2002 Economist Article on the Cost of the Iraq War
The above link is to an article in the Economist about the cost of a war in Iraq. It is notable primarily for its optimism. The worst case scenario--setting aside the use of WMD--was for a war that lasted six months. In hindsight, it makes astonishing reading because the experts underestimated the cost of war so terribly.
A think-tank, the Center for Strategic and International Studies, argued that, at worst, the war might last six months and cause oil prices to spike at 80 dollars a barrell and then remain at 40 dollars a barrel for a long time. Most economists predicted a cost of tens of billions of dollars and that this cost would be recouped by cheaper oil. One economist--one of the few with any sense--predicted that a war that went horribly wrong could cost up to 1.6 trillion dollars.
How did things turn out? Nobel-prize winning economist Joseph Stiglitz estimates the cost of the war at well over 3 TRILLION dollars if one includes disability payments to veterans, lost wages, and other such factors. . Oil prices did not spike to 80 dollars but, at their highest, to 145 dollars. Stiglitz wrote an article discussing the amount of the price increase in oil that was due to the Iraq war and calculated the total cost here. It is sobering reading. The US is hundreds of billions of dollars poorer because of the war's impact on oil prices.
An oil economist calculated that oil would have cost only about one-third of its current value if the US had not invaded. He also pointed out that Saddam Hussein offered the US a very generous deal on oil in return for lifting sanctions but the US refused. I corresponded with the late Israeli sociologist, Baruch Kimmerling, until his death in 2007. Before the Iraq war started, he wrote me that he doubted the war was about oil because cutting a good deal with Saddam Hussein would be much cheaper than fighting a war. As usual, he s right. He was incredibly wise and I never knew him to be wrong.
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