SIX TRILLION DOLLARS

War Costs. The US military occupation of Iraq cannot be won militarily – or even paid for

By Michael R. Kratke

[This article published in: Freitag 13, 3/28/2008 is translated from the German on the World Wide Web, www.freitag.de/2008/13/08130301.php. Michael R. Kratke is a professor of economics at the University of Amsterdam.]

Even top-ranking US military have long admitted that the coalition troops on the most important two theaters of the world war against terror – Iraq and Afghanistan – suffer a disaster. They expelled two regimes with force and are entangled in endless wars. Economically the wars are even a greater catastrophe. These wars cannot be won or even paid for, not even by a country like the US.

Five years ago the American public was told the Iraq war would cost $200 billion, at most $270 billion in the worst case. At that time the Pentagon’s annual military spending was $350 billion. The military invasion was sold as a cheap war that would only help the US and the world: more security and a lower price for oil.

Lawrence Lindsay, economic advisor of the White House who dared to speak of $200 billion, was fired. Earlier the Bush administration claimed the whole adventure would cost at most $50 to $60 billion. That was a brazen lie to calm the American public in light of the planned and introduced tax cuts for owners of capital and assets.

With modest estimates, economists like William Nordhaus from Yale University came to more than five times the amount announced by the government: to $1.9 trillion.

The difference can be simply explained. All the costs arising after the war were simply suppressed by the government. Thus the costs for removing war damages in Iraq could be several hundred billion dollars. The costs for the war victims in Iraq could be astronomical. The costs of state debts on account of George W. Bush’s tax cut policy alone inevitably soar.

With ex-Clinton advisor Linda Bilmes, Joseph Stiglitz, a critic of the disastrous policy of the World Bank, has calculated the past costs of the Iraq war to the US. The official data of the Congressional Budget Office could not be correct, they realized with astonishment. According to the researchers’ statistics, the costs of the Iraq war up to then only amounted to $500 billion – ten times the military spending originally admitted. This estimate was obviously too low. They presented their provisional findings in January 2006. The costs of the war amounted to between one and two trillion dollars according to their cautious estimate.

The official reaction of the Bush administration was: We will not be ordered by accountants when we draw into war. Stiglitz and other “killjoys” were criticized for simply repressing what the war would contribute to the well-being of Iraq and the rest of the world.

Stiglitz and Bilmes then went into detail to refute the US government’s diversion. Up to then, the war was financed with the help of 25 emergency laws, extraordinary budgetary bills. The Pentagon had guarded itself against correctly calculating the real war costs.

After months of research, Stiglitz and Bilmes published their detailed analysis. The result is shattering. Bush’s war in Iraq alone cost the US at least three trillion dollars. Only the direct military spending as reflected in the US budget is included in this sum. Economic costs not itemized in the budget are additional. Stiglitz and Bilmes estimate the macro-economic consequences of the war at three trillion dollars. The direct costs of the Bush war today surpass the Vietnam- and Korean wars together. The total sum of six trillion dollars is equal to all gold and currency reserves of the world. Every month the US will spend more than $16 billion in costs for the wars in Iraq and Afghanistan, in addition to the $439 billion in the defense budget.

What the Pentagon and the economic advisors of the Bush administration suppress is remarkable, for example the costs for the fallen soldiers and their descendants. While advanced medical technology saves lives, the wounded must live their lives as young amputees. According to estimates of non-governmental organizations, Iraqi war victims amount to a million. They do not even appear in the calculation of Stiglitz and Bilmes.

The US government has also lied about the costs of the supposedly efficient privatization of the war. Employees of the security firms that wreak their bloody havoc in Iraq in commission of the Pentagon cost ten times what a GI costs - $400,000 instead of $40,000 per year. In the meantime, 180,000 mercenaries are in Iraq. Absolutely ridiculous savings measures are enforced. US soldiers must pay for part of their equipment. When something is lost in battle, the Pentagon demands compensation.

Stiglitz and Bilmes calculated what the adventurous financing of the Bush war already cost and will cost. Because of massive tax cuts for corporations and owners of capital and property, a growing part of military spending had to be financed with credits. For these war credits, hundreds of millions of dollars will be due in interests. Because Americans mainly live on credit and do not save (many are forced to live on credit because of falling wages and salaries), interests for the war credits must be financed by capital imports. The growing state indebtedness quickly changes into growing foreign indebtedness.

The Bush administration will be gone in nine months. Future generations and governments will have to bear the financial consequences of its war adventure.

Every economist knows what the Bush warriors do not know. The total economic costs are added to the direct costs of the war. Stiglitz and Bilmes calculate the effects of the rapidly rising price of oil. A permanently lower price of oil was promised through intervention in Iraq. As everybody knows, the price is now over $100 per barrel. This has enormous consequences for the US economy and the whole world economy, consequences weakened a little by the rapid price drop or correction of the US dollar.

In the fall of 2007, the impudence with which President George W. Bush promised $200 billion in addition for his war and simultaneously vetoed $20 billion for revitalizing public schools was the last straw for even conservative representatives of the US Congress.

The representatives have reason to worry because war costs climb unrestrainedly. 2008 will be the most expensive year of the Iraq war. Critics now calculate what could have been started with the enormous sums to end the miserable conditions in the richest land of the earth. With one billion dollars, 15 million more teachers could be hired, 530 million children could have health care, and the tuitions for 43 million students could be financed. Degenerate slums could be revitalized and dilapidated school buildings renovated all over the country. The US could finally afford a semi-modern welfare state with a part of the sum blown in demonstrating military superiority. Many things could be done if one freed oneself from the superstition of the “seriousness” and respectability of the ruling elite and the supporting class of owners of capital and property.

The propagandists of the world war against “terror” claim the war has brought many advantages. In fact, whoever makes cost-benefit analysis cannot pass by calculating the uses of this war. In the past, even the Bush propaganda did not dare to describe US oil corporations, construction businesses, security firms and the arms industry as “advantages of war.” Although listing the profits of war profiteers would certainly correspond to neoliberal logic, Joseph Stiglitz had a hard time seeing any advantages in this war. The only advantage that an economics expert with the cynicism available to him can see in the invasion is that it has slowed down the growth of the US economy. The crash, the great worldwide economic crisis that is imminent, may have turned out less terrible without the war.

What is the “lesser evil” of concrete capitalism - pestilence or cholera, war or crisis?