Some market thoughts on war making, making peace, and the economy..
I'll add here that this is not a discussion of humanitarian rights, or of the moral, religious, or right thing to do. Markets exist in the pricing of trading good and services regardless of what people do against or for one another.
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A. All wars and war making are inflationary
The goods and services of war are paid for out of tax revenue or by inflating the currency. Each of these pressures draws down the wealth of a population. The products used to make war and the delivery systems are disposable and have a single destructive use. They are either stockpiled, shot, dropped, exploded, or given to an ally to do the same. A gun or tank is not like a computer or a tractor which has a long productive service life. The expense of war extends also to maintaining an army from hiring, training, supply, and benefits after discharge. Its an expensive wealth draining proposition.
B. The financial benefits of war are political, greater and sometimes complete access or control of natural resources, the writing and enforcement of business and trade laws to one's own benefit. Invention is spurred in preparation for war. There's a cycle of distructive and defensive creativity, which eventually finds use in the general population. Yet, one must wonder at the cost of this cycle, if the same or better benefits can't be gained without the war staging component of the boom bust cycle.
Winning a war puts one's own ecocomy in the driver's seat offsetting some of the costs and burden of making war. Behind the victor's pen that demands conciliations, there stands an army of businessmen ready to launch initiatives to sell, export, camp on, consolidate with and generally control the economy of the vanquished. Sometimes this is a benefit to the loser, most often not. Sometimes winning the war means losing the peace... this has been a trend in modern political/warring struggles where countries that are beaten are also paid welfare to remain allies and trading partners. Unfortunatetly democracy has not blossomed in the many places we've engaged, instead variants of capitalism and the old guard have reworked the status quo.
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What of Kosovo and Yugosalvia?
The peace dividend of having the cold war end largely to our benefit has helped drive down our government debt, increased trade and business, lowered the costs of commodities, especially oil. Another huge benefit not appreciated is the significant intellectual migration of scientists and talented people to our industries.
Its an impossible calculation to wonder what the real costs of the cold war have been, and if the subsequent trillions of dollars in new wealth have come close to making up for it. I think not, yet there are benefits from the cold war including this internet medium we are now communicating through, as well as thousand of other NASA spinoffs and SDI benefits as war technology gets redeployed in the post war economy.
Similarly its also impossible to calculate in dollar terms the loss and/or benefits of fighting against the regime of ethnic cleansing in Kosovo. One can wonder if this had been NATO's fight from the beginning, how would it accelerate the EU economic consolidation process and world trade? We're spending some of the peace dividend of the cold war.
This is the second US assertion of world power and influence since Gorbachev and Reagan. The first assertion was Bush in Iraq. If this is a trend, it can't long last as a policy.
So in semi-conclusion..
The war is inflationary, it has cost the disposal value of all the weapons, costs of delivery and eventual replacement with the same or improved versions. Its also going to cost the sums for peace rebuilding and buy offs for good will of the Serbs, Bulgarians and Russians (as we've already seen the beginning of with renewed IMF funding to Russia). If the war will cost $ 50 billion, the peace will cost will be an equal amount.
While Bush's war in Iraq coincided with a drop in world oil prices for eight years, what will happen here.
The long term capital gain for new US business in the region is minimal, the political gains are minimal except for supporting EU consolidation which has some long term trading block considerations that are probably US competetive.
The political climate in the area will likely be a nightmare for decades to come. We have oil interests in the Caspian Sea development, its possible this has gained some allies from the Moslem perspective and lost support among the old guard. The phrase "to the victor belongs the spoils" holds little promise here because there are no victors and fewer spoils.
Jim |
