Im­bal­anced look at a bun­gled war

Neil James

The Weekend Australian - Review - - Books -

JOSEPH Stiglitz has held the chair in fi­nance and eco­nomics at Columbia Univer­sity busi­ness school since 2001. A for­mer chief econ­o­mist at the World Bank, he also served on the US Coun­cil of Eco­nomic Ad­vis­ers in the Clin­ton ad­min­is­tra­tion. In 2001 he was a cowin­ner of the Swedish cen­tral bank prize for eco­nomics, af­fil­i­ated to the No­bel prizes.

Linda Bilmes lec­tures in pub­lic pol­icy at Har­vard’s Kennedy School of Gov­ern­ment. She also served in the Clin­ton ad­min­is­tra­tion as a se­nior of­fi­cial in the De­part­ment of Com­merce.

The au­thors of The Three Tril­lion Dol­lar War frankly ad­mit that ‘‘ we are both ar­dently op­posed to the war and were against it from the start’’. Un­for­tu­nately, this dis­tracts the book from an ob­jec­tive pub­lic fi­nance and eco­nomic fo­cus or from anal­y­sis based on first prin­ci­ples, un­con­tro­ver­sial as­sump­tions and let­ting facts speak for them­selves.

More gen­er­ally, there are too many for­ays into strate­gic pol­icy and in­ter­na­tional re­la­tions, mat­ters well out­side the au­thors’ so­cial science ex­per­tise and ex­pe­ri­ence.

Stiglitz and Bilmes ably ar­gue that the

The Three Tril­lion Dol­lar War: The True Cost of the Iraq Con­flict Joseph Stiglitz and Linda Bilmes Allen Lane, 311pp, $ 32.95

eco­nomic costs of the Iraq war are very high, that they in­clude a range of vis­i­ble, in­vis­i­ble, di­rect and op­por­tu­nity ( for­gone) costs, that th­ese costs will con­tinue for sev­eral decades and that Bush ad­min­is­tra­tion es­ti­mates have been wrong from the start. They also ef­fec­tively dis­cuss the macroe­co­nomic ef­fects of the war on the US and in­ter­na­tional economies.

But they are much less suc­cess­ful when try­ing to dis­cuss the strate­gic costs.

The $ US3 tril­lion ($ 3.2 tril­lion) fig­ure is their mid- range es­ti­mate and is prob­a­bly much closer to the mark than the fig­ures of up to $ US800 bil­lion quoted by Bush ad­min­is­tra­tion of­fi­cials. Their best es­ti­mate is $ US2 tril­lion; their most pes­simistic, $ US5 tril­lion.

The main cause for the wide dif­fer­ences is that Stiglitz and Bilmes rightly use ( long- term) ac­crual ac­count­ing, whereas of­fi­cial US gov­ern­ment fig­ures are mainly the re­sult of cur­rent cash ac­count­ing meth­ods.

De­spite the book’s ti­tle, one mi­nor com­pli­ca­tion through­out is in­suf­fi­cient sep­a­ra­tion of Iraq war costs from those in Afghanistan ( of­ten be­cause US gov­ern­ment ac­count­ing sys­tems do not fa­cil­i­tate this), and from costs stem­ming from wider ef­forts to counter Is­lamist ter­ror­ism glob­ally. The au­thors note that the US can af­ford $ US3 tril­lion dur­ing the decades- long pe­riod in­volved and that ex­pend­ing such sums will not bank­rupt the coun­try.

They ask a valid ques­tion, how­ever: what else could have been done with the money in eco­nom­i­cally pro­duc­tive ways or in fix­ing the prob­lems af­fect­ing the fu­ture vi­a­bil­ity of the US so­cial se­cu­rity sys­tem? Or, in­deed, in fore­stalling the im­pend­ing US re­ces­sion?

It is in their dis­cus­sion of the an­tecedents and his­tory of the Iraq war, and the ex­e­cu­tion of grand strat­egy and mil­i­tary op­er­a­tions more gen­er­ally, that the au­thors fall vic­tim to er­ror, ques­tion­able as­sump­tions and gen­eral lack of aca­demic rigour. They fail to sep­a­rate the costs of the war in it­self from those re­sult­ing from its bun­gled ex­e­cu­tion. This is not nec­es­sar­ily a prob­lem but it does skew some of their rec­om­mended fi­nan­cial re­forms and fur­ther weak­ens their ar­gu­ment for im­me­di­ate with­drawal from Iraq.

There is also next to no bal­anced dis­cus­sion of the eco­nomic, fi­nan­cial and strate­gic costs of the al­ter­na­tives to the war. Th­ese prin­ci­pally in­volved the con­tin­ued ex­pen­sive, com­plex and fail­ing con­tain­ment of Sad­dam Hus­sein’s regime and the risks to strate­gic equi­lib­rium in the re­gion and to an in­ter­na­tional econ­omy so de­pen­dent on Mid­dle East­ern oil sup­plies. Th­ese costs also in­cluded the se­ri­ous un­der­min­ing of the UN’s author­ity, as its dis­ar­ma­ment sanc­tions were con­tin­u­ally flouted by Iraq and oth­ers.

The book does men­tion the like­li­hood of fur­ther wars pos­si­bly caused by the in­ter­ven­tion and of the op­por­tu­nity costs of the US be­ing so tied down in Iraq that strate­gic threats from Iran and North Korea have ar­guably wors­ened.

The Three Tril­lion Dol­lar War makes nine de­tailed rec­om­men­da­tions for how the US should or­gan­ise the fi­nanc­ing of its wars and a fur­ther nine about the long- term care of vet­er­ans. The book’s wider con­tri­bu­tions to US pol­icy and the for­mu­la­tion of grand strat­egy are neg­li­gi­ble, with three ex­cep­tions ( where con­clu­sions are also ap­pli­ca­ble to Aus­tralia.)

First, the costs of a war ‘‘ live on long af­ter the last shot has been fired’’ and are dis­pro­por­tion­ately borne by war vet­er­ans and their fam­i­lies. Sec­ond, ‘‘ war has be­come too easy for Amer­ica’’. As a check and bal­ance, the costs of any war should be borne by present tax­pay­ers ( not through debt) so that cit­i­zens are forced to con­sider all the im­pli­ca­tions and sac­ri­fices in­volved. Fi­nally, in an era in which a democ­racy’s wars are largely fought by a pro­fes­sion­alised defence force made up of vol­un­teers, ev­ery cit­i­zen must be made to con­front the sac­ri­fices in dead and wounded be­ing made on their be­half, by a very small part of the na­tional fam­ily. Neil James is ex­ec­u­tive di­rec­tor of the Aus­tralia Defence As­so­ci­a­tion.

Costly con­flict: Joseph Stiglitz and Linda Bilmes ably ar­gue that Bush ad­min­is­tra­tion es­ti­mates of the Iraq war’s costs have been wrong from the start, but their stated op­po­si­tion to the war di­min­ishes their ob­jec­tiv­ity

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