The Economy of War

A quick study of economics will teach us that Economic is defined as “the study of allocation of scarce resources”. And what are those scare resources? They are Labor, Capital, Land, and Entrepreneurialship.

Each and every war requires usage of manpower, that is soldier and the military personnel who operate and manage military activities including the war.

Utilization of labor in the military rather than in the production line not only deprive the Federal and State government from receiving payroll tax, but also forces the Federal Government to pay salary to the military personnel which means draining of the treasury.
Furthermore, since the workers are drafted, the local economies started loosing sales and revenue which will worsen the economic situation.

Also each and every war requires money to purchase goods and services to support the military personnel and to further the goal of the war, i.e. to destroy the enemies.

Mr. Lindsey, the White House Economic Advisor who was politely fired along with Mr. Paul O’Neil the Secretary of Treasury. Mr. Lindsey before being fired he told to the reporters that the war with Iraq could cost the United States 200 Billion Dollars. Given the state of our economy these days, the sum of $200 billion seems a lot and in fact is a lot of money.

…people are losing their insurance coverage left and right, spending $200 billion on war sounds illogical.

At the time of economic hardship where the unemployment is rising, consumer confidence falling, and stock market acting like roller coaster, people are losing their insurance coverage left and right, spending $200 billion on war sounds illogical.

Each and every state of the Union was and still is suffering from budget deficit and is forced to cut essential programs such as social services, education, and health care and where the federal government is suffering from billions of dollars in budget deficit, spending the scarce resources for war seems unwise and ill thought.

Some argue that war improves the state of economy. A close examination of this argument reveals that it is only a myth and in reality it worsens the situation.

Furthermore, what we must bear in mind is, that today’s wars are totally different from the old wars such as World War I and II where massive amount of resources been put to production of tanks, vehicles, trucks, weapons, fighter planes, and finally deployment of hundred of thousands of soldiers who many of the them just joined the military for purpose of war.

But using these masses of population, our labor force in going to war was misallocation of resources, because war does not expand the economy. Besides we lost thousands of the precious and productive resources in war and thousands were severely wounded who became unproductive after the war.

The argument is that deployment of these massive troops will cause unemployment to go down. Also due to the fact of engaging in war, the manufacturing industries would increase their production of military equipment which also increases employment.

During the two World Wars indeed massive number of people left their jobs to join the military, the unemployed people also joined the military, therefore, unemployment might have been reduced. But using these masses of population, our labor force in going to war was misallocation of resources, because war does not expand the economy. Besides we lost thousands of the precious and productive resources in war and thousands were severely wounded who became unproductive after the war.

The weapons, vehicles, equipment, and planes are made for one purpose only, to destroy the enemy and if in the process this equipment is destroyed, so be it. The weapons such as bombs have only one and one purpose only to be dropped on the enemy and destroy property and kill enemies which meant lots of money just got burnt.

However, today’s wars are high tech wars and do not require massive number of troops and thousands of transportation equipment or planes. The Persian Golf war proved to us that only a limited number of fighter planes could sustain so much damage with their sophisticated radar and smart bombs and no need for anything else.

In fact the economy experienced a downfall and that was why even after a successful war with Iraq and liberation of Kuwait, President Herbert Bush lost the 1992 election to Bill Clinton.

During the Persian Golf War I, the fighter planes dropped their bombs and virtually destroyed all military and non-military targets in Iraq and rendered Iraqi forces totally indefensible and a few thousand troops went to finish off the remaining part and do the clean up.

While Persian Golf War was going on, we did not witness any increased economic activities in production of military related products, neither did we witness enrollment of thousands of thousands of new draftees into the military.

There was no change in the unemployment rate. In fact the economy experienced a downfall and that was why even after a successful war with Iraq and liberation of Kuwait, President Herbert Bush lost the 1992 election to Bill Clinton. President Bush’s loss of the White House was mainly due to his failure to improve the economy and reduce the unemployment.

Modern wars may cost more due to being high-tech, but they sure do not improve the economy and in fact make the economy worse just because of being so expensive.

A stealth bomber cost the Pentagon about $2 billions. One stealth bomber could wipe out the budget deficit of many states collectively.

A stealth bomber cost the Pentagon about $2 billions. One stealth bomber could wipe out the budget deficit of many states collectively.

Smart bombs cost millions of dollars each. A few of these bombs could improve economic situations in many states.

Deployment of the troops in the front line does not create more jobs or add to the GDP, but in fact causes GDP to shrink as the labor resources which could have been put to production and subsequently increase in GDP are placed in the front line.

Although Mr. Lindsey told the reporters that the war with Iraq would only cost 200 billion dollars and lost his job, because he was blamed by the White House for exaggerating on the cost, but past history proves otherwise. Governments have always used estimates which are not reflective of actuality. The examples are too many to mention here. The Irony is that Mr. Lindsey lost his job for allegedly exaggerating on the cost of the war, but in reality his figures were by far less than the actual which is so far almost a trillion dollars and it is estimated that by the time the war in Iraq is over it would cost between 2 to 3 trillions dollars taking into account the long term cost of taking care of wounded veterans.

It is unfortunate that some misguided foreign policies could cause so much economic havoc within the country.

War with Iraq does not seem proper both economically and politically.

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