ECONOMICS OF THE IRAQI WAR
innumerable definitions of War, including the absence of peace and vice
versa. Perhaps one of the
most famous is that of the Prussian military strategist, Carl von
Clausewitz [1780 – 1831], who opined that war was the continuation of
politics. In recent times
the word has been used, for a variety of reasons, freely and loosely.
Hence we have the war on AIDS, the war on drugs, the war on
smoking, the war on obesity, the war on poverty, the war on terrorism,
and so forth.
The primary meaning
of War, certainly in the Western world, is an armed conflict between 2
or more nation-states. This
definition excludes revolts, rebellions, revolutions and even civil
wars. The Iraqi War, at least at its inception, fits this definition.
In this regard, the time of the commencement of the war is
generally accepted as being the attack by the U S A and its allies,
including Australia, on Iraq.
aspects of the War can be examined and considered in a variety of ways.
These include the connection and significance of economics with
respect to the causes of the war, the ongoing conduct of the War and,
eventually, to its ultimate consequences.
In his 1973 book
“ The Causes of War”, the Australian economic historian Geoffrey
Blainey [Born 1930] considered a variety of the causes of war.
He devoted a chapter to Economics, and to the economic drives and
pressures leading to war. Whilst
he concluded that economics had its place therein, he did not accept
that economic pressures and ills were the main stirrers of wars There
were other factors, including emotional, cultural and psychological and
the inherent nature of human beings. .
stated reason, at the time, for the starting of the War was the alleged
possession of Iraq of so-called weapons of mass destruction [WMD] and
the alleged likelihood of the Iraqi dictator, Saddam Hussein, using
them, particularly against the West.
In effect, this was a claim to be acting in self-defence, by way
of a clear and present danger, justifying a pre-emptive strike.
Thus the attack could be said to be a case of need rather than
As the stated basis
for the war has seemingly proved groundless, the tendency has been to
substitute a claim that a major, if not the major, cause for the war was
the need to remove the tyrant Saddam Hussein and bring democracy to the
Iraqi people. Arguably this
is merely a post hoc rationalisation
An economic basis
for the war is frequently alleged to be a desire of the American people
to acquire control of the Iraqi oilfields, potentially the second
largest in the world. This
does not appear as a likely proposition, however, given that the mass of
the American people would have little to gain from American control of
such oil, and hardly accounts for the actions of the allied nations,
other than the USA, which joined in the attack.
One suggestion has
been that Saddam Hussein was proposing to start charging for Iraqi oil
in Euros rather than US dollars, which could have had a significant
effect on the ability of the USA to maintain the US dollar as the
world’s reserve currency. A
similar suggestion has been made about Iran, which might partly explain
the vaunted preparations for war against that country.
A more likely
possible economic cause of the war could be said to be the economic
benefits that might flow personally to the various powerful individuals
in the USA government, who were the instigators of the war, and their
individual supporters who could be expected to benefit individually from
such war, whether through oil or producing, servicing or supplying
material for the war effort.
Assuming one does
not accept the proposition that the Iraqi War is over and that the USA
and its allies have already won, the economic aspects of the ongoing war
are significant and largely negative.
First and foremost is the cost, which by any standard is
The direct cost of
the War to the USA to September 2007, excluding interest, veterans’
entitlements and so forth, is US $ 456 billion, compared to an initial
budgeted cast for the war in March 2003 of US$ 70.6 billion.
Similarly the UK has spent 7.4 billion pounds, compared to a 2003
estimate of 3 billion pounds. The
USA is estimated to be spending US$6 billion per month. Such expenditures are beginning to starve other respective
areas of government budget expenditure.
economic aspect is the loss of wealth in buildings, infrastructure and
equipment destroyed or damaged, not only of the allies, but of the
Iraqis as well. Interruption
to the flow of Iraqi oil has been one cause of the significant increase
in petrol price. And then
of course there is the value of the loss of life and suffering of
injured and wounded allied personnel, and again of course, of the Iraqi
Perhaps not the
least negative economic aspect of modern wars, such as the Iraq War, is
the loss of government monetary restraint that it engenders,. and which
is already beginning to be observed in the USA.
If unchecked the result could be runaway inflation and the
destruction of the economy.
negative economic aspects of conducting a war could perhaps explain the
attitude of the famous British economist Edwin Cannan [1861-1935] who
wrote, “ What should I answer to anyone who had the impertinence to
ask me, what did I do in the Great War ?
The best answer I can think of is, ‘I protested’ “.
By the nature of
the exercise itself, determining the likely ultimate economic
consequences of the Iraq War is difficult and complex.
If the market for Iraqi oil is developed and opened up, there
could be significant economic benefits.
As well, the successful democratising of Iraqi society and its
opening up to increased economic integration with the West could well
have significant economic benefits.
However if one factors in the significant negative costs and
losses actually incurred, it is difficult to consider that any such
positive aspects will cancel out or exceed them.
22 May 2007