Unemployment is the real price of war

June 22, 2011

The cost of ongoing U.S. wars in Afghanistan, Iraq and Libya is up to at least $1.2 trillion. What would the economic recovery look like if that money hadn’t been spent?

The GDP was about $10.1 trillion when U.S. forces invaded Afghanistan, and is $14.7 trillion now, an annualized growth rate at around 2 percent. That the U.S. economy still was able to grow despite war cost — every penny of it borrowed — other runaway borrowing, and the 2008 revelation of systemic perfidy on Wall Street, at the big banks and at Fannie Mae is testimony to America’s vibrancy.

But imagine if $1.2 trillion had been added to the economy, rather than spent on war. Of course lower military spending does not translate one-for-one into increased economic growth — the two aren’t directly correlated. But they are related, and as Harvard economist Martin Feldstein said last week, “each dollar of extra deficit adds much less than a dollar to GDP.”

So imagine that $1.2 trillion had not been spent smashing things, including America’s own military hardware, in Iraq. Afghanistan and now Libya. War, after all, is about killing people and destroying resources. Economic growth is about empowering people and creating value.

Add war costs back into  the economy and the U.S. GDP would be around $16 trillion today, an annualized growth rate of roughly 3 percent for the last decade. At that level of growth, unemployment would be lower, deficits would be lower and the national mood brighter.

Not having spent  money on war would be no panacea. If there’d been no Afghanistan, Iraq or Libya wars, the United States nevertheless would have felt the economic turbulence all the West has flown through. The European Union spent almost nothing on these wars, and its economies cooled, too.

But without at least $1.2 trillion spent on the last decade’s wars, the United States would be in much better economic and fiscal condition. And the true cost may be higher. The 2010 book “The Three Trillion Dollar War” by Joseph Stiglitz, a Nobel-winning economist, and by Linda Bilmes estimates that long-term expenses such as disability payments will drive the number to that level. Destroying resources gets expensive fast. Last week, the White House acknowledged that U.S. air strikes in Libya have already cost $1 billion.

While the Base Realignment and Closure Commission has been engaged in a two-decades-long tooth-pulling exercise to shutter military installations within the United States, we’ve been furiously opening new ones overseas — nearly 100 U.S. military facilities now operating in Iraq and Afghanistan. The value of the dollars that funds these bases leaves the United States, weakening the U.S. economy.

It is far from clear that United States wars in Iraq, Afghanistan and now Libya were national security requirements, or morally defensible. Outgoing Defense Secretary Robert Gates, a Republican and lifelong pillar of the military and intelligence establishments, just told Thom Shanker and Elisabeth Bumiller of the New York Times the country should avoid “wars of choice.”

After 9/11, the United States was justified in counterattacking Afghanistan in self-defense. Al Qaeda there is long since routed and Osama bin-Laden is dead, yet a huge U.S. military force remains — doing what, exactly? The White House can’t even explain what the Afghanistan war is supposed to be achieving.

Eight year later, no coherent explanation for the invasion of Iraq has been offered by presidents of either party. Saddam Hussein is long since dead, and Saddam’s purported atomic weapons program has long since been shown nonexistent by Pentagon investigators in conquered Iraq. Yet the United States still spends lavishly in Iraq, including, the Washington Post just reported, by giving the Iraqi army American M-1 tanks, the best — and by far most expensive — tank in the United States arsenal. One of the original stated reasons for invasion of Iraq was to disarm it. Now Iraq is receiving powerful advanced armaments at American expense. Set aside whether this makes any sense; the cost is depressing the U.S. economy.

Ninety days ago, the United States began bombing Libya. President Barack Obama has already become sufficiently Nixonian in that he just told Congress three months of bombing does not constitute “hostilities” under the War Powers Act. The stated reason a U.S.-led NATO force began bombing Libya was to prevent the Qaddafi government from killing civilians. Now NATO is killing civilians in Libya. Set aside whether this makes any sense; the cost is depressing the U.S. economy.

Not only does the $1.2 trillion represent money invested in destruction rather than creation: as borrowed money, it gives business reason to think the nation’s future is dim. Businesses that think the U.S. future is dim are investing their capital outside the United States, in nations not engaged in budget-busting military adventures their own leaders can’t explain.

In 1781, George Washington said the cost of the Revolutionary War must be repaid immediately, lest his peers “ungenerously throw upon posterity the burden which we ourselves ought to bear.” The Revolutionary War bought something of great value, liberty. America’s three ongoing wars are buying what, exactly?

Photo: U.S. Army soldiers from the 2nd Platoon, B battery 2-8 field artillery, fire a howitzer artillery piece at Seprwan Ghar forward fire base in Panjwai district, Kandahar province southern Afghanistan, June 12, 2011. REUTERS/Baz Ratner

24 comments

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I’m not sure I get your point. Why isn’t this war spending a $1.2 trillion a form of stimulus? Unless we’re setting Gaddhafi’s goons on fire with $100 bills, aren’t we paying that money to someone, probably American companies like Lockheed-Martin or Boeing?

I’m not necessarily disagreeing that there’s no justification for our current wars, but I’m not sure how war spending is any worse than other forms of stimulus. Didn’t World War II end the Great Depression?

Posted by Dan0 | Report as abusive

The wars have certainly been a drain on our economy just as President Obama’s stimulus has been, just as President’s additional new spending has been, and just as President Obama’s ever-growing list of new regulations have been. I agree that we should shut down most of the foreign bases, but Gregg doesn’t seem to acknowledge the other important factors crippling our economy.

As soon as Gregg acknowledges that the President’s stimulus plan was an abject failure according to all of the President’s own projections in 2009, that all of the President’s additional new spending was a failure, and that all of the President’s new regulations have been a failure that have slowed the economy, then I’ll start listening. Until then, it seems like Gregg’s not focusing on the whole picture.

Posted by Greystoke | Report as abusive

America has not been asked to pay for any of the war efforts of the past decade.

It is a safe bet, a good portion of the war spending remains classified.

America has not been asked to pay for the hyper expanded Homeland Defense agencies.

No new taxes with these two areas of ‘defense’ spending has translated into a huge portion of the deficit over the past ten years.

Washington would be appalled.

Posted by NobleKin | Report as abusive

Another as yet unnoted cost of ENDING this deployment is the injection of some tens of thousands of discharged servicemembers into an economy without enough jobs to absorb them.

Posted by RET_SFC | Report as abusive

Well written article on the consequences of war that went nowhere. However, I have always had the view that money is never wasted. Somebody always gets to spend it. In the case of the US it was the military and energy providers and those that invested in those.
It would be really good if someone could work out how much more the average Joe is spending because of inflation caused by this war, and the extra price of petrol because of it.
The biggest mystery to me is that Republicans, who claim to stand for small government wanted this war, and want it to keep going. Two million people in the military is not small government, or small taxes.
The weight of your theme suggests that if those same two million people were building something useful in America, the people of the US would want for nothing. I have to agree with that notion.
So maybe you can waste money after all. One path spends money to destroys things, other possibilities denied could have built things in the US that would have been useful for the Commonwealth of US citizens.

Posted by radlam | Report as abusive

Amen and AMEN! Let’s ask George Bush to pay some of that back to the public he duped into going to war.

Posted by lundbf | Report as abusive

Indeed… but the cost of service members salaries is far less than the cost of deployment… we could put them to work repairing our infrastructure, and we would spend less, while enriching our nation.

Posted by democracywerks | Report as abusive

[...] shooting a howitzer! saw this on google news. thought the pic was awesome and worth posting. Unemployment is the real price of war | Gregg Easterbrook i didn't read the article [...]

You are underestimating by two thirds the costs of these wars. For an accurate measurement of the cost of the Iraq war done by a winner of the Nobel Prize in Economics go here : http://threetrilliondollarwar.org/

It details the cost of the Afghanistan and Iraq wars.

Posted by cld9731 | Report as abusive

War brings unemployment ?

What about WWII ? Unemployment was the lowest during and after WWII.

The soldiers returning from WWII were the most productive citizens.

War is not the cause of unemployment. But war is unaffordable when there is high unemployment and people lack the spirit to fight the war.

The current unemployment is due to explosive growth of the government, legal and heathcare management sectors which do not produce goods and services that people desire, but which bring down the manufacturing and farming sectors that people desire.

Take down the poisonous sectors and the economic health will improve. Guaranteed !

Posted by SatishDesai | Report as abusive

Maybe it’s all about income (earning) rather than activities and things to do, also job satisfaction for unemployment.

Posted by ABS2204 | Report as abusive

the article highlights the costs, but part of the costs flow back in the economy, as the money spent to make a tank would be paid in the US, uncluding the salaries of the people making them. They would pay tax etc. The money flowing directly to Afganistan might result in Afgans buying American products. Spin off effect from research into new battle field technologies also empower the economy.
The sum of this all is still very negative, but the 1.2 trillion mentioned would be far less. War is general is not a economic boon for the one fighting it, but it is also not a net outflow of money.

Posted by diver9999 | Report as abusive

By the same logic, it will be even better if Obama didn’t wasted almost trillion dollars on useless stimulus. With unemployment around 10%, even Obama admitted that “there’s no such thing as shovel-ready projects”. And what unemployment has to do with spending money on war? (not like I am supporting Libya war and I think we should get out from Iraq and Afghanistan, where objective has been achieved). Where would those money end up? More public sector jobs (which eats taxpayers money)or another waste, like a bailout, another cash for clunkers, or Obamacare monstrosity? Government p… It away every extra penny they get. Our president has no clue how to create job, because he never done it in his entire life, so another trillion wont help in that matter.

Posted by Silverzone | Report as abusive

Why isn’t that $1.2 trillion a form of stimulus, like how World War II ended the Great Depression? That money is probably being spent with American companies like Lockheed-Martin or Boeing? Not that I’m saying that justifies the wars at all.

Posted by Dan0 | Report as abusive

@DanO: One significant difference between financing WWII and the current wars in the Middle East is who the Gov. borrowed the money from. In the 40s our government essentially borrowed our money with a promise to return it after the war (maybe with interest? not sure). This agreement took the form of war bonds. Now, we finance our funding through other countries, so instead of just owing us, the Gov. owes other countries.

WWII also took advantage of our now nonexistent manufacturing sector, which meant more people were hired for the war effort. People who didn’t live during that time (I didn’t) have a difficult time imaging the rate and scale of productivity, IMHO. GM, Ford, and Chrysler converted from producing cars to tanks/airplanes in a month…that’s incredible.

Posted by 8281 | Report as abusive

I think our present unemployment problem is due to Wall St. speculation on the housing market, followed by the collapse of our economy. The housing market is still a mess and recovery of housing prices quite simply has not happened yet. This has also lead to increased scrutiny of loan applicants and a tighter credit market overall. People can’t borrow on the value of their homes and can’t spend beyond their means by racking up huge credit card debt. Not buying = not hiring, as so much of our GDP is based on consumer spending. We need a WPA-style jobs program to fix our infrastructure. Put folks to work, restore pride in our country and build/make some cool places for future generations to enjoy as we do of the WPA/CCC projects still in use today. It worked then, it can work now!

Posted by frisbeeredcat | Report as abusive

The Depression ended before World War II; during the war, the economy was handicapped by scarcity and rationing; after the war ended, the US economy boomed. It’s an urban legend that war is good for the economy: nearly all businesses prefer peace and stability. Yes, some of the $1.2 trillion has been spent on military pay or manufacturing. But military expenditures are “sunk costs,” not investments. if national security is at stake, we have no choice. National security is not at stake in any of the three currentt wars.

Posted by Gregg Easterbrook | Report as abusive

Amen and AMEN. lets ask obama,pelosi,reid to pay some of that back to the public they duped into additional wars and stimulus!

Posted by zotdoc | Report as abusive

Obama is contributing to the Libya fight due to a support of burgeoning democracy and because we’ve loathed Qaddafi for years. Not supporting a democratic movement just paints us as the uncaring foreign empire so many people around the world believe we are.

And Bush got us into Iraq and Afghanistan, not Obama, Pelosi, and Reid. Get your facts straight. One war to fix what Daddy didn’t, and another to put those Taliban people in their place, yessir.
-===
The military is called ’4th sector economy’. The military itself produces nothing except destruction. Sure, SUPPLYING the military produces stuff…but the chain ends there. The military’s job is the destruction of resources, not the making of more of them. Bullets and bombs spent do not make more bombs, bullets, lives or highways…they are items of destruction. And thus money spent on the military is a black hole.

The military is neccessary…if you don’t have one, one will come along and have you. But unneeded wars and expenses are not needed.

==RED

Posted by REDruin | Report as abusive

OK, and what is the REAL cost of insecurity? The President’s first job is to maintain the physical security of the US. That is and will never be free.

Posted by mheld45 | Report as abusive

Some of these comments exhibit curiously distorted historical claims and a clearly Keynesian bias. All of that aside, I agree that Easterbrook did fail to address the flow-back effect of the continual purchasing of arms and material from the military-industrial sector. There is no doubt that certain jobs and profits have been realized by arms manufacturers, oil companies, and many others. But at what cost?

As George Orwell presciently informed us, the purpose of war is not to win. The purpose of war is to divert resources away from the citizens. It is therefore “rational” for government to spend its tax revenues on things that break, and to do so perpetually. To do otherwise is to risk empowering the citizenry in a way that is inherently dangerous to those who hold power. A cowed citizenry is a controlled citizenry. Eisenhower also attempted to warn us of this when he left office.

@Dan0 and the others who believe war stimulates the economy, who believe that WWII ended the Great Depression, go back and read your history more carefully. By 1939, by the time Hitler was really shaking things up in Europe, the Great Depression was in the rearview mirror. FDR did that, in the most basic terms, by demonetizing the dollar (severing it from gold in 1933, which amounted to a confiscation of wealth), and then printing those debt obligations (now treated as “lawful money”, although it wasn’t), and pouring that “money” into public works, such as dams and courthouses.

The parallels to the present situation end at the confiscation of wealth and the demonetization of the currency. In each case, demonetization results in a socialization of debt. But FDR poured that debt back into improvements to infrastructure and the resulting employment. Bush and Obama have poured that debt into the pockets of Goldman Sachs, GE and Lockheed Martin.

Posted by BowMtnSpirit | Report as abusive

I’m starting to appreciate why so many educated people withdraw from tracking politics: it’s extremely frustrating and depressing to see the course we’re on and recognize that, as in Animal Farm, it’s impossible to change course because the sheep just keep baying as loud as possible and drowning out any intelligent commentary.

Take this article. It’s very insightful. The comments shared here, on Reuters, are insightful. But bring it up on Yahoo! News, or on FoxNews.com, or at MSNBC, and you’ll just get a bunch of partisan sheep telling us that we need to cut spending or raise taxes or that Obama or Bush (or Carter or Clinton) is to blame.

Posted by JamieSamans | Report as abusive

@JamieSamans: It’s been years since I logged onto any of those sites, for lots of reasons. And you are correct about politics. It is of very little value, because what the politicians state has very little, superficially, with what they are actually doing, or actually intend to do.

Keep this up and you’ll join me as one of the non-mainstream fringe thinkers the politicos love to ignore or marginalize. ;o)

Posted by BowMtnSpirit | Report as abusive

The $1.2 trillion was actually pulled from the future (with interest) into the present. But it was money spent in the present economy. Therefore, it actually caused a higher growth rate than we would have had without it. The real issue is that we are probably not better off in the long-run for it. That 2% borrowed growth was bought with lower, slower, or no-growth in the years to come.

Posted by nadie | Report as abusive

[...] Unemployment is the real price of war The cost of ongoing U.S. wars in Afghanistan, Iraq and Libya is up to at least $1.2 trillion. What would the economic recovery look like if that money hadn’t been spent? [...]

There has to be some hidden reasoning behind these three wars going on. Someone very powerful and extremely wealthy that is behind these unnecessary conflicts. Certainly the men fighting these wars have nothing monetarily to gain. so if someone really knows the answer please let me know.
Most of those in this conflict are week end warriors and when they signed up for duty it was to defend this country in national disasters and not to be sent to fight global wars. My heart and prayers go out to these brave young men who were duped.

Posted by achtung | Report as abusive

[...] of war in Afghanistan is about 446 billion dollars. However, when we look at the real costs–lost lives, lost earnings, & lost productivity we know that something is not right with the numbers coming out on this anniversary of NATO and the [...]