War and the Economy

The economy continues to slump, and business commentators point to fears of war as the cause of depressed stock prices and lower consumer confidence. This must be disconcerting to Marxist theorists, who claim that all wars are started by capitalists seeking profits. True, some parts of the economy will benefit from war—munitions, supplies and military equipment will have to be replaced. Domestic oil producers in Texas and other states will also be enriched if oil imports are cut because of the war. Despite European conspiracy theories, however, there is little evidence that this war is about seizing control of Iraqi oil fields for American oil companies.



The general view of the business community is that war is bad for business. Business executives fear uncertainty. Will it be a long war or a short one? What will it cost? What will be its impact on taxes and inflation? Will oil prices go up? Will it cause unrest in other countries, making American products and American investments unwelcome? What impact will it have on consumer spending? Will it increase terrorism? These are questions the Bush administration prefers to overlook but that the business community cannot afford to ignore.

The Bush administration hopes that the stock market will bounce back after a quick victory, as it did after the first Persian Gulf war. But it will take more than a quick victory to solve the problems of this economy. Moreover, the cost of this war will be much higher than that of the first gulf war. The White House refuses to give an estimate for the cost of the war, but some analysts put the figure at $95 billion or more. There will also be the protracted cost of occupying and rebuilding Iraq.

The war is bad medicine for a sick economy. The terrorist attacks of Sept. 11, 2001, devastated the travel and tourist industries, but they also inflicted damage on what was already a faltering economy. The dot-com bubble, cooked books, exuberant expectations fed by compromised analysts and a willingness to mortgage the future for current spending—all these had artificially pumped up an economy that seemed destined to grow forever. When the bottom finally fell out, panic set in. What is needed is a carefully crafted economic recovery package, not the uncertainty of war.

With equipment purchases down because of factory overcapacity, what has so far kept the economy going has been consumer spending. But now that troops have been called up and shipped overseas, consumers are becoming nervous. Unemployment has reached a high of 5.8 percent, which makes those with jobs worry about the possibility of layoffs. Consumers are getting skittish; a cutback in consumer spending could send a second shock through our weak economy.

The administration’s domestic program has done nothing to alleviate these fears. Talk of compassionate conservatism makes for good sound bites, but where are the programs? Faith-based initiatives are fine until they become a cover for dumping the poor on the churches’ doorsteps. More tax cuts for wealthy investors are not what is needed. Faced with falling revenues, state and local governments are cutting spending for education, health care, public transit, social services and law enforcement at a time when there is a need to do more, not less. Countercyclical revenue-sharing, not cuts in spending, is what is needed.

most disconcerting to the business community and to people like Federal Reserve Chairman Alan Greenspan are the huge federal deficits we will soon be facing. Without President Bush’s tax cuts and war costs, the Congressional Budget Office projects a $246 billion deficit for 2003. When tax and spending proposals (but not war) are added, the deficit grows to $287 billion this year and $338 billion in 2004, with deficits continuing on into the foreseeable future, when the baby boomers reach retirement. This is a dramatic reversal of the budget surpluses of the Clinton administration. Who would have thought that Republicans would become the party of fiscal irresponsibility, making the Democrats look good, if only by comparison?

Pope John Paul II has made a strong case for the illegality and immorality of a pre-emptive war against Iraq. Both Wall Street and Main Street have made a strong case for the economic risks of war. But none of this appears to be getting through to the White House. Even without the impending war, the Bush domestic program fails to deal with the economic problems we face as a nation. Catholic social teaching points toward the values we as a nation need to emphasize: the dignity of the human person, support for families and community participation, stress on rights and responsibilities, concern for the poor and vulnerable, the dignity and rights of workers and care for God’s creation. These are all being lost as we prepare for war.

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