Wall St. And Business Wednesdays: War Will Stimulate Economy by Armstrong Williams
As the deadline for Iraq to disarm approaches, the public has been subjected to increasingly shrill cries that a war will undercut Bush's economic stimulus package and drag down the world economy. As democratic fear-mongering goes, this is about par.
The reality: a war with Iraq would actually provide short and long term stimulus to the world economy.
Let us recap: In 1991, the Persian Gulf conflict cost roughly $60 billion and dragged the economy into a recession. Then, Bush Sr. established a broad international coalition that helped to defray the costs of war. This time around, President George W Bush seems intent on pursuing war without broad international support, meaning the United States would pick up the brunt of military and peacekeeping expenses. The high costs of debt forgiveness and nation building after the conflict could push the price tag for war upwards of $200 billion.
Predictably, Democrats regard these numbers with alarm. For obvious reasons, they fail to mention that our economy is significantly stronger than it was in 1991. In fact, even the highest war estimates comprise less than 2% of our Gross Domestic Product. This, the US can easily navigate.
Of course, what matters most is our national security. As President Bush sagely noted, the cost of inaction in the face of Saddam's repeated attempts to amass weapons of mass destruction would be far more perilous. An attack by Iraq "would cripple our economy," warned the president recently.
By contrast, a short, preemptive attack on Iraq could actually provide a short-term stimulus to the global economy by bringing an end to the nagging uncertainty about war. Presently, that uncertainty has reduced consumer-spending resulting on a significant drag on the economy. Markets were similarly depressed during the initial stages of the Desert Storm conflict, but consumer confidence quickly rebounded once ground troops were deployed.
Long-term economic benefits would be felt if the US was successful in transforming Iraq into a progressive democratic state. That could help normalize relations in the Middle East, thus removing one of the major engines of uncertainty in the world economy.
Most importantly, a successful invasion would allow the US to increase the amount of Iraq's oil production to the world supply. The administration has observed that regime change will add an extra "three million to five million barrels per day of production to the world supply." The boost in supply would decrease worldwide oil prices. That's good news for the economies of all oil consuming countries--US, Europe, Japan and countless other developing countries--that are currently beholden to Iraq's oil production. Over the long haul, US technology could be utilized to build up Iraq's oil producing and exporting infrastructure, further reducing worldwide oil costs and finally allowing oil consuming countries to deal with OPEC from a position of strength.
Over the next year, war will mean some heavy expenditures. But certainly not enough to make the US economy run out of gas. Thereafter, the boost in cheap oil supplies to the world market will increase the economies of all oil consuming nations while removing one of the real threats-Saddam's terrorism-to the world's economy.
Armstrong Williams can be contacted via e-mail at: email@example.com
Wednesday, March 19, 2003