The Economic Impact of the Iraq War

Some critics of the war in Iraq have called for a military draft as means of building pressure for growth in the anti-war movement. They forget that the U.S. withdrawal from Vietnam followed the ending of the draft by several months. A draft makes extended unjust wars possible. The popular notion to the contrary is due to the fact that the cost of a draft, the conscription of unwilling soldiers, is clearly connected to the war. Unfortunately, the costs of a volunteer army are economic, and their connection to the war are not clear except to those who take the effort to understand them.

Joseph Stiglitz is an economist who has made an effort to understand the connection in the case of Iraq, and the controversy over his conclusions demonstrates my thesis. Notwithstanding the belief in many areas that the war was instigated to guarantee cheap oil to the United States, oil prices quadrupled. Talking heads have tried to pin the blame on rising demand for oil by China and India, but these factors were anticipated by the oil industry before the invasion of Iraq and oil traders estimated that the price would hold at about $25 per barrel. What they did not anticipate was that the war–instituted to facilitate Likudnik designs for the Middle East–would lead to a sustained violent resistance movement that would destabilize Iraq, revive long dormant sectarian strife and harden ethnic divisions. In the end, Iraq’s oil supply was left to the mercy of thieves, sabotage, and corruption.

The connection between a draft and a war is obvious. The connection between the credit crisis in the United States and the war in Iraq is missed by many. This war is expensive. While George Bush claims that the $3 trillion dollar cost estimated by Stiglitz and his co-author Linda Blimes is an exaggeration, they argue that it is conservative.

Whether the cost is $3 trillion or $5 trillion, most people never reflect on from where that money is going to come. The Bush administration is not willing to pay for it out of taxes, so ultimately it must be borrowed from future generations. The timeless method of governments to rob future generations is through the expansion of credit. In ancient times this was done through the debasement of the money supply (palming off base metal as gold or silver). Today it is done through the Federal Reserve system. The flood of credit that the Fed has let loose to pay for the war found its way into the funding of cheap credit for people who couldn’t afford housing. This credit did not make housing affordable for them, it only created the illusion that the housing was affordable. When reality bit them on the nose, they lost their homes. The next step would be for the lenders to go bankrupt, but the Fed has bailed out Bear-Stearns, which means more credit expansion, more distortions in the market, and more future disasters that the average person is likely to not trace back to the war in Iraq.

The war begat high oil fuel prices that begat the change of heart about global warming and carbon footprints by Exxon and so many others, that begat the diversion of food resources into “biofuels,” that begat high food prices, especially the staples like wheat, corn, and rice. Ask the impoverished masses why they can’t afford bread and they may blame the farmers and the bakers, but it would never occur to them to blame the warmongers who are the actual root of the problem. The farmers and the bakers are caught in the middle of forces they neither control nor understand. They are not the ones getting rich. Any benefit they have is marginal, coincidental, and short-lived since the inflationary disaster waiting in the wings will hit them as it hits most of us.

A draft uses outright coercion, involuntary servitude, to man the military. Without it the government resorts to fraud of various sorts to deceive the public into thinking that the suffering they endure is due to greedy businessmen,greedy workers, immigrants, or despised minority groups. It will blame anything but the its own imperial ambitions, the special interests that support it, and its contempt for the general welfare.

Imad-ad-Dean Ahmad, Ph.D.
Minaret of Freedom Institute

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