Concerning the current state in Iraq, Juan Cole writes "how much longer can Iraq limp along as a failing state before it really begins to collapse?" And he's basically right. The situation in Iraq is still tremendously fragile. The political situation has not improved at all and it's even doubtful that current military progress can be sustained after the surge ends in April.
Still, some added insight can be gained by reversing the terms "failure" and "collapse." By the time the surge started last January, Iraq in fact was "collapsing" into profound anarchy. The government was almost entirely dysfunctional with much of the Iraq military and all of the Iraqi police in the hands of militias. Sunni Anbar province in the west was characterized by a three corner brawl between tribal insurgents, global jihadis, and the Americans. The Shiite sector in the southeast was falling apart as Shiite militias made war on each other and the Americans with weapons imported from Iran. Making the situation even worse, the weakness of the central government and loose structures of the militias encouraged the development of criminal gangs which magnified the terror and insecurity of everyday life.
The situation was perhaps worst of all in Bagdad where all factions combined to create a Hobbesian nightmare where life was "poor, nasty, brutish, and short." American troops, American mercenaries the Iraqi government, Sunni militias, Shiite militias, global jihadis, and criminal gangs all operated with impunity and nobody dominated the action. It was the worst of all possible worlds.
Given the horror of the situation, what the surge did was bring Iraq back from collapse. Leading elements in both the Sunni and Shiite populations decided to step back from the pit of anarchy. Tribal leaders in Anbar recoiled at the Taliban-like society that global jihadis were trying to implement and became allies with American troops. Likewise, Moqtada al-Sadr stood down his Mahdi Army. Even the Iranians seem to have pulled back a little. The Iraqi state was still failing but it was no longer in such a nightmare of collapse.
The presence of American troops allowed the tribal militias to gain a firm upper hand in Anbar. Likewise, the American military has also walled off a lot of the Sunni neighborhoods in Iraq so that car bombers can't get in. The price for so much "security" is tha residents from the neighborhoods can't get out and customers for local businesses can't get in. American forces have managed to impose security (quite a military accomplishment by the way) but haven't come close to creating the "stability" needed for the freedom of movement needed for real commerce. In fact, Iraq still seems closer to falling apart again than it is to establishing any kind of real stability or forward movement.
That's why it's very much legitimate for Cole to still refer to Iraq as a failing state.
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