What the Iraq war means for the US economy
Doug Casey - Thu 12 Oct, 2006
...What the Iraq war means for the US economy...Theres a price for empire, and the US is paying it...
- Randolph Bourne once sagely noted that "war is the health of the state," by which he meant that war is particularly fertile soil for growing government power.
- At the beginning of WWII, the US government was powerful but on a par with a half-dozen other states. But the war enabled it to reinvent itself as the centrepiece of American society and the controlling force in the economy.
What the Iraq war means for the US economy: WWII
- Although the US started acting like an empire at least as early as its shameful war against Spain and the taking of Cuba, Puerto Rico and the Philippines, among other places, it was WWII that really set the US on its current path.
- Some dimwits think that war is good for the economy, the theory being that the economy must ramp up to replace all the goods and infrastructure that war destroys. Great; every time the economy starts to falter, let’s bomb the world to pieces.
- The reality is that directing any resources to the government is by definition a misallocation, since it takes funds away from their owners. The capital used to build weapons and blow things up is capital that could have been used to finance sustainable, productive jobs and build more wealth.
- Yes, I know it seemed like a good idea at the time (to some people), but what do you think the US actually gained by spending $375 billion (in today’s dollars) bombing jungles in Vietnam and killing more than 2 million people there?
What the Iraq war means for the US economy: The Iraq war
- The Iraq war is no different. In fact, it will turn out even worse. Vietnam was just a small, isolated, desperately poor country; in Iraq, we’re provoking the whole of the Islamic world. And this war will be vastly more expensive. Osama bin Laden predicted his strategy of financial attrition would bankrupt us, and he’s right.
- On that point, a former US government apparatchik has broken ranks and gone on record with some numbers that I don’t think are going to be far off and that will prove to be well on the light side should the war in the Middle East spread.
- In his recent analysis, Joe Stieglitz, former chief economist of the World Bank and chairman of the President's Council of Economic Advisors, put the tally for the Iraq war at $1 trillion for direct costs and another 1$ trillion for macroeconomic costs (such as the higher price for oil).
What the Iraq war means for the US economy: Oil
- All of this assures oil will stay high for the foreseeable future. As oil is literally the stuff that makes the world go 'round, persistent high oil prices mean a lower standard of living in the US and a lot more power in the hands of oil producers, which range from unstable to overtly hostile.
- And the next big headline — whether it’s a major attack on a US city, the assassination of Mubarak in Egypt or Musharraf in Pakistan, a revolution in Saudi Arabia, things going from terrible to horrific in Iraq, or an expansion of the conflict into Syria and/or even Iran — will unquestionably send the price of oil over $100 bbl.
- More importantly, the US will predictably send troops and bombers to whichever new trouble spot beckons, getting further and further stuck in the tar pit of "Chaostan".
- Proof? Why is it that Condi heads to Lebanon to try and work things out? Why not the secretary of state of, say, Thailand or Mongolia?
- There’s a price for empire, and the US is paying it.
- Just as Vietnam played its role, at the time, in the spiralling inflation of the 1970s, so, too, will Iraq and wherever it is we point the guns next. The situation is escalating as Bush, Rumsfeld and presidential candidate Gingrich actually start using the phrase "World War III" in their speeches.
- The thought precedes the word, and the word precedes the act.
Regards,
Doug Casey
for The Daily Reckoning
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