the dangers of traveling the four miles to his new place of work outweighed any potential benefit.

"I'd love the money, but what are the chances I'll get killed if I travel those roads to work? Then my family would have nothing," he says. "If this continues, soon we'll be like ants, eating what we can find by the side of the road."

Like many Baghdadis, he blames the economic situation on the government's security failures. Prime Minister Nouri al-Maliki came to office this year promising to flood Baghdad's streets with Iraqi and local troops, and restore safety. But July was the second-deadliest month on record – belying US and Iraqi government claims that their efforts were making progress.

"We're a country rich with oil and yet we have children who are starving," says Mr. Hassan. "I don't know of a better measure of a government's failure than when it's people don't get enough to eat."