Saddam may yet come to regret such boasts. But in a 10-day tour of Iraq I found that despite widespread hunger and health problems, Saddam seems to have the political situation under control. He has effectively reorganized the Iraqi Army, which with 500,000 men and 2,000 main battle tanks is still the largest in the Arab world. Technicians are reviving an economy described by the United Nations as virtually blown back to the pre-industrial era. Bridges, roads, electrical grids and water networks are being repaired. And Iraq’s 18 million people each receive a basic “monthly survival ration” that includes cereals, sugar, rice, cooking oil, tea, detergent, soap and baby milk. It is enough to meet 40 percent of an adult’s daily caloric requirement and 60 percent of a child’s. A Harvard study said the distribution system “is remarkably comprehensive, equitable, efficient.”

Even partial successes are impressive, and one European observer in Baghdad says Saddam had recently gained weight and color and “returned from the living dead. He has recovered his balance, his bounce and his belligerency.” But there is no denying the wages of war. A year later, more than 60 percent of the work force is unemployed. Inflation is increasing by at least 30 percent a month and only the wealthiest Iraqis can afford to supplement their rations by buying food from a black market. “Ninety-nine percent of Iraqis are now poor and 1 percent are very rich,” says a leading psychiatrist, Dr. Selim Jalali, with only slight hyperbole. “There is no more middle class.”

The crisis affects virtually every Iraqi. Ragheb Mozah’s mother has been able to feed her emaciated 3-month-old son only rice water since he was born; he has never smiled once in his life and will either die in Baghdad’s Al Qadissiya hospital or suffer permanent brain damage. In the capital’s famed Thieves Market, an elderly woman tries to sell her own children’s clothes for money to buy food. “No one wants to buy anything,” she says. “My children are hungry and now they are cold, too.” Other Iraqis offer goods from their homes–carpets, flatware and cooking utensils-at impromptu street markets known as Souk al Wara, or “markets of confusion.”

Conditions are even worse along the Turkish border and in the south, where Saddam brutally suppressed rebellions Kurds and Shiite Muslims. In the north, several hundred thousand homeless Kurds face a second winter in the savage mountain cold. In the Shiite capital of Basra, the water is so contaminated many residents told me they refused to use it, even to brush their teeth. Still, children splashed happily through streets awash in putrefying sewage.

The government says the 18-month U.N. economic embargo is to blame for the deaths of an estimated 80,000 children. (The Greenpeace organization estimates as many as 243,000 Iraqi civilian deaths due to war-related causes.) The blockade exempts food and medicine but Baghdad insists that since $4 billion of its funds are frozen abroad it cannot purchase either one. Washington and some aid officials accuse Baghdad of playing polities with its own citizens’ lives by blocking international food distribution.

Saddam’s ultimate survival and Iraq’s future will probably depend on which crumbles first-the U.N. sanctions or the loyalty of privileged Iraqis. The embargo has already been somewhat compromised: Switzerland, Britain and Italy have released some Iraqi frozen assets and even the United Nations’ chief coordinator, Prince Sadruddin Aga Khan, calls the sanctions “unfair.”

Meanwhile, the elite show no signs of deserting Saddam. They have yet to feel the pain gripping the rest of the country. I attended a New Year’s Eve celebration at a swank Baghdad hotel and saw rich Iraqis dining on lobster thermidor, suckling pig and five different desserts for the official equivalent of $450 a head. French or American champagne cost an additional $600 a bottle. Others spend long days at the races, guzzling beer and eating oranges no one else can afford. At one recent outing, when a horse named Bright Future finished last, the irony passed unnoticed.

Baghdad intends to outwait the world community. “We are the world’s biggest growers of dates and that is what we will eat if necessary,” insists Trade Minister Muhammad Mahdi Saleh. As I left Iraq, Deputy Prime Minister Tariq Aziz drove ahead of me. His suitcases bulged with what a customs official said was $50 million in cash, presumably to finance one of Saddam’s secret projects. “George Bush has his own economic problems now,” another Iraqi official says, “and maybe Mr. President [Saddam] will be around longer than Bush.” That is not as absurd as it might have seemed only months ago.