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Crippling cost

Print edition : Apr 06, 2007 T+T-

The financial burden the Iraq war has brought upon the United States is far heavier than what the administration wants the people to know.

IN Greek mythology, Pandora opened the box that contained mankind's baser instincts - arrogance, prejudice, vanity, hate, greed, envy, jealousy, and so forth - unleashed them. And soon misery swept over all human beings. Metaphorically, the Iraq war that began in 2003 has been a Pandora's box that has let loose economic hardships, political malice and social disruption, besides death and devastation, particularly in Iraq. Just one thing that you can be downbeat about is that there would be more of this suffering at least until 2008, further escalating the shockingly prohibitive costs of the war. That is the only inference possible, given the United States administration that is more conversant with confrontation and war than with finding the middle ground and advancing peace. A Secretary of Defence is not the same as a Secretary of War, but this difference has been disregarded.

The hostilities have created and sustained a political ambience in Iraq that achieves the terrorists' and jehadists' objectives rather than those of the anti-war pacifists. It is no surprise, therefore, that the hiatus between the intended and actual results keeps widening.

One of the objectives of this brief note is to plead for a complete and itemised disclosure about the full and holistic costs of the Iraq war. The main reason why there has not been a groundswell of disapproval and dissent in matters relating to the proposed "surge" in troops to be ordered to Iraq is the shroud around the full costs as estimated by independent economists. What could possibly turn things around and get the U.S. out of the Iraq imbroglio and save the brave armed forces is a revelation of the total sacrifice the U.S. has made already, is continuing to make, and is to make in the coming years. The same cost sheet should also illustrate how the U.S. could have deployed those very funds more constructively and fruitfully - in education and human capital development, eradication of hunger and poverty, health initiatives, the elimination of AIDS and other scourges, and development activity both at home and abroad. These from a component of the "option values" that Linda Blimes and Joseph Stiglitz (2006) mention in the study The Economic Costs of the Iraq War: An Appraisal.

The prediction, made three months before the war began in 2003, by the National Intelligence Estimate of the16 security agencies, that terrorists would gain the upper hand in the case of a U.S. intervention/invasion, has proved unerringly accurate. The 2006-07 Federal Budget, proposing an outlay of $ 2.77 trillion, slashed funding for medicare and other beneficial activity and instead boosted the spending on Defence expenditure and homeland security, a sheer travesty of the principles of public finance that call for choosing the well-being and interests of the masses rather than of the ordnance factories. In this setting, "compassionate conservatism" becomes an oxymoron and an inaccurate evaluation of the guiding principle.

Even before the war, in 2002, William D. Nordhaus, Sterling Professor of Economics at Yale University, estimated the Iraq war costs to the U.S. alone at between $100 billion and $1.9 trillion over a 10-year period (2003-2012). This study took into account the costs of a) occupation and reconstruction, b) humanitarian assistance, c) impact on oil imports, and price shocks and d) the macroeconomic impact. Nordhaus estimated the cost of the oil shock alone at $778 billion and the macroeconomic impact at $391 billion.

Earlier, Larry Lindsey, a White House official, had noted that the costs of an Iraq war would be between $100 billion and $200 billion or about 1 to 2 per cent of the U.S. gross domestic product (GDP). The Lindsey estimate was dismissed by other officials as an overestimate. In fact, this and other estimates made around 2002, with the exception of Nordhaus, were serious miscalculations, intentional or otherwise, that took the war impact on the budget and the economy too lightly. The fact is acknowledged widely, and today the Congressional Budget Office talks about $500 billion or more for this hasty and reckless adventure.

What staggers the independent observer is the disinformation about the war costs that most sections of the media seem to accept gullibly, such as $300 billion so far, without grasping that this is just the lowball budget cost. The media too continue to reiterate uncritically the budget figures, such as the monthly cost was $4.4 billion ($52.8 billion annually) in 2003 and now it is $8.4 billion ($100.8 billion annually). Certain funds earmarked for Iraq are also buried in emergency supplemental budgets and often remain unspecified. The half-done numbers are invariably jumbled up with the costs of the "war on terrorism" and the credulous believe that these costs are a small price to pay for defence and security. There is a real need to put out complete information about the full costs of the war and let the people know by way of empowering them as decision-makers.

The most comprehensive estimates of the Iraq War Costs are those of Linda Blimes and Stiglitz (2006). Besides budgetary costs, their study takes into account some of the implicit expenditure that is sparked off by the Iraq war. The Blimes-Stiglitz estimate projects both the direct and not-so-evident costs of the war into the future. For instance, it forecasts the cost of treating the veterans of the war for numerous ailments including psychiatric disorders such as delusions and distorted perceptions of reality.

The authors admit that their evaluation does not allow for costs relating to planning of the war and military costs of other countries as well as those of Iraq. The costs that are not factored into the estimate are the costs of the war for Iraq itself: costs of destruction and loss of life; costs due to increased insecurity that are several such as reduced investments, not to speak of the state of despondency most Iraqis feel, analogous to a state of demoralisation and dejection. Not included in the estimate is the U.S.' own reduced capability to respond to threats elsewhere internally or globally as in the case of the Katrina disaster in New Orleans. The Blimes-Stiglitz estimates also do not include a couple of macroeconomic costs such as price volatility in oil and other commodities. If there is any benefit of the war such as stimulating an economy under recession, the staggeringly larger losses pre-empt any discussion of such a benefit. Also the benefit, if any, was limited to the firms in the military-industrial complex and did help them utilise their built-up capacity to a fuller extent.

In order to pacify critics, initially, Pentagon and other administration officials downsized the costs to $ 50 billion. Later, after plunging into the war, this was jacked up to larger numbers such as $250 billion. As the authors say, no analysis was undertaken to figure out the "option values".

The projection of a total cost of $2.24 trillion is based on an assumption that U.S. troops would stay in Iraq until 2010 but their numbers would fall off steadily. They projected the number of troops there in 2006 at about 136,000. Currently, the U.S. has 153,000+ troops in Iraq. If the "surge" in troops occurs, it may go beyond 175,000. The insurgents and others would have more success with more human targets, vastly increasing the fatalities for U.S.

The anarchists and radicals organising suicide bombings place no value on human life. The marginal cost of the death of an individual, therefore, is perhaps zero for the radicals, whereas for the U.S. it is about a million dollars or more.

It is to be noted, however, that all Iraqi civilians are not extremists. Their deaths, estimated at around 500,000 so far (aside from about 260,000 people who died while taking part in violent acts) will unquestionably have a higher marginal cost.

A survey of Iraqi households, undertaken by a team of American and Iraqi public health researchers and analysis of data by the faculty of the Johns Hopkins School of Public Health and published in the Lancet journal, estimated that "approximately 600,000 people have been killed in the violence of the war that began with the U.S. invasion in March 2003". The actual number mentioned in the study as excess deaths above the pre-invasion level is 654,965.

The U.S. has not suffered that many fatalities in all of its battles from the Civil War to the two World Wars as well as the Korean and Vietnam Wars, all combined. Some 53,000 of these deaths are due to non-violent causes such as deterioration in health care facilities brought about by the war. These killings are bound to create much hostility against the U.S., the cost of which is hard to estimate.

The Blimes-Stiglitz estimates do not include the cost of these deaths. What is noteworthy is that so far American deaths have been a little over 3,000, relatively small compared with the Vietnam War in which there were 47, 369 American fatalities. The number of Americans who were wounded and maimed in the Iraq war is a lot larger. The fatalities and disabling injuries are likely to climb sharply as more troops are sent to Iraq, which is torn between Shias and Sunnis, with the Kurds holding out in the north. Sending in more troops now is not very different from stepping into wilderness blindfolded because the U.S. does not fully understand the sectarian strife and fraternal hate between the two main groups that are as old as their religion.

It is germane to recall here what the Chinese General Sun Tzu wrote in his The Art of War: "If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle."

Dr. Sudhanva V. Char is Professor, Business Department, at Life University in Marietta, Georgia.