Dave Lindorff: The US Economy and the Costs of War

[marmar]

The US Economy and the Costs of War
Mon, 04/21/2008 - 15:28 — dlindorff



Is the Iraq War to blame for America’s long-term economic decline and for the current economic crisis?

Martin Neil Baily, a chair of the Council of Economic Advisers under President Bill Clinton, and now director of the business initiative at the Brookings Institution, in an opinion piece that ran Sunday in the New York Times, says no. Claiming to be opposed to the Iraq War, he nonetheless suggests that the nearly $500 billion spent on Iraq to date—all of it borrowed money—cannot be blamed for the credit crisis, or for high oil prices.

But Baily is looking at things way too narrowly.

First of all, as Joseph Stiglitz, a Nobel economist and chief economist at the World Bank, has noted, the real cost of the Iraq War is probably now closer to $3 trillion, in terms of future costs of veterans benefits, replacement of equipment, and payment on the debt that has been piling up because of the government’s unwillingness to make the public pay for the war in real time. That whopping bill is in the minds of the international investors who have been deserting the dollar in droves, causing it to approach Third World status as a currency.

But there are other links too, between the war and US economic crisis and decline.

One is the misdirection of much of the nation’s remaining industrial strength into war production. The late industrial engineer Seymour Melman long ago demonstrated how the military-industrial complex, by producing things not on a competitive but rather a cost-plus basis, destroys economic competitiveness, sucks up research and development talent and resources, and investment capital, and ends up producing nothing of use either for society or for the national trade account. Melman (who was a professor of mine when I studied at Columbia University), went further to argue that military production has a kind of viral impact across the economy, that sickens the whole system. One example: if investors see higher returns in military industries, they will shift their investments away from other industries, leaving them starved for capital.

We can see the results of this military-industrial virus in the failure of Boeing to produce its next generation jet, the Dreamliner, on schedule, in the pathetic performance of the nation’s dying domestic automotive industry, and in the failure of the country’s once vibrant entrepreneurial economy to do anything significant to tackle the challenge of global warming and the crying need for non-polluting, renewable energy sources.

The nation’s universities have no problem winning massive grants for defense projects, but academic researchers are hard-pressed to get grants for alternative energy research. There certainly is no federal money available for scholarships to students who want to go into environmental or energy majors, but there’s no lack of money for students who want to sign up for ROTC programs. ......(more)

The complete piece is at: http://www.thiscantbehappening.net/?q=node/136