the eco of war

The United States Economy is being negatively impacted by the prospect of war with Iraq. Many times uncertainty about the future has an even more negative effect on the economy than being involved in the actual war. This seems to be the case with the United States as we continue to anticipate a change in our country’s status. The American people are reluctant to spend money, particularly in regards to high ticket items such as houses and cars, when they are not sure of their potential earnings in a wartime climate. Even Alan Greenspan cautions the Senate Banking Committee that the potential war against Iraq is “the single biggest threat to economic health”. Ironically, as governments global spending goes up when the prospect of war looms, the individual tends to curb their spending. When considering the possible scenarios regarding a war with Iraq which include a quick war that does not impact oil prices, a long, drawn-out war with sends oil prices way up, and doing nothing but talking about the possibility of a war, the most negative impact for both the US economy and overall global economics is the prospect of neither a war, nor peace and continuing discussions with no end in sight.

Oil prices would probably go up when the war with Iraq began but much depends upon how OPEC members react. If they choose to cut their output, prices will initially rise but eventually stabilize at an acceptable rate of around $40.00 a barrel. If the OPEC members choose to flood the market with crude oil which would create a surplus, prices of oil would be deflated. Saudi Arabia and the entire Gulf region has been jolted by the events of September 11. Many countries have been reluctant to invest in the Arab countries and have curtailed their lending in regards to most investment activities in the area. The economy of the Arab nations has been nearly frozen since the attacks on the World Trade Centers. Since the economy of the Gulf region is already being affected by this reluctance to invest any money in the area, and because of the instability caused by the current political turmoil in Iraq, the most likely prospect would be that the OPEC members would adjust their output to accommodate the change in Iraq’s production. This would keep the global price of oil fairly stable.

In the long term, if the Iraqi regime is changed by the war and Saddam Hussein is no longer in power, the embargo which has been imposed on Iraq could be lifted could be lifted and Iraq would be able to eventually return to fully to the oil market. This would help to stabilize the price of oil which would lead to economic stabilization for the United States economy and eventually a stable world economy. The question in this scenario which would affect the length of time it would take to have an acceptable, stable price set for crude oil, remains with the current Iraqi government. There is a very real possibility that the Iraqis will choose to blow up their own oil fields. This would have far-reaching implications for the global economy with developing countries, who are much more dependent on Gulf oil than the United States, suffering the most.

The United States is the world’s largest economy. For this reason they have a real, vested interest in seeing the economies of individual countries prosper which would help to continue global economic development. We can give the economy a boost by insuring that the political conditions in the Arab countries become stable but this stability can only be achieved by changing Iraq’s regime. This means ridding Iraq of Hussein and to do that, we will have to go to war. To have our government seem indecisive about initiating a war with Iraq is negatively impacting both our economy and the global economy.

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