The War Recession

For the sake of all the people who have either lost their jobs, seen their mortgages turned upside-down, or at least been plunged into anxiety, one certainly hopes that the $790 billion "stimulus" package, the most expensive piece of legislation ever passed, will do whatever it is supposed to do to the economy. Unfortunately it is not likely to do so, both because it is based on shaky economic theory [.pdf] and because neither it nor much of the discussion concerning our economic doldrums has taken into account the contribution that "defense" spending has played in bringing about this recession.

But it is still possible to learn a few things and to begin some reforms and even paradigm shifts that, though they might not end this recession [.pdf] next week or even next year, could make it less likely that we will make similar mistakes in the future.

A good deal has been written, by me and many others, of the factors that led to the current economic debacle. While greed and inscrutable securities played their roles, a loose-money policy at the Fed and government mandates to make mortgages available to people of dubious creditworthiness, especially when housing prices began to fall and using the increasing paper value of one’s house as an ATM was no longer an option, all played their roles.

It is difficult to untangle all the contributors to this perfect storm of an economic downturn, but one factor that hasn’t received enough attention, in my view was the costs of the unnecessary wars undertaken by the Bush administration. The Iraq war has cost around $600 billion so far, and the costs will continue to accrue. The Congressional Budget Office estimates that the total cost will be around $2 trillion, while Joseph Stiglitz and Linda Bilmes calculate that it will be more like $3 trillion. As Doug Bandow put it last October, as the financial crisis had begun to become apparent in its full horror, "Getting out now would cut the expense, but many of the costs are impossible to escape, such as the expense of caring for America’s grievously wounded, which will stay with us throughout their lifetimes."

Those wounded warriors will give rise to other costs that cannot be put into dollars, especially in the communities where they live. Beyond the costs to young people rendered "differently abled" to various degrees and therefore facing greater hurdles in the way of achieving their aspirations, entire families and communities will be sadly aware of the human costs of war. It is impossible to predict just what effect this will have on the willingness of young people in the near future to put themselves in the service of the empire. Young people notoriously believe they are immortal and bad things can’t happen to them. It seems more than possible, however, that military morale, difficult as it is to measure in mere dollars, will suffer in ways that show up, for example, in recruitment – although one short-term impact of the recession seems to have been an increase in recruits – and suicides. If loose credit and near-heedless increases in spending (the Bushies increased discretionary domestic spending faster than any administration since LBJ and maybe FDR) contributed to the economic downturn, it is difficult to see how an even greater increase in spending and more government pressure to loosen standards and get credit flowing again will be a sovereign cure. If the spending does have a stimulating effect, it is likely to be brief and followed by inflationary pressures. China, which has been essentially subsidizing Bush’s spending spree by purchasing U.S. Treasury securities, is facing its own internal troubles and is likely to be less eager to buy debt made in the USA, which is likely to drive up the cost of borrowing to finance spending based on dubious claims of a multiplier effect.

While this recession might not achieve the depth and length of the Great Depression, it is likely to last longer and be deeper than any since WWII. How much of the problem is attributable to the costs of the Iraq and Afghanistan wars and the roughly $515 billion the U.S. spends annually on "normal" military operations may not be possible to calculate, though I would love to hear about respectable studies that have been done on the matter. But it seems probable that the desire to be a world-bestriding imperial power with 800 military bases and facilities scattered around the globe has played a role in bringing the U.S. to its economic knees.

The fact that the U.S. government faces other unfunded obligations is relevant, of course, to its ability to continue to spend taxpayers’ hard-earned money defending Europeans from threats that evaporated with the demise of communism or the South Koreans from a North Korea whose GDP is about one-fortieth of theirs. The Social Security and Medicare systems, if not reformed reasonably soon, could bankrupt the country or crowd out all other government spending. And the longer reform is postponed, the greater the social dislocations that will result.

In short, the United States may not be able to afford the empire it has built over the years, or indeed to redeem the numerous promises the government has made to Americans that they will be supported comfortably in their old age. The possibility that somebody in a garage is developing a technology as revolutionary in its efficiency-boosting implications as the computer has been cannot be discounted, but it cannot be guaranteed either. Hard choices are ahead in a society that may well be significantly less entrepreneurial than it has been in the past.

Some would argue that most of the empires of the past never really paid for themselves, although they may have gained trade concessions or access to resources for a while. But the promoters of empire would like us to believe that while empires may have costs, they will bring us more than commensurate benefits. That argument has never had much resonance in the U.S. (even though military activities have sometimes led to commercial advantages). Our imperialists prefer to couch the advantages in terms of promoting democracy and human rights and uplifting the disadvantaged in benighted countries, even – or perhaps especially – when a little digging would uncover more venal motives.

If it turns out, however, that we can afford neither humanitarian nor ostensibly geopolitically advantageous military interventions because they keep us from meeting needs at home (whether these should be done through free markets or government activity will still be tussled over), however, we might just decide to let Afghans, Pakistanis, Indians, Estonians, Lithuanians, Poles, Czechs, Slovaks, and so many more – not to mention Russia, China, Japan, south Asia, and a Middle East we have never mastered – decide for themselves how to live. We might maintain the illusion that we could reduce the amount of suffering and bloodshed if only we had the resources to intervene, but we don’t.

It wouldn’t be the end of the world if the American empire retreated and eventually was no more. Berlin, Paris, London, Vienna, Moscow, Tokyo, Istanbul, Beijing, Delhi, Rome, and dozens of other cities have their charms yet, even if they are no longer the centers of great empires. Washington would have more charms than it does now if it ceased to be the geopolitical center of the world and the Pentagon was converted to condos.

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Author: Alan Bock

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Alan Bock is senior essayist at the Orange
County Register
. He is the author of Ambush
at Ruby Ridge
(Putnam-Berkley, 1995).