Oil price hikes owing to the Iraq war lowered overall U.S. income GDP by roughly $274 billion from 2003 to 2008, a direct transfer of about $124 billion and a further GDP effect of $150 billion, according to these estimations.
How can war cause economic downturn?
If inflation is a concern during a conflict, recession is a concern afterward. If all defense contracts are abruptly cancelled, the tremendous growth in production to provide resources for the war effort will result in the layoff of a large number of employees.
What were the consequences of the Iraq war?
The Iraq War was a long-running armed confrontation in Iraq that lasted from 2003 to 2011. It began with the invasion of Iraq by a USled coalition, which ousted Saddam Hussein’s Iraqi government. For much of the next decade, the struggle raged on as an insurgency rose up against the coalition forces and the post-invasion Iraqi government. In 2011, US forces were officially removed. In 2014, the US re-entered the battle as the leader of a new coalition, and the insurgency and many aspects of the armed conflict continue to this day. Despite the fact that there was no link between the attacks and Iraq, the invasion took place as part of George W. Bush’s War on Terror following the September 11 attacks.
Congress gave President Bush the authority to determine whether or not to initiate a military attack in Iraq in October 2002. The Iraq War began on March 20, 2003, when the United States, along with the United Kingdom, Australia, and Poland, launched a “shock and awe” bombing campaign against Iraq. As coalition forces stormed into Iraq, Iraqi forces were rapidly crushed. The invasion brought down the Ba’athist administration; Saddam Hussein was captured in December of that year during Operation Red Dawn and killed three years later. Following Saddam Hussein’s demise, the Coalition Provisional Authority’s mismanagement resulted in widespread civil war between Shias and Sunnis, as well as a long insurgency against coalition forces. In Iraq, Iran and al-Qaeda backed a number of violent insurgency groups, with Iran supporting primarily Shia militias against Al-Qaeda and other Sunni factions. In 2007, the United States replied by deploying 170,000 troops. Many people considered this build-up to be a success because it provided Iraq’s government and military more power. In 2008, President George W. Bush agreed to pull all US combat forces out of Iraq. President Barack Obama completed the pullout in December 2011.
The invasion was justified by assertions that Iraq had a weapons of mass destruction (WMD) program and was a threat to the US and its allies. Furthermore, several American officials wrongly accused Saddam Hussein of harboring and assisting al-Qaeda. The 9/11 Commission determined in 2004 that there was no proof of a link between Saddam Hussein’s regime and al-Qaeda. Iraq has never had any WMD stocks or an operational WMD program. Officials from the Bush administration made various statements regarding a claimed Saddamal-Qaeda alliance and WMDs, all of which were based on shaky evidence that intelligence officials dismissed. Both domestically and internationally, the war’s justification was heavily criticized. The invasion, according to Kofi Annan, then-UN Secretary-General, was illegal under international law since it breached the UN Charter. The 2016 Chilcot Report, a British inquiry into the United Kingdom’s decision to go to war, concluded that not all peaceful options had been considered, that the United Kingdom and the United States had undermined the United Nations Security Council in the process of declaring war, that the process of identifying a legal basis for war was “far from satisfactory,” and that the war was unnecessary when taken all together. Saddam Hussein affirmed that Iraq had no weapons of mass destruction before to the US invasion when questioned by the FBI.
Iraq had multi-party elections in 2005, following the invasion. Nouri al-Maliki was appointed Prime Minister in 2006 and served until 2014. The policies of the al-Maliki government alienated the country’s traditionally strong Sunni minority and exacerbated sectarian tensions. In the summer of 2014, ISIL began a military attack in northern Iraq and declared a worldwide Islamic caliphate, prompting the United States and its partners to initiate Operation Inherent Resolve, a new military response. Iran has emerged as the “sole victor” of the war, according to a 2019 US Army assessment.
In the first three to five years of the battle, an estimated 151,000 to 1,033,000 Iraqis died. The war claimed the lives of at least a hundred thousand civilians and tens of thousands of military personnel (see estimates below). Between 2004 and 2007, the majority of deaths were caused by insurgencies and civil wars. Following that, the Iraq War, which is considered a domino effect of the invasion and occupation, resulted in at least 155,000 deaths and the displacement of more than 3.3 million people within the country from 2013 to 2017.
What impact did Desert Storm have on the US economy?
It’s been a year since Iraq invaded Kuwait, and it’s been half a year since the US and its coalition allies destroyed Iraq in a 100-hour land war. This appears to be a suitable time to examine the economic impact of the Persian Gulf war on the United States.
This was a one-of-a-kind war in American history in terms of its impact on the budget and economy, both because it was fought with stockpiles and because the war was paid for, at least in the short term, by America’s allies. During the fiscal year 1991, which ends on October 1, the US made a “profit” on the war.
The United States received $54 billion in promises from coalition partners. So far, $46.6 billion has been received, with $41.8 billion in cash and $5.4 billion in kind, primarily fuel, received. Cash contributions are expected to exceed $48.2 billion by the end of the year, bringing the total cash-and-kind gifts to $54 billion promised, according to the Office of Management and Budget.
According to the Congressional Budget Office, the United States’ added costs for Desert Shield and Desert Storm totaled $15 billion. As a result, it estimates that the US will have earned $33 billion more than the war’s extra costs this year, with cash receipts anticipated to exceed $48 billion.
Is war good for the economy?
Increased military spending can have a good economic impact by creating jobs and stimulating economic growth, as well as contributing to technical advancements. This has the potential to create a multiplier impact that spreads to other industries.
What is the economic impact of war?
Aside from the very real human costs of war, there are also significant economic consequences: infrastructural destruction, a decrease in the working population, inflation, shortages, uncertainty, a rise in debt, and disruption of normal economic activities.
War may appear to be good in terms of increasing demand, employment, innovation, and profits for businesses from some views (especially when the war occurs in other countries.) However, we must be aware of the ‘broken window fallacy’ when discussing the ‘economic benefits’ of war spending money on war creates demand, but it also represents a significant opportunity cost rather than building bombs and rebuilding destroyed towns, we could have used this money to improve education or health care. By the end of 2009, the opportunity cost of the Iraq war was estimated to be $860 billion (source: NY Times)
War and inflation
In many cases, conflict causes inflation, which results in the loss of people’s savings, increased uncertainty, and a lack of faith in the financial system. The Confederacy, for example, struggled financially to fulfill the war’s costs throughout the American Civil War. As a result, they began printing money to pay the salaries of the soldiers. However, as more money was printed, the value of money began to fall. Middle-income savers are the hardest hurt by high inflation, since their assets lose value.
Because the economy was nearing maximum capacity, high levels of government spending, and a labor shortage, the United States experienced an increase in inflation during WWII. Due to shortages of products and services and increased prices of basic commodities such as oil, the economy may face cost-push inflation during a war. (Intriguingly, price controls and rationning helped to keep inflation in check throughout WWII.)
When a country is destroyed by war and its capacity to manufacture commodities is drastically curtailed, hyperinflation can result when governments hurriedly print money to make up for the shortage of goods. In 1946, for example, Hungary and Austria saw the greatest rates of hyperinflation on record due to a crippled economy.
War and oil prices
Because serious conflict might jeopardize oil supplies, war can often lead to higher oil prices.
The Gulf War of 1990, for example, resulted in higher oil prices. Prices jumped from $21 per barrel in July to $46 in mid-October, a post-invasion high. (However, prices dropped shortly after)
The Russian invasion of Ukraine in 2022 resulted in an increase in oil and gas prices, which will lead to higher worldwide gasoline prices. Economic penalties against Russia in response to the invasion will limit supplies and put upward pressure on gas prices because Russia is a significant supplier of oil and gas.
War and National debt
We frequently observe a rapid increase in public sector debt during times of war. Because there is patriotic support for the war effort, the government is willing to borrow far more than usual.
Both the First and Second World Wars cost the United Kingdom a lot of money. The national debt increased dramatically in both cases. Due to reconstruction and the establishment of the welfare state, debt continued to climb throughout the postwar decades.
The national debt of the United Kingdom reached 150 percent at the end of World War II, but by the early 1950s, it had risen to 240 percent.
During WWII, the United Kingdom relied on loans from the United States, which took decades to repay.
The rise in national debt was less pronounced in the United States, which was not involved for the first two years. During the early years of the Cold War, the United States benefitted from the sale of weaponry and equipment to the United Kingdom (though on generous lend-lease terms)
The financial cost of war
Although war can temporarily raise domestic demand, it is vital to remember that war comes at a price. The opportunity cost of military spending, the human cost of lost lives, and the cost of rebuilding after a war’s devastation are all factors to consider. It also depends on the type of war, how long it has lasted, and where and how it is waged. For example, the United States fought wars during WWII, the Korean War, and the Vietnam War, and it appeared that these conflicts resulted in an increase in domestic demand, with some manufacturing enterprises performing very well. However, it is important to remember that these wars took place in countries other than the United States. The true carnage occurred in Asia and Europe.
Cost of civil war
Civil conflict can have a disastrous effect on a country’s economic prosperity. Tourism, international investment, and domestic investment will all suffer as a result of civil war. It may result in a reduction in life expectancy and a reduction in GDP. A document titled “According to the research “Africa’s Missing Billionaires” (Oxfam, 2007), the cost of war in Africa is equal to the amount of international aid. A country such as the United States “The “Democratic Republic of Congo” has been through a particularly tough war, which has cost it 9 billion, or 29 percent of its gross domestic product, in addition to killing about 4 million people.
According to the paper, continued war and greater weapon availability can lead to a rise in armed violence and organized crime.
This is an illustration of Burundi’s estimated GDP loss during the civil war. It is calculated using a pre-war GDP trend estimate and actual GDP. It demonstrates that a decade of fighting is a big contributor to declining GDP.
However, it is worse than the graph depicts because a huge percentage of GDP is spent on damaging military weapons during the war. Health-care and education services are expected to deteriorate even worse.
The aftermath of War?
War always leaves a debt legacy and an army of demobilized warriors. After WWII, debt was no longer a barrier to growth, and we enjoyed one of the longest periods of economic expansion in history. (Britain after WWII)
The aftermath of war, on the other hand, is not always so good. Following the end of the Napoleonic Wars and the First World War, the United Kingdom struggled. The United Kingdom had a long period of unemployment in the 1920s, with returning troops facing bleak job prospects. Nonetheless, the United States and Europe experienced full employment following WWII.
The aftermath of World War I and the demand for reparations wreaked havoc on Germany’s economy. In order to meet restitution payments, Germany printed money, resulting in hyperinflation. The squabbles over German hyperinflation in the 1920s sowed the roots for future political radicalism and wars.
The Allies, on the other hand, did not repeat this error after WWII. The United States provided considerable aid to Western Europe, assisting in the reconstruction process and resulting in Europe’s economic miracle, particularly in Germany.
Psychological costs
It is feasible to assess the economic costs of conflict – military costs, for example. However, estimating the psychological costs of war the pain of death, misery, terror, and impairment is more difficult. Soldiers and civilians might be traumatized for the rest of their lives as a result of a battle. Post-traumatic stress disorder (PTSD) has become more commonly recognised in recent years, but putting a price tag on how conflict negatively impacts people who are involved has proven challenging.
Economic benefits of wars
It may appear that war has economic benefits. All of this, as previously said, could be accomplished without the use of force.
- Increased innovation as the government invests in new technologies, such as the creation of radar/jet engines during WWII, which might be utilized for peaceful purposes.
- Social attitudes have shifted. Women entered the labor market following the First World War, for example.
J.M. Keynes supported government borrowing and spending to alleviate the Great Depression’s enormous unemployment in the 1930s. However, it wasn’t until the outbreak of World War II that there was political pressure to increase spending. Both the UK and the US economies quickly attained full employment, with shortages in vital areas as men enlisted in the army.
At the outbreak of World War II, unemployment was at an all-time low.
Indeed, one of the unintended consequences of the First and Second World Wars was an increase in female work. In the years 1914-18, women took on jobs that had traditionally been reserved for men alone; this helped to shift societal perceptions and give women the right to vote shortly after the First World War ended.
Possible unemployment
However, when great wars come to a conclusion, returning troops may find it difficult to find work. Following the end of World War I, there was a severe economic downturn, and returning troops struggled to locate occupations that had been lost during the conflict.
Following the end of World War I, there was a significant increase in unemployment. The Versailles Treaty, which sought reparations from Germany, did not help because it resulted in a reduction in trade.
s economic boom
The United States was involved in major hostilities in Korea, Vietnam, and Cambodia during the 1950s and 1960s. Military spending has risen as a percentage of GDP, contributing to robust domestic demand and high rates of economic growth. Arms manufacturers reported an increase in demand and profit.
Who makes money from wars?
Any individual or organization that profits from violence or the sale of weapons and other items to warring parties is known as a war profiteer. The phrase is usually associated with a negative connotation. In times of peace, general profiteering, or making an excessive or unjustifiable profit, is also practiced. The “shoddy” billionaires who purportedly sold recycled wool and cardboard shoes to soldiers during the American Civil War were an example of war profiteers. In the post-9/11 age, some have suggested that large modern defense conglomerates like Lockheed Martin, Boeing, BAE Systems, General Dynamics, and Raytheon meet the bill. This argument is based on the defense industry’s political clout; for example, in 2010, the defense sector spent $144 million on lobbying and donated $22.6 million to congressional candidates, as well as substantial earnings for defense company stockholders following 9/11.
Is war responsible for inflation or deflation?
Military spending produces a large new source of demand, and governments print money to support it, therefore major wars tend to be inflationary. In the aftermath of World Wars I and II, when the economy switched from war to peacetime interests, there were significant price surges.
Is Iraq still fighting in 2021?
The US military stated earlier this month that it will no longer be fighting in Iraq.
The action comes just months after Iraqi Prime Minister Mustafa al-Kadhimi and US President Joe Biden met in July. Following that, the leaders made a statement declaring that “by December 31, 2021, there would be no US forces with a combat role in Iraq.”
According to experts, the two reached an arrangement in order to relieve pressure on al-government. Kadhimi’s It was attacked by Iran-backed militias in Iraq known as the Popular Mobilization Forces (PMF), who oppose any US involvement in the nation. The same forces are accused of carrying out ongoing drone and rocket attacks on US logistical convoys and bases, as well as an assassination attempt on al-Kadhimi.
The plan to reclassify US troops was accomplished ahead of time. Iraq’s national security adviser, Qasim al-Araji, said on December 9 that the transition to a mission of “advising, assisting, and enabling” had been completed.
The majority of US forces in Iraq are part of the International Coalition for Operation Inherent Resolve, whose mission is to combat the so-called “Islamic State” (IS).