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What Economic Price This War?
Published on Monday, March 24, 2003 by the Boston Globe
What Economic Price This War?
by James K. Galbraith
 

RECENTLY AS we debated the war now underway in Iraq, seven Nobel laureates joined 150 other US economists (including myself) to call for careful consideration of the costs of war in Iraq. When economists talk about costs, what do we mean? First, we mean budget costs -- for gasoline, equipment, and explosives -- that begin at about $100 billion. This figure is based on an assumption that the war goes well. It the assumption is wrong, the numbers will go up fast. The history of warfare -- from Europe in 1914 to Vietnam in the 1960s -- is littered with gross underestimates of budget costs.

We also mean the material costs, which are sometimes overstated in war -- bombs may fall on empty fields or on rubble and damage can look worse than it is. In Iraq, though, the civilian population is already stressed. Even modest material damage -- to the water, to the electric grids and the health system -- could bring on humanitarian disaster. There are risks of sabotage, not least to the oil fields. And there will be some damage, inevitably, to the archeological heritage of Iraq and especially Baghdad.

The human costs are beyond accounting. No matter the number of casualities, every dead soldier, on either side, every dead civilian, is a human being who could have lived a productive and perhaps happy life. Every injured person will carry a burden of pain. We need not demean the grief ahead by trying to give it money value.

The uncertainty costs are more prosaic but just as hard to calculate. How much business investment, how much production, how much trade have we already lost -- not only in the United States but in the world economy -- because of the fear and uncertainty surrounding this war? What effect will war have on global economic decision-making, consumer and market confidence, global energy prices? How much more lies ahead?

The reconstruction costs are imponderable. One estimate for the cost of rebuilding Iraq runs to $2 trillion. But will the US actually do the job? What if it takes two years and a 100,000 troops? Five years and 200,000 troops? What if the oil fields are shut down in the meantime?

The follow-on costs arise from the military situation we may face after the war ends. Will peace and democracy break out in Iraq? Will the war lead to peace, democracy, and demilitarization across the Middle East, as some believe? Or will there be rebellions, revenge killings, and proxy wars across Iraq, Syria, Iran, Saudi Arabia, and even Egypt? Not to mention in Israel and Palestine.

The diplomatic costs lie in the damage already done, and more may lie ahead -- to relationships with Europe, Russia and other countries. One may count also the cost of disillusion, of much of the world's population, with the American ideal.

The opportunity costs are those that arise every time we make a decision to do one thing rather than another. By choosing to go to war, we are choosing to do less to solve our problems at home. We face a crisis in every state and local budget in this country -- in every school, every welfare program, and every part of public health care. We face a crisis of trust in our corporations, and a crisis of confidence in the profitability of future business investment. American households are facing in slow motion a crisis of household debts. Little will be done about any of this, so long as we are preoccupied with war.

Finally, the apocalyptic costs should be considered. There is the risk, already unfolding, that North Korea will produce atomic bombs. There is also the risk that Iran will buy a few of them or make some of its own. There is the risk that we will shortly face one, two, or perhaps more nuclear powers who regard us -- and not entirely without reason -- as a mortal threat to their existence. There is the risk that we may make a catastrophic mistake in our response.

Once the real costs have been considered, the economic conclusion is not controversial. It is that collective security -- the kind provided by strong alliances, the rule of law, and the United Nations Security Council -- is the only real security. It is certainly the only kind that we, or any other country, can afford. Perhaps war is sometimes necessary. But it is never really cheap enough.

James K. Galbraith is chair of Economists Allied for Arms Reduction, which spearheaded the US Economists' Statement on Iraq. He teaches at the University of Texas at Austin.

© Copyright 2003 Globe Newspaper Company

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