by Washington's Blog
January 10, 2010
Everyone knows that the too big to fails and their dishonest and
footsy-playing regulators and politicians are largely responsible for
trashing the economy.
But the military-industrial complex shares much of the blame.
Nobel prize winning economist Joseph Stiglitz says that the Iraq war
$3-5 trillion dollars.
Sure, experts say that the Iraq war has increased the threat of terrorism.
And we launched the Iraq
war based on the
false linkage of Saddam and 9/11, and
claims that Saddam had WMDs. And
top British officials, former
CIA director George Tenet, former
Treasury Secretary Paul O'Neill and many others say
that the Iraq war was planned before 9/11. But this essay is about dollars
America is also spending a pretty penny in Afghanistan. The U.S. admits
there are only a small handful of Al Qaeda in Afghanistan.
U.S. intelligence officials have concluded
there are only about 100 al Qaeda fighters in the entire country.
With 100,000 troops in Afghanistan at an estimated yearly cost of $30
billion, it means that for every one al Qaeda fighter, the U.S. will
commit 1,000 troops and $300 million a year.
Sure, the government apparently planned the
Afghanistan war before 9/11 (see
And the Taliban offered to turn over Bin Laden
this). And we
could have easily killed Bin Laden in 2001 and
again in 2007, but chose not to, even though that would have saved the U.S.
hundreds of billions of dollars in costs in prosecuting the Afghanistan war.
But this essay is about dollars and cents.
Increasing the Debt
Burden of a Nation Sinking In Debt
All of the spending on unnecessary wars adds up.
The U.S. is adding trillions to its debt burden to finance its multiple wars
in Iraq, Afghanistan, Yemen, etc.
Two top American economists - Carmen Reinhart and Kenneth Rogoff
- show that the more indebted a country is, with a government debt/GDP ratio
of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP
growth drops materially.
Reinhart and Rogoff write:
The relationship between government debt and
real GDP growth is weak for debt/GDP ratios below a threshold of 90
percent of GDP. Above 90 percent, median growth rates fall by one
percent, and average growth falls considerably more. We find that the
threshold for public debt is similar in advanced and emerging
Indeed, it should be obvious to anyone who looks
at the issue that
deficits do matter.
A PhD economist told me:
War always causes recession. Well, if it is
a very short war, then it may stimulate the economy in the short-run.
But if there is not a quick victory and it drags on, then wars always
put the nation waging war into a recession and hurt its economy.
You know about America's unemployment problem.
You may have even heard that the U.S. may very well have suffered a
permanent destruction of jobs.
But did you know that the defense employment sector is booming?
As I pointed out in August, public sector spending - and mainly defense
spending - has accounted for virtually all of the new job creation in the
past 10 years:
The U.S. has largely been financing job
creation for ten years. Specifically, as the chief economist for
Business Week, Michael Mandel, points out, public spending has accounted
for virtually all new job creation in the past 1o years:
Private sector job growth was almost non-existent over the past ten
years. Take a look at this horrifying chart:
Between May 1999 and May 2009, employment in
the private sector sector only rose by 1.1%, by far the lowest 10-year
increase in the post-depression period.
Itís impossible to overstate how bad this is. Basically speaking, the
private sector job machine has almost completely stalled over the past
ten years. Take a look at this chart:
Over the past 10 years, the private sector
has generated roughly 1.1 million additional jobs, or about 100K per
year. The public sector created about 2.4 million jobs.
But even that gives the private sector too much credit. Remember that
the private sector includes health care, social assistance, and
education, all areas which receive a lot of government support.
Most of the industries which had positive job growth over the past ten years
were in the HealthEdGov sector. In fact, financial job growth was nearly
nonexistent once we take out the health insurers.
Let me finish with a final chart.
Without a decade of growing government support
from rising health and education spending and soaring budget deficits, the
labor market would have been flat on its back. 
Raw Story argues that the U.S. is building a largely military economy:
The use of the military-industrial complex
as a quick, if dubious, way of jump-starting the economy is nothing new,
but what is amazing is the divergence between the military economy and
the civilian economy, as shown by this below New York Times chart.
In the past nine years, non-industrial production in the US has declined
by some 19 percent. It took about four years for manufacturing to return
to levels seen before the 2001 recession - and all those gains were
wiped out in the current recession.
By contrast, military manufacturing is now 123 percent greater than it
was in 2000 - it has more than doubled while the rest of the
manufacturing sector has been shrinking...
It's important to note the trajectory - the military economy is nearly
three times as large, proportionally to the rest of the economy, as it
was at the beginning of the Bush administration. And it is the only
manufacturing sector showing any growth. Extrapolate that trend, and
what do you get?
The change in leadership in Washington does not appear to be abating
So most of the job creation has been by the
But because the job creation has been financed
with loans from China and private banks, trillions in unnecessary interest
charges have been incurred by the U.S. So we're running up our debt (which
will eventually decrease economic growth), but the only jobs we're creating
are military and other public sector jobs.
Dean Baker points out that America's massive military
spending on unnecessary and unpopular wars lowers economic growth and
Defense spending means that the government
is pulling away resources from the uses determined by the market and
instead using them to buy weapons and supplies and to pay for soldiers
and other military personnel. In standard economic models, defense
spending is a direct drain on the economy, reducing efficiency, slowing
growth and costing jobs.
A few years ago, the Center for Economic and Policy Research
commissioned Global Insight, one of the leading economic modeling firms,
to project the impact of a sustained increase in defense spending equal
to 1.0 percentage point of GDP. This was roughly equal to the cost of
the Iraq War.
Global Insightís model projected that after 20 years the economy would
be about 0.6 percentage points smaller as a result of the additional
defense spending. Slower growth would imply a loss of almost 700,000
jobs compared to a situation in which defense spending had not been
increased. Construction and manufacturing were especially big job losers
in the projections, losing 210,000 and 90,000 jobs, respectively.
The scenario we asked Global Insight [recognized as
consistently accurate forecasting company in the world] to model turned
out to have vastly underestimated the increase in defense spending
associated with current policy. In the most recent quarter, defense
spending was equal to 5.6 percent of GDP.
By comparison, before the September 11th
attacks, the Congressional Budget Office projected that defense spending
in 2009 would be equal to just 2.4 percent of GDP. Our post-September
11th build-up was equal to 3.2 percentage points of GDP compared to the
pre-attack baseline. This means that the Global Insight projections of
job loss are far too low...
The projected job loss from this increase in defense spending would be
close to 2 million.
In other words, the standard economic models
that project job loss from efforts to stem global warming also project
that the increase in defense spending since 2000 will cost the economy
close to 2 million jobs in the long run.
The Political Economy Research Institute at the
University of Massachusetts, Amherst
has also shown that non-military
spending creates more jobs than military spending.
So we're running up our debt - which will eventually decrease economic
growth - and creating many fewer jobs than if we spent the money on
But the War on Terror
is Urgent for Our National Security, Isn't It?
For those who still think that the Iraq and Afghanistan wars are necessary
to fight terrorism, remember that a leading advisor to the U.S. military -
the very hawkish and pro-war Rand Corporation - released a study in 2008
called "How Terrorist Groups End
- Lessons for Countering al Qa'ida".
The report confirms that the
war on terror is actually weakening national
As a press release about the study states:
"Terrorists should be perceived and
described as criminals, not holy warriors, and our analysis suggests
that there is no battlefield solution to terrorism."
Former U.S. National Security Adviser
Zbigniew Brzezinski told the Senate that
the war on terror is
"a mythical historical narrative". And
Newsweek has now admitted that the
war on terror is wholly unnecessary.
In fact, starting right after 9/11 - at the latest - the goal has always
been to create "regime change" and instability in Iraq, Iran, Syria, Libya,
Sudan, Somalia and Lebanon; the goal was never really to destroy Al Qaeda.
As American reporter Gareth Porter
in Asia Times:
Three weeks after the September 11, 2001,
terror attacks, former US defense secretary Donald Rumsfeld established
an official military objective of not only removing the Saddam Hussein
regime by force but overturning the regime in Iran, as well as in Syria
and four other countries in the Middle East, according to a document
quoted extensively in then-under secretary of defense for policy Douglas
Feith's recently published account of the Iraq war decisions.
Feith's account further indicates that this
aggressive aim of remaking the map of the Middle East by military force
and the threat of force was supported explicitly by the country's top
Feith's book, War and Decision, released last month, provides excerpts
of the paper Rumsfeld sent to President
George W. Bush on September 30,
2001, calling for the administration to focus not on taking down
bin Laden's al-Qaeda network but on the aim of establishing "new
regimes" in a series of states...
General Wesley Clark, who commanded the North Atlantic Treaty
Organization bombing campaign in the Kosovo war, recalls in his 2003
book Winning Modern Wars being told by a friend in the Pentagon in
November 2001 that the list of states that Rumsfeld and deputy secretary
of defense Paul Wolfowitz wanted to take down included Iraq, Iran,
Syria, Libya, Sudan and Somalia [and Lebanon].
When this writer asked Feith... which of the six regimes on the Clark
list were included in the Rumsfeld paper, he replied, "All of them."
The Defense Department guidance document made it clear that US military
aims in regard to those states would go well beyond any ties to
terrorism. The document said the Defense Department would also seek to
isolate and weaken those states and to "disrupt, damage or destroy"
their military capacities - not necessarily limited to weapons of mass
Rumsfeld's paper was given to the White House only two weeks after Bush
had approved a US military operation in Afghanistan directed against bin
Laden and the Taliban regime. Despite that decision, Rumsfeld's proposal
called explicitly for postponing indefinitely US air-strikes and the use
of ground forces in support of the anti-Taliban Northern Alliance in
order to try to catch bin Laden.
Instead, the Rumsfeld paper argued that the US should target states that
had supported anti-Israel forces such as Hezbollah and Hamas.
After the bombing of two US embassies in East Africa [in 1988] by
al-Qaeda operatives, State Department counter-terrorism official Michael
Sheehan proposed supporting the anti-Taliban Northern Alliance in
Afghanistan against bin Laden's sponsor, the Taliban regime. However,
senior US military leaders "refused to consider it", according to a 2004
account by Richard H Shultz, Junior, a military specialist at Tufts
A senior officer on the Joint Staff told State Department
counter-terrorism director Sheehan he had heard terrorist strikes
characterized more than once by colleagues as a "small price to pay for
being a superpower".
If you still believe that the war on terror is
Torture is Bad for the Economy
For those who still think torture is a necessary evil, you might be
interested to learn that top experts in interrogation say that, actually:
Indeed, historians tell us that torture has been
used throughout history - not to gain information - but as a form of
intimidation, to terrorize people into obedience. In other words, at its
core, torture is a form of terrorism.
Moreover, the type of torture used by the U.S. in the last 10 years is of a
special type. Senator Levin revealed that the
the U.S. used torture
techniques aimed at extracting false confessions.
McClatchy subsequently filled in some of the details:
"Former senior U.S. intelligence official
familiar with the interrogation issue said that Cheney and former
Defense Secretary Donald H. Rumsfeld demanded that the interrogators
find evidence of al Qaida-Iraq collaboration...
For most of 2002 and into 2003, Cheney and Rumsfeld, especially, were
also demanding proof of the links between al Qaida and Iraq that (former
Iraqi exile leader Ahmed) Chalabi and others had told them were there."
It was during this period that CIA interrogators water-boarded two
alleged top al Qaida detainees repeatedly - Abu Zubaydah at
least 83 times in August 2002 and Khalid Sheik Muhammed 183 times in
March 2003 - according to a newly released Justice Department
"When people kept coming up empty, they were told by Cheney's and
Rumsfeld's people to push harder," he continued. "Cheney's and
Rumsfeld's people were told repeatedly, by CIA... and by others, that
there wasn't any reliable intelligence that pointed to operational ties
between bin Laden and Saddam..."
A former U.S. Army psychiatrist, Maj. Charles Burney, told Army
investigators in 2006 that interrogators at the Guantanamo Bay, Cuba,
detention facility were under "pressure" to produce evidence of ties
between al Qaida and Iraq.
"While we were there a large part of the time we were focused on trying
to establish a link between al Qaida and Iraq and we were not successful
in establishing a link between al Qaida and Iraq," Burney told staff of
the Army Inspector General.
"The more frustrated people got in not being
able to establish that link . . . there was more and more pressure to
resort to measures that might produce more immediate results."
"I think it's obvious that the administration was scrambling then to try
to find a connection, a link (between al Qaida and Iraq)," [Senator]
Levin said in a conference call with reporters. "They made out links
where they didn't exist."
Levin recalled Cheney's assertions that a senior Iraqi intelligence
officer had met Mohammad Atta, the leader of the 9/11 hijackers, in the
Czech Republic capital of Prague just months before the attacks on the
World Trade Center and the Pentagon.
The FBI and CIA found that no such meeting occurred.
In other words, top Bush administration
officials not only knowingly lied about a non-existent connection between Al Qaida and Iraq, but they pushed and insisted that interrogators use special
torture methods aimed at extracting false confessions to attempt to create
such a false linkage. See also this and this.
Paul Krugman eloquently
summarized the truth about the type of torture used:
Letís say this slowly: the Bush
administration wanted to use 9/11 as a pretext to invade Iraq, even
though Iraq had nothing to do with 9/11. So it tortured people to make
them confess to the nonexistent link.
Thereís a word for this:
But since this essay in on dollars and cents,
the important point is that terrorism is bad for the economy.
a study by Harvard and NBER points out:
From an economic standpoint, terrorism has
been described to have four main effects (see, e.g., US Congress, Joint
Economic Committee, 2002)
First, the capital stock (human and
physical) of a country is reduced as a result of terrorist attacks.
Second, the terrorist threat induces
higher levels of uncertainty.
Third, terrorism promotes increases in
counter-terrorism expenditures, drawing resources from productive
sectors for use in security.
Fourth, terrorism is known to affect
negatively specific industries such as tourism.
The Harvard/NBER concludes:
In accordance with the predictions of the
model, higher levels of terrorist risks are associated with lower levels
of net foreign direct investment positions, even after controlling for
other types of country risks.
On average, a standard deviation increase
in the terrorist risk is associated with a fall in the net foreign
direct investment position of about 5 percent of GDP.
So the more unnecessary wars American launches,
the more innocent civilians we kill
the more people we torture
less foreign investment in America
the more destruction to our capital
the higher the level of uncertainty
the more counter-terrorism
the less expenditures in more productive sectors
the greater the hit to tourism and some
Terrorism has contributed to a decline in
the global economy (for example, European Commission, 2001).
So military adventurism and torture, which
increase terrorism, hurt the world economy. And
For the foregoing reasons, the military-industrial complex is ruining the