How the State Profits from War Essay

One of the most enduring misconceptions in economics is that war is beneficial to the economy (Moffatt, n. pag. ). This myth was further perpetuated by the economist and New York Times columnist Paul Krugman, who wrote: â€Å"Ghastly as it may seem, (the destruction of the World Trade Center) could even do some economic good†¦ the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings† (Tracinski, n. pag. ). Indeed, bad economics reign in moments of crisis and or panic, when people are desperate for solutions. To refute the alleged benefits of the â€Å"War Economy,† critiques use the â€Å"fallacy of the broken window† (Tracinski, n. pag. ). When a vandal throws a brick through a shop’s window and the shop’s owner has to spend, say, $200 for the window’s repair, the people will think that the defacer has given a positive contribution to society. After all, the repair of the broken window meant an â€Å"instant boost in employment and economic activity† (Tracinski, n. pag. ). But what these short-sighted citizens didn’t know was that the $200 that was spent on fixing the window could have been used in ventures that might have advanced the shop owner’s enterprise. Unfortunately, proponents of the â€Å"War Economy† assumed that â€Å"(since) a broken window can stimulate the economy, (it must be better) when literally thousands of them are broken† (Tracinski, n. pag. ). For them, wars are crucial for the survival of modern economies (Cline, n. pag. ). â€Å"War Economy† advocates believed that almost every industry is involved with providing goods and services to the armed forces (uniforms, food, medicines, weapons manufacturing, etc. ). Hence, should war be eliminated, these businesses, particularly technology and manufacturing, will fold up. Another argument of the backers of the â€Å"War Economy† is that it is the fastest solution to an economic slump (Moffatt, n. pag. ). When the economy is undergoing recession, production is low and people are spending less than usual. But when the government goes into war, it will need weapons and equipment for its soldiers. Economic activity is therefore expected to increase due to the rise both in government spending and the private sector’s business transactions with the miliatry. Corporations will scramble for contracts that will allow them to supply uniforms, vehicles and bombs to the army. These companies will have to hire more workers to keep up with the increase in demand, lowering the unemployment rate in the process. There are even some workers who will be employed to replace those who volunteered as reservists abroad. Since the unemployment rate is decreased, consumers will spend more again. Increased consumption, in turn, will boost the retail sector. At the end of the day, there will be overall economic growth, thanks to the government preparing for war. However, critics contended that the above-mentioned projected economic advancement is at the expense of helpless civilians from Third World countries (http://www. unpac. ca, n. pag. ). In 2002, annual global military expenditures were estimated to be more than $800 billion (http://www. unpac. ca, n. pag. ). The United States was at the top of this list, spending $343. 2 billion yearly (http://www. unpac. ca, n. pag. ). Canada earned more than $3 million from selling weapons in the same year (http://www. unpac. ca, n. pag. ). According to the United Nations Platform for Action Committee – Manitoba (UNPAC-Manitoba) article The Economics of War (n. d. ), â€Å"a large part of the economies of all of the world’s wealthiest countries derives from the sale of weapons† (http://www. unpac. ca, n. pag. ). From 1996 to 2000, the US exported $54 billion worth of arms – 45% of the total amount of weapons that was exported around the world (http://www. unpac. ca, n. pag. ). Russia came second at $21 billion (17%), followed by France ($11 billion or 9%), the United Kingdom ($8 billion or 7%) and Germany ($6 billion or 5%) (http://www. unpac. ca, n. pag. ). As a result, says the United Nations Development Program (UNDP) in 2002, 500,000 firearm-related deaths occur annually (http://www. unpac. ca, n. pag. ). Each year, land mines kill 15,000-20,000 children and adults (http://www. unpac. ca, n. pag. ). Iraq’s cancer rates rose to 700% between 1991 and 1994 due to chemical weapons, while 86 million people have perished in hostilities after World War II (http://www. unpac. ca, n. pag. ). The Iraq war in 2003 was the latest example of how the US turned war into a money-making venture. It was â€Å"rooted in the logic of global monopoly capital, specifically American capitalism, to expand into an empire† (Barona, 33). Despite being packaged as a â€Å"terrorist war,† (to instill fear among detractors) it was brought about by the globalization policies of American multinational companies, particularly the US oil industry and the military-industrial complex (MIC) (Barona, 33). Iraq is one of the world’s biggest oil reserves – it, along with other OPEC countries such as Saudi Arabia, Iran, Kuwait and the United Arab Emirates, has 79% of the world’s total oil supply (__________, 16). For the US to have unlimited access to Iraq’s oil, it simply had to remove Saddam Hussein, a staunch US opponent, from power. Back home, the US economy was sustained by military spending – the injection of fresh capital was necessary to revive an economy that would continue to deteriorate if left to the â€Å"free market† (Barona, 33). But the Iraq war proved to be disastrous for the US economy. The US spends $200 million daily just to be able to continue its military operations in Iraq (Wolk, n. pag. ). Even if the US finally decides to pull its troops out of Iraq â€Å"within another three years, total direct and indirect costs to US taxpayers will likely by more than $400 billion†¦the total economic impact at up to $2 trillion† (Wolk, n. pag. ). Economist and Nobel Prize winner Joseph Stiglitz (a well-known castigator of the Iraq war) claimed that the total cost of US military intervention in Iraq is a â€Å"staggering $1 trillion to $2 trillion, including $500 billion for the war and occupation and up to $300 billion in future health care costs for wounded troops† (Wolk, n. pag. ). Stiglitz added that further expenses include â€Å"a negative impact from the rising cost of oil and added interest on the national debt† (Wolk, n. pag. ). These astronomically huge sums of money came from taxes – funds that should have been diverted to basic social services such as education, health and housing. While ordinary American citizens were suffering from the economic catastrophe brought about by the Iraq war, a few individuals and corporations cahsed in on the said conflict. In 2007, Lockheed Martin (the leading weapons manufacturer in the US) had a profit increase of 22% (Scheer, n. pag. ). In the same year, the profits of its competitors Northrop Grumman and General Dynamics rose by 62% and 22%, respectively (Scheer, n. pag. ). Boeing’s profits, meanwhile, increased by 61% (Scheer, n. pag. ). Below are some personalities who were said to have also profitted from the Iraq War: a) Former US President George W. Bush, Sr. – Shareholder and former Senior Advisor in the Carlyle Group, a defense contractor with ties to the Saudi royal family and the Bin Ladens. b) Former Defense Secretary Frank Carlucci – Member of the RAND Board of Trustees and co-chair of the RAND Center for Middle East Public Policy Advisory Board. Also the chairman of the Carlyle Group. c) Former Secretary of State and Secretary of Treasury James Baker – Former Carlyle Senior Counselor. d) White House Budget Advisor Richard Darman – Carlyle Managing Director e) US Vice President Dick Cheney – Head of Halliburton Co. , an oil enterprise that traded with Libya and Iran through foreign subsidiaries (Lynch, n. pag. ). Thanks to the hysteria brought about by the â€Å"War on Terrorism† and the Iraq war, taxpayers were swindled into funding the â€Å"War Economy† that made millionaires out of Bush and his ilk. And as long as the absurd propaganda of â€Å"The War on Terrorism† and the Iraq war continues to exist, ordinary Americans will spend their entire lives paying taxes not for basic social services, but as a â€Å"tribute† to Bush and his sort for them to be able to live like kings. Works Cited â€Å"The Oil Equation in the US Bid against Iraq. † Education for Development October 2002: 15-16. Barona, Caesar.â€Å"Technology, Power and the ‘War against Terrorism. ‘†The National Guilder July 2002: 32-33. Cline, Austin. â€Å"Economic Benefits of War. † n. d. About. com. 18 February 2008 . Lynch, Colum. â€Å"Firms Iraq Deals Greater Than Cheney Has Said. † 23 June 2001. Global Policy Forum. 19 February 2008 . Moffatt, Mike. â€Å"Are Wars Good for the Economy? † n. d. About. com 18 February 2008 .