Commentary

Dennis Morrison, Contributor

Surprisingly, the withdrawal of United States combat troops from Iraq, the biggest movement of military materiel since World War II, is turning out to be an anticlimactic moment coming after a war that evoked such bitter opposition in America. The notion that the war would have been over quickly and that democracy would bloom in Iraq, encapsulated in the slogan 'Mission Accomplished', has long been dismissed.

Expansion of American economic influence in the region, specifically over Iraq's massive oil reserves that was presumed by some to have been the underlying motivation for the invasion, has also not materialised.

There is, too, no sign that the aspiration of the Bush administration that American intervention would catalyse change in the Middle East is alive as Israeli and Palestinian leaders prepare to resume direct talks. By some accounts it may, on the contrary, have complicated the political balance of forces in that part of the world, with Iran's regional influence being strengthened, at least in the short term. For sure, the price paid by America in blood and treasure is humongous, and will endure.

On the human side, troop deployment, which went as high as over 170,000 at the peak of the 'surge' in 2007, and had dropped to around 140,000 by the time President Obama took office, has imposed huge burdens. With the withdrawal of combat forces, there will still be nearly 50,000 remaining in Iraq. More than 5,000 US troops have been lost in combat, over 60,000 have been wounded and, frighteningly, over 100,000 have returned from the war suffering from serious mental disorders, and this number is still rising. A quick comparison shows that in the 1991 Gulf War, less than 150 US troops were killed, under 500 injured in direct combat, and 40,000 suffered long-term disabilities.

Huge financial cost

Daily reports about troop losses and injuries have kept alive the sense of human suffering in the minds of Americans, and played a big part in fomenting opposition to the war. But its financial and economic costs, which are huge, have been far less dramatised. While pre-war estimates had put the direct cost at US$50 billion, according to a study by Joseph E. Stiglitz and Linda J. Bilmes - The Three Trillion Dollar War - the US had spent well over $1 trillion by early 2008. By their analysis, the total budgetary and economic costs could rise to a staggering US$3 trillion when all the components are added up over the long term.

Since the bill for the war is not being met from increased taxes, as has been customary, it is being added to the US national debt, contributing to its rapid rise in the past decade. In fact, the level of the US national debt and its budget deficit now threaten America's macro-economic stability. Again, comparison with the 1991 Gulf War is instructive. That war was financed by America's allies, substantially by Saudi Arabia and Kuwait, although the US has been spending over $4 billion each year to pay compensation to veterans.

With the US economy badly damaged by the recession and recovery hampered by debt-strangled consumers and a housing market wounded by the financial meltdown, the economic and financial cost of the Iraq war is going to be more burdensome for the American people. Having emerged from the Cold War as the world's single superpower, America now finds itself with a weakened economy with infrastructure that is falling behind and likely to hurt its competitiveness. Its bridges, airport systems, electricity transmission grid and rail system, among other things, have been starved of capital, even as it has expended massive resources on a war the grounds for which have largely been discredited.

China booming

In the meantime, China, its long-term main competitor economically and for global power, has doubled its economy in a few short years, leap-frogging Germany and Japan. It is investing in infrastructure at a mind-boggling pace that is almost singly responsible for growth in global demand for commodities, particularly base metals, which are key raw materials for industry. Such is the momentum of the Chinese economic engine that leading forecasters have revised their predictions to 2025 as the date by which China will overtake the US.

China has progressed rapidly in rebalancing its economy to be less export-driven, doing so by accelerating investment activity that is directed at expanding production for domestic consumption. It has been able to do this because of a high savings rate and the efficiency and speed of execution of its investment process. The American economy, on the other hand, is caught in a paradox where growth is being stifled as consumers must cut spending to relieve their overburden of debt which only reinforces the problem.

Given the large US fiscal deficit and its high and rising debt level to which the Iraq war contributed, it will have to undergo painful adjustments in coming years. This will dampen economic growth because consumers' disposable incomes will be curtailed. Public investment in the modernisation of its infrastructure, which is long overdue [more than 50,000 bridges need replacing or major repairs], and an electric grid to meet the demands of new energy systems could provide momentum for growth and economic resurgence.

While the Obama administration has put forward ambitious policy proposals for such investments, gridlock in America's political system is likely to stymie such investment-propelled growth.

Dennis Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.