Risk Intelligence and the Iraq War: Part I

The Bush Administration took at least three big risks on its ability to stabilize Iraq after an invasion. The first was that the shock of an overwhelming invasion force would pacify the country long enough to let significant reconstruction start.

The second risk was that the prospect of democratic elections would reconcile conflicting groups such as Iraq's Shia, Sunnis and Kurds. And the third was that peaceful majorities could suppress opportunistic violence by foreign jihadists and domestic extremists.

Criticism that the United States should avoid such risks seems misguided since large potential benefits — like Iraqi political freedom — sometimes accompany them. The real issue is whether the Administration could have known it was at a disadvantage in taking these risks — making success hard to attain.

The concept of disadvantage in risk-taking highlights the competitive nature of any military or security proposal. What matters is whether you can learn about a security risk as fast as whoever may resist you.

In my view, the U.S. government could have determined in advance that it was at a disadvantage in assessing each of these risks. Avoiding similar mistakes in the future will require a clear sense of the information advantages and disadvantages — a concept I call risk intelligence — that can lead to bad decisions.

The first risk was that overwhelming force during an initial assault — shock and awe — would pacify Iraq long enough to allow reconstruction to begin. A formative experience of several Bush Administration leaders — Saddam Hussein's quick capitulation and withdrawal from Kuwait after the first Iraq war — suggested the risk was well worth taking.

Looking at the Iraqi side of the equation, the three groups there that are most responsible for post-conflict Iraqi violence all drew on very different experiences. These groups have included so-called Baath Party rejectionists — or Sunnis afraid of the loss of power to the country's majority Shia — opportunistic foreign jihadists, such as Abu Musab al-Zarqawi from Jordan, and ambivalent Shiite militants unwilling to share power, such as Moqtada Sadr.

Instead of looking to the first Iraq war to judge the prospects of destabilizing Iraq after an overwhelming invasion, they looked to another source of experience — Chechnya. And the lesson they drew was much more encouraging for an insurgency.

Even years into it, Russia's overwhelming military advantage is only just beginning to pacify a long-festering low-level insurgency in Chechnya that has occasionally spilled over into spectacular acts of violence beyond its borders. Savage reprisals left almost 100 people dead in a Moscow theatre in 2002 — and almost 200 schoolchildren dead in Beslan in 2004.

The lesson that Iraq's would-be insurgents learned from Chechnya is that overwhelming force won't prevent an insurgency from paralyzing a country — if the insurgents are sufficiently violent.

As a matter of fact, the lasting effects of an overwhelming invasion force actually went untested in the first Iraq war. If anything, Shiite and Kurdish attempts at rebellion after the first Iraq war — both apparently put down by Saddam's chemical weapons — suggested few lingering effects from the initial onslaught.

What really mattered was Saddam's continued monopoly of power in Iraq after 1991. The fact that no local Chechen actor wielded any such power made it a better model for Iraq in 2003.

The second risk was that democratic elections would overcome internal conflicts and create a shared interest in a unified Iraqi state. Once again, there was a striking set of facts that suggested the risk was worth taking.

In 1989, the democratic transformation of one Eastern European country after another began — as their communist governments fell.

So swift and successful were those transformations that many commentators, and not just neoconservative ones, thought we had reached a new level of economic development — one where the prospect of democracy motivates people to set aside long histories of conflict.

If that unvarnished belief were true, there would have been good reason to hope Iraq would stabilize itself as soon as Saddam left Baghdad. But you didn’t need to believe democracy had replaced the state of nature to think the Eastern European experience applied to Iraq.

After all, why should post-conflict stability in an ethnically and economically fragmented country like Iraq differ greatly from post-communist stability in homogeneous countries like Poland and Estonia? Why should fragmentation matter when the point of democracy is to reconcile differences?

While democratic institutions reconcile political differences after a change in regime, economic prospects matter for stability. As readers of The Globalist know, William Easterly shows just how much they matter in his book “The Elusive Quest for Growth.” He argues that development failures in strife-ridden areas such as Chiapas, Guatemala, Sierra Leone and Zambia are examples of a fatal mixture of ethnic and class hatreds.

In my book “Risk Intelligence,” I explore whether social fragmentation may have an even more systematic impact than these dysfunctional hatreds. It may block the growth of businesses from local markets to the scale of their national market.

Both income disparity and ethnic fragmentation are enemies of the open market. To get started, most businesses need a homogeneous local market — customers who resemble one another send the clearest signals, and clear signals are what entrepreneurs need most.

If the national market of the business is diverse while its "starter" market is homogeneous, however, the business will run into trouble when it tries to grow beyond that initial market. By definition, its startup customers won't resemble the diverse mix of customers it will have to serve at a national scale.

For a local incubator market to mimic or represent the national market of Iraq, for example, it would have to include Shia, Sunnis and Kurds. There are neighborhoods with that diversity in Baghdad. But they would make very poor incubator markets because their conflicting traditional preferences would provide highly confusing feedback to fledgling businesses.

Countries like Poland and Estonia are another matter. There are plenty of economically and ethnically homogeneous local markets in those countries that are ideal for start-up entrepreneurs. And many have the added advantage of resembling their respective national markets, allowing quick growth for nimble competitors.

So there are good, hard business reasons to doubt whether development prospects can motivate reconciliation in a fragmented country like Iraq as powerfully as in homogeneous places like Poland and Estonia. Even more compelling than business reasoning, however, is real-life experience. And a vivid experience of failed post-conflict reconciliation is something else that Iraq's Sunni rejectionists, foreign jihadists and Shiite militants all shared.