Consequences of the Iraq-Afghan War on the U.S. Economy
Consequences of Iraq Afghan War on US Economy
Introduction
Nearly every government that goes to war underestimates its duration, neglects to tally all the costs, and overestimates the political objectives that can be accomplished by the use of brute force.
The huge size of the military operation in World War II and the largely debt-dependent financing method resulted in publicly held gross debt reaching 120% of GDP and the end of excess capacity. The political will required for this to occur could only have happened in the face of the enormous urgency and the size of the existential threat. In this sense, the main contribution of the war was the creation of a ‘necessary’ existential threat to enable the political will for the government to spend over 37% of GDP on military outlays for the last three years of the war. This removed excess capacity and enabled previously unemployed people to enter the workforce. However, this was arguably already happening prior to the war when the economy was on a growth trend from 1933 to 1937 which was supported by New Deal spending that averaged a much lower 15.4% of GDP with unemployment 10% lower in 1940 than in 1933.
One of the positive lasting effects from WWII was a more even distribution of wealth. WWII started a trend that would last to the end of the Vietnam War. It can be argued that this reallocation of income created the ideal conditions for the formation of an advanced consumer economy. Expert opinion varies wildly on the relevance of U.S. war spending in Iraq and Afghanistan to the health of the U.S. economy. At the most basic level, economists disagree whether these wars will have a positive or negative long-term economic impact. Total military spending (including spending on support and operations inside Iraq and Afghanistan, as well as operations tied to the “Global War on Terrorism,” all of which are budgeted separately from the U.S. defense budget) remains relatively modest compared to historical levels.
Introduction
Nearly every government that goes to war underestimates its duration, neglects to tally all the costs, and overestimates the political objectives that can be accomplished by the use of brute force.
The huge size of the military operation in World War II and the largely debt-dependent financing method resulted in publicly held gross debt reaching 120% of GDP and the end of excess capacity. The political will required for this to occur could only have happened in the face of the enormous urgency and the size of the existential threat. In this sense, the main contribution of the war was the creation of a ‘necessary’ existential threat to enable the political will for the government to spend over 37% of GDP on military outlays for the last three years of the war. This removed excess capacity and enabled previously unemployed people to enter the workforce. However, this was arguably already happening prior to the war when the economy was on a growth trend from 1933 to 1937 which was supported by New Deal spending that averaged a much lower 15.4% of GDP with unemployment 10% lower in 1940 than in 1933.
One of the positive lasting effects from WWII was a more even distribution of wealth. WWII started a trend that would last to the end of the Vietnam War. It can be argued that this reallocation of income created the ideal conditions for the formation of an advanced consumer economy. Expert opinion varies wildly on the relevance of U.S. war spending in Iraq and Afghanistan to the health of the U.S. economy. At the most basic level, economists disagree whether these wars will have a positive or negative long-term economic impact. Total military spending (including spending on support and operations inside Iraq and Afghanistan, as well as operations tied to the “Global War on Terrorism,” all of which are budgeted separately from the U.S. defense budget) remains relatively modest compared to historical levels.
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