Despite the violence in central Iraq, the national economy is doing well. Inflation is low, the GDP continues to grow, the currency is stable (trading at 1400-1500 dinars per dollar for over a year) and unemployment is going down (although it's still over twenty percent, which is about as bad as it gets in Europe, and better than many other Moslem nations.) New business formations increase month by month (to nearly 30,000 a month). Crude oil production has stayed at about 2.1 million barrels. The oil infrastructure, which Saddam starved for investment for over two decades, is being rebuilt. Much of the construction in the country is to catch up with two decades of little or no construction in essential services (oil, energy, healthcare, schools, water, sewage and roads). Most of this doesn't get reported outside of Iraq.
The foreign reporters tend to go to those few areas in central Iraq where Sunni Arabs continue to fight. Many Sunni Arab Iraqis did not accept the overthrow of their guy, Saddam Hussein, in 2003. Encouraged by European and Arab nations, the Sunni Arabs use terrorism in their attempt to turn things around. But the only progress the Sunni Arab Iraqis have made is in the foreign media. At home, the Sunni Arabs remain a smaller and smaller minority, able to launch fewer attacks, as an increasing number of Sunni Arabs abandon the fight.
This increasing pacification among Sunni Arabs is encouraged by the growing number of Iraqi police and soldiers. Most have not been trained to American standards, or anywhere close. But they have achieved traditional Iraqi standards, which means they can shoot it out with other Iraqis. There are over 60,000 police, who keep the peace in northern (Kurdish) and southern (Shia Arab) Iraq. In central Iraq, police control varies from town to town and neighborhood to neighborhood. The traditional problems of corruption and divided loyalty are still there, as they have been for generations. As in Saddams day, there are "special police", controlled by the central government, to keep an eye on the regular police (who, then and now, can also be loyal to local gangsters or tribal and religious leaders). There are some 30,000 of these special police, better trained SWAT teams, border police and riot police working directly for the Ministry of Interior.
The 75,000 troops in the armed forces are getting a different kind of training, in an attempt to break a long tradition of poor performance. Iraqi troops have, for a long time, been the most inept in the Arab world. This is saying something, as Arab armies have not distinguished themselves over the last few centuries. The Iraqi army is being rebuilt from scratch, with new officers and NCOs, and more intense training that Iraqi soldiers are used to.
Most Iraqis still recognize the "strong man" system of government. This means that guys with lots of armed followers, and a way with the media, can attract the loyalty of many people. In the north, Kurds have rallied around two tribal leaders. These two guys have a truce, and an agreement to cooperate, for the moment. In the south, there are half a dozen major Shia Arab groups, the largest being the militias of Sadr, and the pro-Iran Badr Organization. But these two represent more guns than people. Most of the Shia are loyal to religious leaders. But when push comes to shove, the bullets tend to brush aside the sermons and prayers. The Ministry of Interior is dominated by Shia politicians, who try to avoid domination by any of the Shia militias. Many of the Shia militiamen have joined the police and the government, and continued to work for their militia bosses. Such a sweet deal, collecting two paychecks for one job. It is not, however, the most effective way to run a government.
The biggest obstacle to peace and prosperity continues to be corruption. Too many leaders will steal, and be bought, too easily. Such practices are found everywhere in the world, but corruption is so pervasive in Iraq that it interferes with government administration and economic growth. Iraqis are reluctant to confront the corruption issue. Few will say anything positive about corruption, but few will step forward and actually do something about it. Making anti-corruption statements and speeches is the most that Iraqi politicians will do. In the end, prosperity and good government will only come about if the corruption is reduced, a lot.