When this was not met, a formal declaration of war against Iraq was made on March 20, with the support of Great Britain. Bush has also argued that Hussein refused to conform to the policies on human rights, and terroristactivity following the first Gulf War in the early 1990s. A large amount of criticism has been made of the US for declaring war despite a lack of support from the UN and other countries. The subsequent failure to locate WMDs and the high death tolls and civilian casualties in the region have led others to suggest that the US invaded Iraq as part of a longer plan to consolidate oil power in theMiddle East.
Geopolitical Risk and Market Psychology
Experts say some of the gravest economic effects of the wars in Iraq and Afghanistan are also among the hardest to define quantitatively. Markets build assessments of financial and geopolitical risk into their pricing of just about everything. To the extent that political unrest in Iraq threatens the stability of Middle Eastern and globalmarkets more generally, it also has a broad, though somewhat ambiguous, dampening effect on asset prices. Yale economist William D. Nordhaus outlined the plethora of ways different fallout scenarios from the Iraq war could weigh on the global economy in a December 2002 article in the New York Review of Books. Though Nordhaus quotes cost estimates that have now been surpassed, his general outline offallout scenarios remains viable. They include “prolonged conflict [in Iraq]; adverse impacts on oil markets; escalation of war by Israel; terrorist acts around the world; heavy occupation and peacekeeping costs; burdensome reconstruction costs and nation-building; costly humanitarian
assistance; shocks to the overall U.S. economy; and the use of weapons of mass destruction.” Add to that list thepossibility of conflict with Iran, which many experts say has been exacerbated by U.S. involvement in Iraq; the possibility of conflict between Turkey and Iraqi Kurdistan, which would threaten lucrative oil production in northern Iraq; and the opportunity cost that an overwhelming U.S. foreign policy focus on Iraq could spell if it delays the resolution of conflicts in other regions.
Inaddition, experts comment on the psychological toll involvement in Iraq has taken on the United States, and specifically the U.S. economy. In a recent essay in Newsweek International, Fareed Zakaria notes that worries spawned in part from U.S. involvement in Iraq have undermined what was previously an “open and expansive” U.S. attitude toward foreign policy and economics. Zakaria says the United Stateshas become a nation consumed by fear and pessimism. He says this fear has led to protectionist policies on trade, immigration, and markets, which in turn threaten the future of the U.S. economy
Direct Economic Impact of the War
Apart from abstract questions about whether war spending is helpful or hurtful, economists also debate the specific economic impact of the current wars in Iraq andAfghanistan. Whether one estimates the total long-term cost of the wars at $2.4 trillion or $3.5 trillion—the estimates of the CBO and the congressional Democrats on the Joint Economic Committee—experts debate precisely what direct impact this expenditure would have on the U.S. economy. The analysis differs starkly depending whose numbers you use. If the CBO’s prediction is correct that the wars...