Chapter 5 through Chapter 7, The Trillion Dollar War

The Three Trillion Dollar War, Stiglitz & Bilmes 

The Macroeconomic Effects Of The Conflicts 
a. oil prices from $25 a barrel to $90
b. higher cooking fuel prices in Indonesia
c. more expensive bus fares in Ethiopia
d. lead to larger trade deficits & inflationary pressures
e. higher interest rates: lower investment, lower consumer spending
f. declines in share prices
g. slowing of the economy
h. “Today, no serious economist holds the view that war is good for the economy. The economist John Maynard Keynes taught us how, through lower interest rates and increased government spending, countries can ensure that the peacetime economy operates near or at full employment.”(115)
i. “But money spent on armaments is money poured down the drain: had it been spent on investment-whether on plants and equipment, infrastructure, research, health, or education-the economy’s productivity would have been increased and future output would have been greater.”(115)
j. “The question is not whether the economy has been weakened by the war. The question is only by how much.”
k. “It is enough to say that if America went to war in the hope of securing cheap oil, we failed miserably,”(116)
l. “Exxon-Mobil and other oil companies have been among the few real beneficiaries of the war, as they profits and share prices have soared.” 
m. “We conclude, accordingly, that a significant proportion of the increase in the price of oil resulted from the war.”(117)
n. “As oil prices reach $100 a barrel, and as futures markets continue to predict that high prices will persist years into the future, we feel that $5 to $10 a barrel for just seven or eight years is really too conservative,”(117-118)
o. “Higher oil prices mean people have less money to spend on everything else. Since oil prices started their ascent, American families have had to spend about 5 percent more of their income on gasoline and heating than before. Even governments-especially those on the state and local level, which must limit spending to revenues-have had to cut back other spending to pay the higher prices of oil imports.”(118)
p. increasing spending on goods made in America would increase wages and profits which would then be spent in America
q. $187B in damage to GDP-higher costing oil imports
r. our economy had been operating well below its potential

Government Spending, p. 120
a. government spending on war doesn’t stimulate the economy the same way as domestic spending
b. “What would the country’s output have been if even part of the money that was spent on building military bases in Iraq was spent on building schools in the United States? Such expenditure switching would have led to higher output in both the short run and the long.
c. “Earlier we described how reduced spending by consumers on U.S.-produced goods as a result of higher oil prices reduced the economy’s output.”(120)
d. $1000 spent on Nepalese workers to perform services in Iraq doesn’t have the same multiplier as $1,000 spent on university research 
e. switching $800B to domestic investment to domestic investment would increase the GDP $320B
f. savings by private households didn’t increase to make up for deficits
g. “David Walker, Comptroller General of the United States has warned that there are “striking similarities” between America’s current situation and the factors that brought down Rome, including “an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government.”(123)
h. “private investment has a far greater multiplier than the Iraqi war expenditures”(123)
i. “The money spent on Iraq could have been spent on schools, roads, or research. These investments yield high returns.”
j. growing deficits crowd out private investments, p. 123
k. “There is no free lunch-and there are no free wars. In one way or another, today and in the future, we will pay for the war.”(125)
l. “Wage increases have been moderate and corporate profits have surged.”(125)
m. consumption has been lower, weakened economy
n. the Federal Reserve kept interest rates low
o. Americans borrowed against their houses & consumed above their means
p. “the full ramifications of the “subprime” mortgage crisis are still unfolding, p. 126
q. higher oil prices
r. “We as a country have been living off of borrowed money and borrowed time.”(126)
s. “The war, whatever its initial aims, has not increased stability and security in the Middle East.”(128)
t. “On the contrary, the threat seems to have increased, as evidenced by the number of recent terrorism incidents.”(128)
u. “Disruptions at airports have become worse, not better. The bombings and attempted bombings in Bali, Spain, and the United Kingdom in recent years show again that the impact reaches around the world.”(128)
v. “Insecurity is, of course, bad for the economy-businesses dislike risk and work hard to keep it under control. Risk is bad for investment and growth.”(128) 
w. “Globalization has brought enormous benefits to the world. It has meant the closer integration of the countries of the world as goods, services, and labor move more freely across borders, largely as a result of lower transportation costs and communication costs, but also because of the reduction of man-made barriers.”(128)
y. “American firms, especially those that have become icons, like McDonald’s and Coca Cola, may also suffer, not so much from explicit boycotts as from a broader sense of dislike of all things American.”(129)

The Full Tally
a. more than $4T in economic costs, costs have also been imposed on other people!

Chapter 6, Global Consequences 
a. “The global consequences of the invasion of Iraq are far-reaching. Iraq has borne the brunt of the damage, but the breakdown in most areas of central government there means it is difficult to secure reliable numbers with which to perform the type of cost analysis we have done for the United States.”(132)
b. “Iraq was a dysfunctional yet viable country,”(132)
c. “the war has essentially ruined the country’s economy, society, and sovereignty.”(132)
d. higher oil prices, $1.1T cost to the world economy
e. 4.6M people uprooted from their homes, 133
f. largest migration since the creation of Israel in 1948
g. the majority of Iraqi children are not attending school
h. Syria, will no longer accept Iraqis without Visas
i. Billions to take care of refuges
j. 7,697 Iraqi soldiers dead, the US government doesn’t keep track
k. $172B in Iraqi lives
l. “the Iraqi economy is poorer as a result of the loss of its young men.”(135)
m. civilian casualties, death penalty punishments, cholera-from inadequate water supplies, sanitation, food safety, and hygiene practices
n. “Before the war, choler was extremely rare in Iraq”(137)
o. “the overall quality of water & sanitation is very poor, a factor known to facilitate greatly cholera contamination.”
p. increase in fatalities of 654,965
q. “By destroying the economic and political infrastructure, the American occupation meant that there was less reason for the country to hold together.”(139)
r. Iraq, humiliating defeat in the Gulf War in 1991
s. “The country has a thriving middle class, and most Iraqis had high hopes for the future once their nation was freed from the burden of an embargo.”(140)
t. more unemployment, fewer hours of electricity each day
u. 59% of Iraqis view economic conditions as poor
v. Bush wanted to privatize the country’s assets, abolished many tariffs, capped corporate & income tax @ 15%
w. privatizing Iraq’s businesses-breaks international law
y. little foreign investment besides oil
z. need to focus on creating jobs @ small businesses
1. most of reconstruction $ went to high priced American contractors
2. imported Nepalese workers instead of hiring Iraqis, led to resentment
3. the administration wanted to privatize Iraq’s oil sector
4. “Suffice it to say, no matter what assumptions one makes, it is hard to imagine a bleaker situation than the current one.”(144)
5. “The Iraq war has contributed to a clash of civilizations,”(144)
6. USA provided the majority of the troops for the conflict
7. long trail of disability and health care costs that other countries will have to bear themselves, p. 145
8. “Afghanistan has become the largest supplier to the global heroin market.”(146)
9. suicide bombings which used to be rare and other violence have become commonplace, 146
10. 200,000 troops “needed” for stability” in Afghanistan
11. UK-pivotal role in the strategic, military, and political aspects of the Iraq conflict
12. Britain facilitated every aspect of the war, p. 148
13. “British citizens have little clarity about how much is actually being spent.”(149)
14. “It should not be the case that this information has to be discovered through Freedom of Information requests.”(149)
15. “The UK will face a significant cost in providing disability benefits for its disabled servicemen and women as a consequence of the Iraq and Afghan conflicts.”
16. “The government is also using private health care providers to treat returning servicemen where the waiting times for NHS treatment are too long. It is not clear how widespread this practice is, but there is evidence that it may add billions of pounds in costs to the medical bill for British veterans.”(151)
17. “there are costs to the UK civilian economy through such impacts as higher oil prices, possible recession effects and the need for higher defense spending which has to be financed through either higher taxation or reduced public spending in other areas.”(153)
18. similar social costs in UK to USA, 154
19. until 2005, UK was a net oil exporter
20. “As it is, the UK joins the United States as one of the big losers from the war.”(155)
21. British forces in Afghanistan will increase
22. cost of operations in Afghanistan will rise 39%
23. social costs-$20 Billion pounds, 18B pounds without social costs
24. “Those who have gained are, by and large, dictators in the oil-producing countries-including some who have been quite open about using their increased wealth to advance an agenda that is anti-American and in some cases anti-Western.”(157)
25. “Indeed, it is hard to think of anything else that the United States could have done that would have been, on a global scale, so much against its own interests.”(157*)
26. Europe, Japan, USA, and other OECD-importing countries have more expensive oil imports
27. $194B, best case for Europe, $590B-realistic/moderate estimate
28. “Our long-standing friends in Europe and Japan are among the global losers. But net, the world is a loser-and by a considerable amount.”(159)
29. “America’s occupation has helped feed extremism throughout the Islamic world and beyond. This growth of extremism has made the task of leaders in moderate Islamic republics all the more difficult.”(160)
30. “America’s standing in the world has never been lower.”(160*)
31. “citizens of many countries saw America in Iraq as a greater threat to global peace than Iran.”(160-161)
32. “In short, all over the world, the US was viewed as a greater danger than the countries President Bush included in his “axis of evil”(161)
33. “Today, there is a serious lack of confidence in American leadership.”(162)
34. “This book has emphasized the costs of the war in Iraq: the economic costs as well as the opportunity costs-the diversion of funds that could have been used in so many other and better ways. In the long run, though, the squandering of America’s leadership role in the international community, and the diversion of attention from critical global issues-including issues like global warming and nuclear proliferation in North Korea that simply won’t go away on their own, and that cannot wait to be addressed-may represent the largest and most long-standing legacy of this unfortunate war.”(163)

Chapter 7, Exiting Iraq 
1. “Unfortunately, five years after the invasion,with hundreds of billions having been spent and thousands of casualties, things are not much better. In 2007, Iraq ranked 178th out of 180 countries in terms of corruption. Only Somalia and Myanmar (formerly Burma) were worse.”(164)
2. “On the political front, Iraq now has a religious government-whereas it had secular governments for eighty years prior to the U.S. invasion.”(165)
3. “Staying longer may not make things better; it could make them worse.”(166)
4. “Whereas clean water, electricity or quality medical care are in short supply in the rest of the country, the bases are islands of fully functioning amenities. They include sports facilities, department stores, fast food restaurants, a Hertz Rent-a-Car, movie theaters, air conditioning, satellite Internet access, cable television, and international phone service.”(168) 
5. staying another 2 years, $600B
6. “Finally, there are the political costs-the continuing decline in American standing around the world and the increasing disillusionment of American citizens with foreign entanglements.”(169)
7. “Despite a massive effort, stability in Iraq remains elusive and the situation is deteriorating.”(169)
8. “In short, five years into the war, we have not created a safe and stable Iraq.”(170)
9. “It makes no sense to send even more young Americans to die in vain.”(172)
10. we haven’t done much to rebuild Iraq!
11. “We should accept some responsibility for what we have done; but there are many ways to help Iraq, including support for multinational reconstruction efforts (probably not managed by Halliburton or other U.S. contractors with a demonstrated record of failure.”(173)
12. “Staying in Iraq in order to maintain our credibility, or so that those who have already died will not have died in vain, or so that we can finally repair the damage for our invasion, are three of the more obviously fallacious reasons offered for remaining.”(173)
13. “The reality of the Middle East is not dominated by the increasing popularity of extremist factions such as Hezbollah, Hamas, and the Muslim Brotherhood (in Egypt).”(173-174)
14. “With voter sentiment more than two to one against the war, Republican leaders had every reason to want the issue off the table. Instead, the president remained adamant about staying in-even as one after another member of his own party urged a major change in course.”(176)
15. “Americans will need to be told the ugly truth: there is no easy way out of the tragedy that has unfolded in Iraq.”(176)
16. high number of disaffected, unemployed, and armed Iraqi soldiers
17. the deployment of troops to protect the oil ministry reinforced cynicism about motives
18. “We wanted to promote democracy, but we knew that America was not popular in the Middle East. Similarly, the Bush administration never fully grasped that a majority of citizens-the Shiites-might not only favor a radical Islamic government (of the kind that we were opposing in Iran and Afghanistan), but even see itself as an ally of Iran.”(177-178) 
19. “With a supply that responds to actions, killing one enemy could actually increase the number of enemy soldiers.”(178)
20. “In any country, it is noble to fight for one’s freedom against the occupier.”(179)
21. “The United States has not been able to create jobs, get the economy working, or maintain law and order.”(180)
22. “If good individuals are treated badly (e.g. tortured), then there is little incentive to be good.”(181)
23. “That is, as more people join the insurgency, the likelihood of success for the American vision of a united Iraq diminishes.”(181)
24. “Every society is likely to react strongly against outsiders who are insensitive to cultural mores.”(182)
25. “Will matters be substantially better upon our departure two, or six years from now, enough better to justify the deaths and casualties in the interim?”(184)