| Author | Message | | Guest | | Posted: Thu Dec 26, 2002 8:01 am Post subject: The economics of coming war |
| The economics of war
Alan Reynolds
I am often asked about the cost of starting a war with Iraq — not just the cost to taxpayers, but also the potential impact on the economy, oil prices, the stock market, etc. Before we can even begin to answer such questions, we must first evaluate the odds that U.N. inspections will or will not prevent a full-scale war. Then we must try to arrive at an informed opinion about whether any war is likely to be brief or protracted.
Those most eager for a U.S. invasion use arguments that do not fit together very well. They claim to have indisputable information about Iraq's "weapons of mass destruction." Yet they are equally confident that inspections will fail because those same weapons will supposedly be impossible to find. If the weapons and factories are so impossible to find, how can we be so sure they exist?
Enthusiasts for war say we must be in a big hurry to invade before Iraq acquires weapons of mass destruction, thus changing the complaint from weapons Saddam has to weapons he wishes he had. But that is equivalent to admitting Iraq does not yet have the many dangerous weapons that were supposed to justify invasion in the first place — gas, germs, nukes and (more importantly) the means of delivering them to U.S. shores. Inspections do not "buy time" for Saddam. He could not start or expand a weapons program with ground inspectors and aerial photographers looking over his shoulder.
Those who claim to be certain Iraq has a formidable arsenal of fearsome weapons also express inexplicable confidence that those weapons pose no danger to U.S. troops. They declare that an invasion will be fast and easy. "I guarantee it will be over within 10 days," says Mort Zuckerman of U.S.News. Such assurances that Iraq is a feeble military power contradict the rationale for war — namely, the assertion that Iraq is in possession of terrifying weapons. Iraq may be a dangerous predator or an easy prey, but it cannot be both.
To maximize the alleged danger of Saddam's weapons while minimizing the risk to U.S. troops seems reckless. After reading "Iraq's Weapons of Mass Destruction" from the International Institute for Strategic Studies and "When Every Moment Counts" by Sen. Bill Frist, Tennessee Republican, my understanding is that homeland risks from chemical or biological terrorism are smaller than from, say, two snipers. Although it is unlikely Iraq has any method of delivering significant quantities of gas or germs as far as the United States, it is more plausible he might use whatever he has against invading U.S. troops.
My best guess is that war and its aftermath would be more costly and difficult than the optimists admit. The fact presidential adviser Larry Lindsey publicly estimates it would cost $100 billion to $200 billion implies the administration expects a second Iraq war to be 2 or 3 times more difficult than the first one.
Despite recent musings about deflation, wars are always inflationary. Money chases fewer goods, as labor and materials are diverted to military uses, boosting business costs and squeezing profits. Wholesale prices rose 122 percent from 1915 to 1920 and 52 percent from 1945 to 1948, but we are not talking about anything on such a horrific scale. News of an Iraq invasion would provoke a speculative and probably ephemeral rise in prices of metals and other military materials, as in 1990, but it would be a big mistake for the Fed to mistake that for sustained inflation.
Oil prices doubled in a couple of months after Iraq invaded Kuwait, approaching $40 a barrel, but the current situation is quite different. In 1990, there was a threat to Kuwait's oil, not just Iraq's, and there was some anxiety that a major power might end up taking Iraq's side in a conflict with the United States. Unlike 1990, oil is already fairly pricey today because (1) substantial risk of war has already been priced into the oil markets, and (2) the post-1991 "sanctions" have reduced world oil supplies while making the Iraqis more dependent on Saddam. In 1991, oil prices fell and stocks rallied when the United States attacked Iraq. But that was because pushing Iraq out of Kuwait reduced risks to world oil supplies. An attack on Iraq today would have the opposite effect.
The S&P stock index fell nearly 12 percent from 1941 to 1952, which spanned World War II and the Korean War. But risks of a relatively short war today probably explain only a fraction of the stock market's troubles, since even defense stocks have fared poorly. Risks of terrorism, on the other hand, have a paralyzing effect on business investments.
Perhaps the biggest risk of a war with Iraq is that it would divert the nation's security resources from fighting al Qaeda to fighting Saddam, and from homeland security to foreign affairs. Ambassador L. Paul Bremer III, chairman of the National Commission on Terrorism, recently told Fox News, "I don't buy the idea that there is a tradeoff." But the tradeoff is a mathematical certainty, not a matter of opinion.
It impossible to devote 100 percent of resources to two or three tasks at the same time. Assigning a higher priority to one thing (Iraq) means a lower priority for something else (al Qaeda). The president cannot work more than about 60 hours a week, for example, so devoting 30 hours to a foreign war and 10 hours to the domestic economy would leave only 20 for homeland security and everything else. More troops "over there" means fewer over here. More intelligence agents monitoring Iraq means fewer watching out for a Taliban resurgence in Afghanistan or for al Qaeda cells plotting trouble in U.S. cities.
In short, war is still hell, even if we call it liberation. And the unavoidable diversion of effort, attention and resources to any foreign war also implies greater risk of domestic troubles, including domestic terrorism. The prospect of war with Iraq is not as hellish as some other wars, but it is not necessarily unavoidable, either. Time has a way of solving many problems, and only time will tell.
Alan Reynolds is a senior fellow with the Cato Institute and a nationally syndicated columnist.
Collateral Damage:
the health and environmental costs of war on Iraq
Executive Summary
Up to four million people could die in a war on Iraq involving nuclear weapons. A more contained conflict could cause half a million deaths and have a devastating impact on the lives, health and environment of the combatants, Iraqi civilians, and people in neighbouring countries and beyond. It could also damage the global economy and thus indirectly harm the health and well-being of millions more people across the world.
Researched and written by health professionals, this evidence-based report examines the likely impact of a new war on Iraq from a public health perspective. Credible estimates of the total possible deaths on all sides during the conflict and the following three months range from 48,000 to over 260,000. Civil war within Iraq could add another 20,000 deaths. Additional later deaths from post-war adverse health effects could reach 200,000. If nuclear weapons were used the death toll could reach 3,900,000. In all scenarios the majority of casualties will be civilians.
The aftermath of a ‘conventional’ war could include civil war, famine and epidemics, millions of refugees and displaced people, catastrophic effects on children’s health and development, economic collapse including failure of agriculture and manufacturing, and a requirement for long-term peacekeeping. Destabilisation and possible regime change in countries neighbouring Iraq is also possible, as well as more terrorist attacks. Global economic crisis may be triggered through trade reduction and soaring oil prices, with particularly devastating consequences for developing countries.
The financial burden will be enormous on all sides, with arms spending, occupation costs, relief and reconstruction possibly exceeding $150-200bn. The US is likely to spend $50bn - $200bn on the war and $5bn - 20bn annually on the occupation. As the report points out, $100bn would fund about four years of expenditure to address the health needs of the world’s poorest people.
Conflict will be more destructive than 1990-1991 Gulf War
The avowed US aim of regime change means any new conflict will be much more intense and destructive than the 1990-91 Gulf War, and will involve more deadly weapons developed in the interim. Furthermore, the mental and physical health of ordinary Iraqis is far worse than it was in 1991, making them much more vulnerable this time round, and even less able to muster the resources needed for recovery and reconstruction.
Thanks to the oil revenues and social policies of Saddam Hussein’s dictatorship, Iraq pre 1991 had become a reasonably prosperous, urbanised, middle-income country with a modern social infrastructure and good public services. The combined effects of war and sanctions, only partly offset by the humanitarian relief of the Oil-for-Food programme, relegated it to a pre-industrial age, and it now occupies a lowly 126th place out of 174 in the UN Human Development Index
The likely war scenario
The report bases its estimates on data from the earlier Gulf War, from comparable conflicts and crises elsewhere, and from the most reliable recent information on the health status of Iraq. It hypothesises a credible war scenario from current US military strategy, which envisages four different elements: sustained and devastating air attacks on government and military facilities and infrastructure in
Baghdad and other major urban centres; landing of ground forces to seize oil-producing regions in the south east; gaining control of north Iraq; and rapid deployment forces backed by air attacks to take Baghdad.
The US goal of leadership change is counterbalanced by Saddam Hussein’s goal of survival, so a short, clinical campaign is probably wishful thinking. The options open to Saddam Hussein include:
 firing oil wells and using radiological or chemical missiles to pollute the sites
 paramilitary attacks on Kuwaiti and Saudi oil fields, pipelines and facilities
 paramilitary attacks on civilian centres in other Gulf states
 paramilitary attacks on targets in the US, UK and other Coalition countries
 selective use of chemical and biological weapons (CBW).
The report considers the circumstances in which more substantial use of chemical, biological and nuclear weapons may occur. An Iraqi CBW attack on Israel or elsewhere could provoke immediate nuclear retaliation from Israel, the US and/or UK, while the UK and US have not ruled out the nuclear first-strike option.
Many questions remain unanswered about the aftermath and the likelihood of installing a stable new regime. The current problems of Afghanistan provide a reminder of the huge investment required to rebuild a shattered country, and the reluctance of the global community to support such long-term development.
Alternatives to war
As an objective report by health professionals, the report does not take a political stance on the alternatives to war on Iraq. Its main goal is to aid decision-making and encourage informed public debate by spelling out the true cost of a new war, against which any potential gains from going to war must be weighed. It lists non-violent strategies that have not yet been fully explored - some relating specifically to Iraq, and some to improving the international security context. It concludes that there is an urgent need for humane and wise global leadership which recognises that national security is impossible without international security.
Collateral Damage: the health and environmental costs of war on Iraq is being issued in London on 12 November 2002 by the global health organisation Medact, the UK affiliate of International Physicians for the Prevention of Nuclear War - winner of the Nobel Peace Prize in 1985. It is being released on the same day in the US by IPPNW and its US affiliate Physicians for Social Responsibility, and by other IPPNW affiliates in ten other countries.
The report can be found on Medact’s website www.medact.org and on IPPNW’s website at www.ippnw.org. A longer version with additional information, references and statistics can also be viewed on the Medact website. | |  | | Guest | | | | Guest | | | | | ©2002-2009 WarWithoutEnd.co.uk |
