The Military-Industrial Complex is Ruining the Economy
By Washington's Blog
URL of this article:www.globalresearch.ca/index.php?context=va&aid=16887
Global Research, January 10, 2010 Washington's Blog - 2010-01-09
Everyone knows that the too big to fails and their dishonest and
footsy-playing regulators and politicians are largely responsible
for trashing the economy.
But the military-industrial complex shares much of the blame.
Nobel prize winning economist Joseph Stiglitz says that the Iraq
war will cost $3-5 trillion dollars.
Sure, experts say that the Iraq war has increased the threat of
terrorism. See this, this, this, this, this, this and this. And we
launched the Iraq war based on the false linkage of Saddam and 9/11,
and knowingly false claims that Saddam had WMDs. And top British
officials, former CIA director George Tenet, former Treasury Secretary
Paul O'Neill and many others say that the Iraq war was planned
before 9/11. But this essay is about dollars and cents.
America is also spending a pretty penny in Afghanistan. The U.S.
admits there are only a small handful of Al Qaeda in Afghanistan.
As ABC notes:
U.S. intelligence officials have concluded there are only about 100
al Qaeda fighters in the entire country.
With 100,000 troops in Afghanistan at an estimated yearly cost of
$30 billion, it means that for every one al Qaeda fighter, the U.S.
will commit 1,000 troops and $300 million a year.
Sure, the government apparently planned the Afghanistan war before
9/11 (see this and this). And the Taliban offered to turn over Bin
Laden (see this and this). And we could have easily killed Bin Laden
in 2001 and again in 2007, but chose not to, even though that would
have saved the U.S. hundreds of billions of dollars in costs in
prosecuting the Afghanistan war. But this essay is about dollars
and cents.
Increasing the Debt Burden of a Nation Sinking In Debt
All of the spending on unnecessary wars adds up.
The U.S. is adding trillions to its debt burden to finance its
multiple wars in Iraq, Afghanistan, Yemen, etc.
Two top American economists - Carmen Reinhart and Kenneth Rogoff -
show that the more indebted a country is, with a government debt/GDP
ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds,
the more GDP growth drops materially.
Specifically, Reinhart and Rogoff write:
The relationship between government debt and real GDP growth is
weak for debt/GDP ratios below a threshold of 90 percent of GDP.
Above 90 percent, median growth rates fall by one percent, and
average growth falls considerably more. We find that the threshold
for public debt is similar in advanced and emerging economies...
Indeed, it should be obvious to anyone who looks at the issue that
deficits do matter.
A PhD economist told me:
War always causes recession. Well, if it is a very short war, then
it may stimulate the economy in the short-run. But if there is not
a quick victory and it drags on, then wars always put the nation
waging war into a recession and hurt its economy.
You know about America's unemployment problem. You may have even
heard that the U.S. may very well have suffered a permanent destruction
of jobs.
But did you know that the defense employment sector is booming?
As I pointed out in August, public sector spending - and mainly
defense spending - has accounted for virtually all of the new job
creation in the past 10 years:
The U.S. has largely been financing job creation for ten years.
Specifically, as the chief economist for Business Week, Michael
Mandel, points out, public spending has accounted for virtually all
new job creation in the past 1o years:
Private sector job growth was almost non-existent over the past ten
years.
Take a look at this horrifying chart:
Between May 1999 and May 2009, employment in the private sector
sector only rose by 1.1%, by far the lowest 10-year increase in the
post-depression period.
It's impossible to overstate how bad this is. Basically speaking,
the private sector job machine has almost completely stalled over
the past ten years. Take a look at this chart:
Over the past 10 years, the private sector has generated roughly
1.1 million additional jobs, or about 100K per year. The public
sector created about 2.4 million jobs.
But even that gives the private sector too much credit. Remember
that the private sector includes health care, social assistance,
and education, all areas which receive a lot of government support.
***
Most of the industries which had positive job growth over the past
ten years were in the HealthEdGov sector. In fact, financial job
growth was nearly nonexistent once we take out the health insurers.
Let me finish with a final chart.
Without a decade of growing government support from rising health
and education spending and soaring budget deficits, the labor market
would have been flat on its back. [120]
Raw Story argues that the U.S. is building a largely military
economy:
The use of the military-industrial complex as a quick, if dubious,
way of jump-starting the economy is nothing new, but what is amazing
is the divergence between the military economy and the civilian
economy, as shown by this New York Times chart.
In the past nine years, non-industrial production in the US has
declined by some 19 percent. It took about four years for manufacturing
to return to levels seen before the 2001 recession -- and all those
gains were wiped out in the current recession.
By contrast, military manufacturing is now 123 percent greater than
it was in 2000 -- it has more than doubled while the rest of the
manufacturing sector has been shrinking...
It's important to note the trajectory -- the military economy is
nearly three times as large, proportionally to the rest of the
economy, as it was at the beginning of the Bush administration. And
it is the only manufacturing sector showing any growth. Extrapolate
that trend, and what do you get?
The change in leadership in Washington does not appear to be abating
that trend...[121]
So most of the job creation has been by the public sector. But
because the job creation has been financed with loans from China
and private banks, trillions in unnecessary interest charges have
been incurred by the U.S.So we're running up our debt (which will
eventually decrease economic growth), but the only jobs we're
creating are military and other public sector jobs.
PhD economist Dean Baker points out that America's massive military
spending on unnecessary and unpopular wars lowers economic growth
and increases unemployment:
Defense spending means that the government is pulling away resources
from the uses determined by the market and instead using them to
buy weapons and supplies and to pay for soldiers and other military
personnel. In standard economic models, defense spending is a direct
drain on the economy, reducing efficiency, slowing growth and costing
jobs.
A few years ago, the Center for Economic and Policy Research
commissioned Global Insight, one of the leading economic modeling
firms, to project the impact of a sustained increase in defense
spending equal to 1.0 percentage point of GDP. This was roughly
equal to the cost of the Iraq War.
Global Insight's model projected that after 20 years the economy
would be about 0.6 percentage points smaller as a result of the
additional defense spending. Slower growth would imply a loss of
almost 700,000 jobs compared to a situation in which defense spending
had not been increased. Construction and manufacturing were especially
big job losers in the projections, losing 210,000 and 90,000 jobs,
respectively.
The scenario we asked Global Insight [recognized as the most
consistently accurate forecasting company in the world] to model
turned out to have vastly underestimated the increase in defense
spending associated with current policy. In the most recent quarter,
defense spending was equal to 5.6 percent of GDP. By comparison,
before the September 11th attacks, the Congressional Budget Office
projected that defense spending in 2009 would be equal to just 2.4
percent of GDP. Our post-September 11th build-up was equal to 3.2
percentage points of GDP compared to the pre-attack baseline. This
means that the Global Insight projections of job loss are far too
low...
The projected job loss from this increase in defense spending would
be close to 2 million. In other words, the standard economic models
that project job loss from efforts to stem global warming also
project that the increase in defense spending since 2000 will cost
the economy close to 2 million jobs in the long run.
The Political Economy Research Institute at the University of
Massachusetts, Amherst has also shown that non-military spending
creates more jobs than military spending.
So we're running up our debt - which will eventually decrease
economic growth - and creating many fewer jobs than if we spent the
money on non-military purposes.
But the War on Terror is Urgent for Our National Security, Isn't
It?
For those who still think that the Iraq and Afghanistan wars are
necessary to fight terrorism, remember that a leading advisor to
the U.S. military - the very hawkish and pro-war Rand Corporation
- released a study in 2008 called "How Terrorist Groups End: Lessons
for Countering al Qa'ida".
The report confirms that the war on terror is actually weakening
national security. As a press release about the study states:
"Terrorists should be perceived and described as criminals, not
holy warriors, and our analysis suggests that there is no battlefield
solution to terrorism."
Former U.S. National Security Adviser Zbigniew Brzezinski told the
Senate that the war on terror is "a mythical historical narrative".
And Newsweek has now admitted that the war on terror is wholly
unnecessary.
In fact, starting right after 9/11 -- at the latest -- the goal has
always been to create "regime change" and instability in Iraq, Iran,
Syria, Libya, Sudan, Somalia and Lebanon; the goal was never really
to destroy Al Qaeda. As American reporter Gareth Porter writes in
Asia Times:
Three weeks after the September 11, 2001, terror attacks, former
US defense secretary Donald Rumsfeld established an official military
objective of not only removing the Saddam Hussein regime by force
but overturning the regime in Iran, as well as in Syria and four
other countries in the Middle East, according to a document quoted
extensively in then-under secretary of defense for policy Douglas
Feith's recently published account of the Iraq war decisions. Feith's
account further indicates that this aggressive aim of remaking the
map of the Middle East by military force and the threat of force
was supported explicitly by the country's top military leaders.
Feith's book, War and Decision, released last month, provides
excerpts of the paper Rumsfeld sent to President George W Bush on
September 30, 2001, calling for the administration to focus not on
taking down Osama bin Laden's al-Qaeda network but on the aim of
establishing "new regimes" in a series of states...
***
General Wesley Clark, who commanded the North Atlantic Treaty
Organization bombing campaign in the Kosovo war, recalls in his
2003 book Winning Modern Wars being told by a friend in the Pentagon
in November 2001 that the list of states that Rumsfeld and deputy
secretary of defense Paul Wolfowitz wanted to take down included
Iraq, Iran, Syria, Libya, Sudan and Somalia [and Lebanon].
***
When this writer asked Feith . . . which of the six regimes on the
Clark list were included in the Rumsfeld paper, he replied, "All
of them."
***
The Defense Department guidance document made it clear that US
military aims in regard to those states would go well beyond any
ties to terrorism. The document said the Defense Department would
also seek to isolate and weaken those states and to "disrupt, damage
or destroy" their military capacities - not necessarily limited to
weapons of mass destruction (WMD)...
Rumsfeld's paper was given to the White House only two weeks after
Bush had approved a US military operation in Afghanistan directed
against bin Laden and the Taliban regime. Despite that decision,
Rumsfeld's proposal called explicitly for postponing indefinitely
US airstrikes and the use of ground forces in support of the
anti-Taliban Northern Alliance in order to try to catch bin Laden.
Instead, the Rumsfeld paper argued that the US should target states
that had supported anti-Israel forces such as Hezbollah and Hamas.
***
After the bombing of two US embassies in East Africa [in 1988] by
al-Qaeda operatives, State Department counter-terrorism official
Michael Sheehan proposed supporting the anti-Taliban Northern
Alliance in Afghanistan against bin Laden's sponsor, the Taliban
regime. However, senior US military leaders "refused to consider
it", according to a 2004 account by Richard H Shultz, Junior, a
military specialist at Tufts University.
A senior officer on the Joint Staff told State Department
counter-terrorism director Sheehan he had heard terrorist strikes
characterized more than once by colleagues as a "small price to pay
for being a superpower".
If you still believe that the war on terror is necessary, please
read this.
Torture is Bad for the Economy
For those who still think torture is a necessary evil, you might
be interested to learn that top experts in interrogation say that,
actually:
* Torture doesn't work in providing information which will keep us
safe
* Torture actually reduces our national security and creates new
terrorists
* Most of those tortured were innocent
Indeed, historians tell us that torture has been used throughout
history - not to gain information - but as a form of intimidation,
to terrorize people into obedience. In other words, at its core,
torture is a form of terrorism.
Moreover, the type of torture used by the U.S. in the last 10 years
is of a special type. Senator Levin revealed that the the U.S. used
torture techniques aimed at extracting false confessions.
McClatchy subsequently filled in some of the details:
Former senior U.S. intelligence official familiar with the interrogation
issue said that Cheney and former Defense Secretary Donald H.
Rumsfeld demanded that the interrogators find evidence of al
Qaida-Iraq collaboration...
For most of 2002 and into 2003, Cheney and Rumsfeld, especially,
were also demanding proof of the links between al Qaida and Iraq
that (former Iraqi exile leader Ahmed) Chalabi and others had told
them were there."
It was during this period that CIA interrogators waterboarded two
alleged top al Qaida detainees repeatedly Abu Zubaydah at least
83 times in August 2002 and Khalid Sheik Muhammed 183 times in March
2003 according to a newly released Justice Department document...
When people kept coming up empty, they were told by Cheney's and
Rumsfeld's people to push harder," he continued."Cheney's and
Rumsfeld's people were told repeatedly, by CIA . . . and by others,
that there wasn't any reliable intelligence that pointed to operational
ties between bin Laden and Saddam . . .
A former U.S. Army psychiatrist, Maj. Charles Burney, told Army
investigators in 2006 that interrogators at the Guantanamo Bay,
Cuba, detention facility were under "pressure" to produce evidence
of ties between al Qaida and Iraq.
"While we were there a large part of the time we were focused on
trying to establish a link between al Qaida and Iraq and we were
not successful in establishing a link between al Qaida and Iraq,"
Burney told staff of the Army Inspector General. "The more frustrated
people got in not being able to establish that link . . . there was
more and more pressure to resort to measures that might produce
more immediate results."
"I think it's obvious that the administration was scrambling then
to try to find a connection, a link (between al Qaida and Iraq),"
[Senator] Levin said in a conference call with reporters. "They
made out links where they didn't exist."
Levin recalled Cheney's assertions that a senior Iraqi intelligence
officer had met Mohammad Atta, the leader of the 9/11 hijackers,
in the Czech Republic capital of Prague just months before the
attacks on the World Trade Center and the Pentagon.
The FBI and CIA found that no such meeting occurred.
In other words, top Bush administration officials not only knowingly
lied about a non-existent connection between Al Qaida and Iraq, but
they pushed and insisted that interrogators use special torture
methods aimed at extracting false confessions to attempt to create
such a false linkage. See also this and this.
Paul Krugman eloquently summarized the truth about the type of
torture used:
Let's say this slowly: the Bush administration wanted to use 9/11
as a pretext to invade Iraq, even though Iraq had nothing to do
with 9/11. So it tortured people to make them confess to the
nonexistent link.
There's a word for this: it's evil.
But since this essay in on dollars and cents, the important point
is that terrorism is bad for the economy.
Specifically, a study by Harvard and NBER points out:
From an economic standpoint, terrorism has been described to have
four main effects (see, e.g., US Congress, Joint Economic Committee,
2002). First, the capital stock (human and physical) of a country
is reduced as a result of terrorist attacks. Second, the terrorist
threat induces higher levels of uncertainty. Third, terrorism
promotes increases in counter-terrorism expenditures, drawing
resources from productive sectors for use in security.
Fourth, terrorism is known to affect negatively specific industries
such as tourism.
The Harvard/NBER concludes:
In accordance with the predictions of the model, higher levels of
terrorist risks are associated with lower levels of net foreign
direct investment positions, even after controlling for other types
of country risks.
On average, a standard deviation increase in the terrorist risk is
associated with a fall in the net foreign direct investment position
of about 5 percent of GDP.
So the more unnecessary wars American launches, the more innocent
civilians we kill, and the more people we torture, the less foreign
investment in America, the more destruction to our capital stock,
the higher the level of uncertainty, the more counter-terrorism
expenditures and the less expenditures in more productive sectors,
and the greater the hit to tourism and some other industries.
Moreover:
Terrorism has contributed to a decline in the global economy (for
example, European Commission, 2001).
So military adventurism and torture, which increase terrorism, hurt
the world economy. And see this.
For the foregoing reasons, the military-industrial complex is ruining
the economy.
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