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The Economic Costs Of The Iraq War
So, we haven't found Osama, and we've just made this massive mess in Iraq that looks, by all accounts, to be a gift that's gonna keep on giving, and at what price -- not just in the lives of our soldiers, but in dollars, and not just dollars now, but future costs? This paper, The Economic Costs of the Iraq War: An Appraisal Three Years After the Beginning of the Conflict, by Linda Bilmes and Joseph Stiglitz says:

This paper attempts to provide a more complete reckoning of the costs of the Iraq War, using standard economic and accounting/budgetary frameworks. As of December 30, 2005, total spending for combat and support operations in Iraq is $251bn, and the CBO's estimates put the projected total direct costs at around $500bn. These figures, however, greatly underestimate the War's true costs. We estimate a range of present and future costs, by including expenditures not in the $500bn CBO projection, such as lifetime healthcare and disability payments to returning veterans, replenishment of military hardware, and increased recruitment costs. We then make adjustments to reflect the social costs of the resources deployed, (e.g. reserve pay is less than the opportunity wage and disability pay is less than forgone earnings). Finally, we estimate the effects of the war on the overall performance of the economy. Even taking a conservative approach and assuming all US troops return by 2010, we believe the true costs exceed a trillion dollars. Using the CBO's projection of maintaining troops in Iraq through 2015, the true costs may exceed $2 trillion. In either case, the cost is much larger than the administration's original estimate of $50-$60bn. The costs estimated do not include those borne by other countries, either directly (military expenditures) or indirectly (the increased price of oil). Most importantly, we have not included the costs to Iraq, either in terms of destruction of infrastructure or the loss of lives. These would all clearly raise the costs significantly.

Posted by aalkon at February 24, 2006 10:54 AM

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I think it's time for a new kind of war. Currently we wage war by inflicting hardship and killing people. We destroy infrastructure and aim to prevent the enemy from hitting back by placing insurmountable stresses on his economy. This is hugely wasteful. Not only do we spend mountains of cash on things that go bang, we also end up having to repair all the damage if we win, we kill civilians, and everything has to be paid for by taxes and hardship at home.


The problem is that we (and our enemy) have evolved to withstand hardship. We pull together against a common enemy; morale improves; and in some cases quality of life improves during a war. You have to destroy a huge amount before you get any payoff, especially if the enemy is fighting to the last man.


Instead of pushing against the enemy, it would be possible, I reckon, to pull. By this I mean to flood the enemy with good stuff: food, money, books, computers, medicines, small arms, cellphones, furniture - everything for a comfortable life. Iraq has a population of 20 million. If we dropped a million dollars' worth per person, that's a lot of stuff, but it costs peanuts compared to the old approach.


What's the point of giving them all this stuff? Because it would destroy the economy. No-one would need to work, if there's tins of peaches falling into the garden. It would be like an extreme case of dumping goods at low prices, which destroys third world economies. In Iraq, it would have given the people a means to sort things out for themselves. No bridges blown, no landmines, no gas. People would just have enough small arms to defend themselves, time to talk to each other, and cellphones to arrange political meetings. Soldiers would desert. Saddam would have been left without enough followers to do anything.


There's benefits at home too. Instead of spending taxes on bombs, we spend it on consumer goods. So there's a huge demand for goods, we get economies of scale, prices fall. No hardship there.


The moral dimension is obvious. We don't need to kill anyone. All that happens is that the target military-industrial economy - which is the real enemy - gets zapped.


Would it work? Would it be worth a try?

Posted by: Norman at February 24, 2006 11:43 AM

A trillion dollars is a completely unimaginable sum! But on the other hand, where does this money go? Money that is spent inside the country just re-circulates, surely? The taxpayer has to fund it but the cash goes to pay troops that otherwise would need to find jobs. Unless there’s a labour shortage in the US those people would have to be supported by the taxpayer anyway, wouldn’t they? I guess they could be more productive, but is labor the limiting factor on productivity? If there’s more labor around then everybody gets paid less for their time because they’re more expendable.

The money hasn’t left the planet, and most of it hasn’t even left the country. So is it really a debit?

Posted by: Norm at February 24, 2006 11:46 AM

Economics are always important. But how much do you want to spend? Would you feel better if it cost $253bn? Or would we be less likely to win? Would $726bn be a better amount? Nobody knows how much war is supposed to cost. What we know is that people don't want to pay for armoured vehicles (or wheelchairs) unless they absolutely have to... Human nature sucks.

> Currently we wage war
> by inflicting hardship
> and killing people.

Tautology...

> I mean to flood the
> enemy with good stuff...

God's already tried that: Underneath their feet is the world's finest flood of petrochemical value. (It's silly of me to refute socialist fantasy.)

> the target military-industrial
> economy - which is the real
> enemy

No, the enemy is entrenched totalitarian --and often theocratic-- regimes in states holding pivotal resources. Perhaps if we're going to deal with them, our bargain should be the kind that can't be renegotiated. Knowut I mean, Jelly Bean?

Posted by: Crid at February 24, 2006 2:14 PM

... how much do you want to spend?


As little as possible. I haven't questioned whether people should go to war at all - I take it as an unalterable fact that people always have and always will. My hope is to make it less hellish.


God's already tried that ...


Not quite - it takes a good deal of effort and organisation to get any benefit from oil under your feet.


No, the enemy is entrenched totalitarian --and often theocratic-- regimes in states holding pivotal resources.


My point is that the real target is not individual people but their organisation. A regime is not just a bunch of people - it is a bunch of people organised in a particular way. Currently we destroy the organisation by destroying the people and resources it depends on. It may be possible to destroy just the organisation directly, by using our enormous capacity to produce material goods.

Posted by: Norman at February 25, 2006 1:35 AM

> As little as possible... My
> hope is to make it less hellish.

We coulda sent a single platoon with with Ray Bans instead of night vision, but it wouldn't have been ethical. See "the Powell Doctrine."

> it takes a good deal of effort
> and organisation

The totalitarians are plenty organized, what they're lacking is civilization.

> by using our enormous capacity
> to produce material goods.

Microwave ovens and video games aren't gonna to help. Poverty is not the cause of evil. If poverty caused crime, Bel Air would be a seminary, and this not the case.

Posted by: Crid at February 25, 2006 7:58 AM

Listen, maybe we're in almost the same place in terms of seeing what Iraq needs, but it really hurts to see you say you want to spend "as little as possible," because there evidence that we've spent even less than that.

Posted by: Crid at February 25, 2006 8:21 AM

No, poverty's not the cause of evil. Keeping to Iraq as an example, Saddam was a danger, but is he now? No. Is he the same person? Yes. So what has changed? Just that he can't get people to do his bidding. He didn't personally do all the bad things while he was in power. He needed subordinates. Why were they subordinate? Various reasons. Some surely reckoned he was a good leader: if they followed, he would lead them to good stuff. Some were just doing a paid job to put bread on the table. Some were scared not to follow orders.


The point of giving them free stuff is to break the link between these people and Saddam. If we can do that, then Saddam has no power. It's not about poverty, it's about who controls the means of production and distribution. If Saddam does, he can use them to enforce his will. Flooding with free stuff takes that control away because it (a) makes the local means of production irrelevant and (b) removes people's need to keep the means of production in working order. So the economy collapses.


Look: we had 10 years of UN sanctions: bugger all good that did. Then we had a war that has cost god knows how much and hasn't exactly been an unmitigated success either. It's worth considering alternatives.


... there evidence that we've spent even less than that.
Made me snort. :-) But I predict we'll go on spending until we reach any number you care to think of. The money doesn't go into outer space, as Norm (not me) said. It comes out of your pocket and mine as taxes, and it goes into arms manufacturers' pockets to make bombs that destroy things, which we then have to pay more taxes to repair. And how many people have to get hurt in this process? I'd rather the money stayed in my pocket, or at least was spent on consumer goods - if the idea would work. Compared to conventional methods of war, it wouldn't cost much to try.

Posted by: Norman at February 25, 2006 12:41 PM

> Saddam was a danger, but
> is he now? No.

HELL NO he's not: We made war on him!

> Why were they subordinate?
> Various reasons.

Chief amongst them was that he was a murderous, rampaging thug.

> to break the link between these
> People and Saddam. If we can do that

Done! Next....

> It's not about poverty, it's about
> who controls the means of
> production and distribution.

Tautology.


> we had 10 years of UN sanctions...

And their violation and corruption engendered the biggest financial scandal of all time... Of all time! We'd TRIED flooding his populace with unearned value. But he got the money anyway. Totalitarians always do.

> it goes into arms manufacturers'
> pockets to make bombs that
> destroy things

That's what we want bombs to do, destroy things! There's no reason ordnance should be free.

Normster, you're no fun to argue with, because in your heart of hearts, you believe in regime change. As mentioned previously, George W. Bush welcomes you to this historic effort to change the vectors of American foreign policy by insisting on the decent government of our vendor nations. With your sincere, thoughtful support of these measures, we knows victory is at hand.

God Bless you, Norman... And God Bless the United States of America. Goodnight.

Posted by: Crid at February 25, 2006 3:52 PM

Yes, I believe in regime change. I can't see any sense in accepting human rights abuses just because they're hidden behind national sovreignty, any more than we should accept child abuse because it's "in the family".


The problem is how to do it in practice. Recent examples - Iraq, Germany and Japan in 1945- show that the cost of conventional methods is horrifically high. That's why I wondered if there might not be a different way. I've written to the press with this idea but never had an acknowledgement, let alone a publication. It would take an economist to put meat on the bones. Perhaps it's entirely crazy, but no-one's really explained why - not even yourself, Crid.


For example, We'd TRIED flooding his populace with unearned value. But he got the money anyway. Totalitarians always do. - we didn't try what I had in mind! No-one ever has. There have been a few almost-cases such as the Opium Wars, counterfeit money in WWII, and 1st world dumping on 3rd world countries. Enough to show that economic battles can be fought, but not enough to really test the idea of economic warfare.)

Posted by: Norman at February 26, 2006 11:26 AM

> Germany and Japan in 1945-
> show that the cost of
> conventional methods
> is horrifically high

But inarguably effective!

> we didn't try what I
> had in mind!

What, saying "pretty please" as we write the check?

> never had an acknowledgement,

Don't lose sleep.

Sending money to Iraq is like carrying coals to Newcastle... But the metaphors fails, because coal and oil are kinda the same.

> It would take an economist
> to put meat on the bones.

Any freeway offramp vendor could fatten that calf for you, if you were willing to listen.

It comes down to your view of human nature... Have we been asking too much of the Iraq for the past two (or four) generations, or too little? The latter, sez me.

Posted by: Crid at February 26, 2006 6:28 PM

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