Iraq War and Economy



This research paper focuses on how the American economy has been affected by the war on Iraq. America alleged that Iraq possessed weapons of mass destruction (WMD), which could be used against American interests and the interests of its allies, and thus declared war in early 2003. This paper will explore how some specific dimensions of the financial system of the country were affected by choosing the military option.


America is not only incurring direct costs from the conflict, but feared attacks on the homeland are also adversely affecting the economy. However, some optimists do expect that the country’s economy will rise to the challenge.

Direct cost of war

Unlike in the Gulf War, this time around the US was largely the sole financier of the operation and spent almost as much as $100 billion for military preparation and the war. (LaFranchi).

The cost incurred during war preparation was massive. Transporting military equipment to the other side of the planet in addition to two hundred and fifty million troops resulted in an expense of approximately $13 billion. And the monthly cost of maintaining this force is a whopping $9 billion. A “shock and awe” war strategy raised the total bill several notches higher (Stark).

Equipment costs are as follows: $55 bullets; million-dollar cruise missiles; $4 billion aircraft carriers and $50 million jets on board (Stark): The economy was bound to take a beating.

Everyday costs include supplying fuel, delivering foodstuff, and building laundry facilities for the soldiers in the region (Stark).

The cost rose further after Iraq was occupied, and will continue to rise depending upon the duration of the occupation. Bringing peace to Iraq is more expensive than fighting against it as it requires more inflow of troops, and it may take years to reconstruct the devastated infrastructure and restore the war ravaged population with humanitarian aid (Stark).

However, some believe it to be a small total as compared to the aggregate bulk of the US economy (Francis).

Indirect cost of war

Constant fear of surprise attacks, maybe of higher magnitude than 9/11, is not making life any easier for the general population.

The stock market has been especially vulnerable to perceptions of how long the war is going to last (Stark).

The airlines industry has been one of the biggest victims. Delta and American Airlines have cut down on the number of flights and Northwest and Continental have sacked over six thousand employees. In spite of the airline industry’s insistence that the government provide financial relief, lest some airlines go bankrupt, there have been no commitments from Washington. (Stark).

Backlash on the economy

Gas prices rose up sharply, stock prices plummeted, consumers and businesses went into a state of paralysis, and finally widespread unemployment is adding to the ever-increasing burden on Americans. The war and stringent homeland security measures are adding up to a $250 billion dollar deficit. (Stark)

Some believe that certain countries can be influenced into providing clandestine assistance to America during the war. Experts also believe that removing Iraq from the rogue state list and facilitating its full participation in the international energy market would lower oil prices and as a result positively affect the global economy and certainly the US economy (LaFranchi).

However, “Events such as casualty-heavy urban fighting, a failure to take out Hussein, or a desperate Hussein successfully sending missiles or biological weapons into Israel or Saudi Arabia would almost certainly drag down the world economy” (LaFranchi, 2002) and the economy of the sole superpower as well. This has not happened, but fingers all over the world are crossed for other surprises.


If the conflict prolongs, the economy will certainly go into recession. A quick resolution would somewhat restore investors” confidence. However, not all analysts agree on this. “Steadily rising unemployment, mounting consumer debt loads, a corporate sector that is still struggling to maintain growth, and lingering worries over other global hotspots like North Korea will still likely keep the economy subdued in the months to come” (Valenti).



LaFranchi, Howard. Iraq war to carry a high tab. Accessed from World Wide Web:

Francis, David R. The Price of War and Peace for US Economy. Accessed from World Wide Web.

Stark, Betsy. War’s economic impact. The Prospect of a Long War Threatens the Economy’s Health. Accessed from World Wide Web:

Valenti, Catherine. Weighing the War. Even With Prospect of Quick Conflict, Worries Hit U.S. Economy, Markets. Accessed from World Wide Web:

Stark, Betsy. Tallying the Cost of war. Billions For War Effort Add to Economic Strain of Deficits, Tax Cuts. Accessed from World Wide Web:

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