By DAVE LINDORFF -
Martin Neil Baily, a chair of the Council of Economic Advisers under
President Bill Clinton, and now director of the business initiative at
the Brookings Institution, in an opinion piece that ran Sunday in the
New York Times, says no. Claiming to be opposed to the Iraq War, he
nonetheless suggests that the nearly $500 billion spent on Iraq to date
=97all of it borrowed money=97cannot be blamed for the credit crisis, or
for high oil prices.
But Baily is looking at things way too narrowly. First of all, As
Joseph Stiglitz, a Nobel economist and chief economist at the World
Bank, has noted, the real cost of the Iraq War is probably now closer
to $3 trillion, in terms of future costs of veterans benefits,
replacement of equipment, and payment on the debt that has been piling
up because of the government=92s unwillingness to make the public pay
for the war in real time. That whopping bill is in the minds of the
international investors who have been deserting the dollar in droves,
causing it to approach Third World status as a currency.
But there are other links too, between the war and US economic crisis
and decline.
One is the misdirection of much of the nation=92s remaining industrial
strength into war production. The late industrial engineer Seymour
Melman long ago demonstrated how the military-industrial complex, by
producing things not on a competitive but rather a cost-plus basis,
destroys economic competitiveness, sucks up research and development
talent and resources, and investment capital, and ends up producing
nothing of use either for society or for the national trade account.
Melman (who was a professor of mine when I studied at Columbia
University), went further to argue that military production has a kind
of viral impact across the economy, that sickens the whole system. One
example: if investors see higher returns in military industries, they
will ****ft their investments away from other industries, leaving them
starved for capital.
We can see the results of this military-industrial virus in the
failure of Boeing to produce its next generation jet, the Dreamliner,
on schedule, in the pathetic performance of the nation=92s dying
domestic automotive industry, and in the failure of the country=92s once
vibrant entrepreneurial economy to do anything significant to tackle
the challenge of global warming and the crying need for non-polluting,
renewable energy sources.
The nation=92s universities have no problem winning massive grants for
defense projects, but academic researchers are hard-pressed to get
grants for alternative energy research. There certainly is no federal
money available for scholar****ps to students who want to go into
environmental or energy majors, but there=92s no lack of money for
students who want to sign up for ROTC programs.
One could argue that at least the war is providing jobs for some of
the nation=92s growing army of the unemployed, but that would be to
ignore the wastefulness of the work, and the enormous needs facing the
nation. How much better to use federal funds to employ people at
projects like reforestation, wetlands restoration, teaching, highway
repair, school construction, slum renovation, etc., than at jobs
involving killing overseas. It is ludicrous to assert that there is no
connection between the hundreds of billions of dollars a year being
spent on the military, and the fact that Philadelphia=92s school
district, the fifth largest in the nation, is bankrupt and run by the
state, and that even so, many of its students, packed 40 to a
classroom, have to sit on classmates=92 desks and study from science and
history textbooks printed in the 1980s, because of lack of funds.
I just went for a run in Philadelphia=92s Fairmount Park yesterday,
along Wissahickon Creek. The beautiful running path takes one past a
covered bridge, a cabin, scenic stone bridges, and other visual
delights, all constructed by workers funded by the Civilian
Conservation Corps. a New Deal public works program that hired the
unemployed during the depths of the Great Depression.
No such program exists today, because this government is in the
killing business.
Nor can oil prices and commodities prices, which Baily suggests are
soaring in price not because of the Iraq War, but because of
increasing demand from places like India and China, be so casually
separated from America=92s warmongering.
Firstly, even oil traders will acknowledge that there is a premium on
oil in part because of the threat to 20 percent of the world=92s oil
posed by the Bush/Cheney administration=92s growing belligerence towards
Iran, and its threats to attack the world=92s number-two oil producer, a
move which would effectively close off the Persian Gulf as an oil-
producing venue indefinitely. The Iraq War hasn=92t just reduced oil
production in Iraq, the world=92s third-biggest oil producing nation; it
has led to fears of a much wider disruption in oil supplies from Iran,
Kuwait and Saudi Arabia--and oil investors make their price decisions
based on future prospects, not on current usage.
Second, the administration=92s obsession with waging a vastly unpopular
war has led it to avoid doing anything that might cause the American
public to feel pain from that conflict. That would include trying to
mandate any kind of reduction in oil demand in the US, by for instance
increasing the tax on gasoline, or mandating improved mileage
standards for automobiles and trucks.
Much of the rise in oil prices, of course, is only being felt by
Americans, because it is an increase in the dollar price for oil. For
Europeans and Asians, whose currencies are appreciating against the
dollar, oil prices are not rising, and may even be falling. So to the
extent that the massive US spending on a war funded on credit is
contributing to the dollar=92s collapse, so is that spending leading to
the soaring oil prices that are dragging down the domestic economy.
There is another problem with Baily=92s argument too, and it is one that
many American economists, with their almost religious faith in markets
and the identification of people as simply consumers, make.
Specifically it is that people are worried by all this war and fear
mongering, and people who are fearful do not invest and spend the way
people who are confident about the future do.
This is an intangible thing, but I think it=92s a good bet that many
Americans are putting off investments, whether in a new house or a new
car, or even in a new business venture, because of fears of a wider
war in the Middle East, or of an economic collapse here at home, or
because of another jump in oil prices. Many people may not even be
aware that they are making such calculations, and yet they are.
In short, Baily is wrong. The Iraq War is certainly having a profound
negative effect on the US economy, in both short, and in long-term
ways.
The worst of these effects will show up when, a decade or more hence,
as the oceans are rising, coastal cities are being devastated by storm
surges, and croplands are being parched, we will look back at the lost
op****tunities to act decisively on climate change that were squandered
by an administration obsessed with making war on a group of Third
World nations, and with grabbing control of a resource=97oil--that it
should have been working hard to replace altogether as an energy
source.
Dave Lindorff is the author of Killing Time: an Investigation into the
Death Row Case of Mumia Abu-Jamal. His book of CounterPunch columns
titled "This Can't be Happening!" is published by Common Courage
Press. Lindorff's newest book is "The Case for Impeachment", co-
authored by Barbara Olshansky.
He can be reached at: dlindorff@[EMAIL PROTECTED]
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