The Costs of War in Iraq Jayati Ghosh

It is no secret that the occupying powers in Iraq have destroyed the country’s infrastructure. The output of Iraq’s national electrical grid is lower than it was prior to the invasion. The average urban Iraqi household has electricity for only half the day at best. Even in the capital Baghdad, there is electricity for no more than six hours a day.

Safe water supply – once available to all of Iraq’s population – is now accessible by only a tiny proportion of the country 26 million people, and the majority of the population is forced to buy water at exorbitant rates. Roads, bridges, rail tracks remain shattered and unusable, destroying even the most basic transport and communication facilities in a country that was once among the most well-networked in the Middle East.

Even oil production – the revenues from which the US planned to use to finance most of the reconstruction – has been so badly affected by the wartime attacks and subsequent sabotage that the level remains substantially below the levels achieved pre-invasion even during the most oppressive sanctions.

This is the country for which George Bush had declared, in the heady days of apparent victory just after the invasion, that the US would build the best infrastructure of the region. Nearly three years afterwards, the much-hyped reconstruction has barely taken off. Essential services have been very slow in coming back on line and roughly half the money earmarked for reconstruction has been diverted into the military effort against the insurgency.

And now, according to a recent report in the Washington Post (2 January 2006) the Bush administration has decided to abandon reconstruction altogether. It has declared that it will not be adding any more funds to the paltry $18.4 billion it has allocated for reconstruction since April 2003. General William McCoy, the American commander overseeing construction projects, has been quoted as saying that US financing of reconstruction was never meant to be more than a “jump-start … The US never intended to completely rebuild Iraq.”

So now the enormous task of reconstruction and recovery from the enormous physical damage wrought by the occupiers is to be left entirely to the quisling Iraqi government and the handful of NGOs that still dare to work in the country. This decision probably reflects the general tendency apparent in the Bush administration, to lessen its commitment to Iraq because of domestic anti-war pressures.

But it is also because the US government is now realizing that the war in Iraq has done more than destroy both material and social life in what used to be a modern country. It has also been much more expensive than expected for the United States itself. A recent study by Linda Bilmes and Joseph Stiglitz (”The economic costs of the Iraq War: An appraisal three years after the beginning of the conflict”, available at www.josephstiglitz.com) finds that both previous and current estimates of the costs of the war are far below what is likely to be the reality.

The current official estimate of the direct costs of the Iraq, by the Congressional Budget Office, place it in the range of $500 bilion. But Bilmes and Stiglitz point out that this underestimates the actual costs by a wide margin. They use current and expected troop deployment to make a reasonable projection of the likely costs.

The direct budgetary costs to the US government of the Iraq war include current and likely future spending on combat and support operations; medical care costs of returning injured veterans, including those with brain injuries (which are more expensive to treat) ; disability pay; costs of demobilisation; increased capital spending for defence; and interest payments on debt. Looking purely at these direct budgetary costs, they estimate that the total cost of the Iraq war to be in the range of $750 billion to $1.1 trillion, assuming that the US begins to withdraw troops in 2006 and maintains a diminishing presence in Iraq for the next five years.

But of course these are only part of the costs to the US economy as a whole. There are the indirect or opportunity costs of the war, which include the economic cost of the National Guard and Reserve forces, who are not available to do the work they are supposed to (which became starkly evident during the recent floods that affected New Orleans). The also include other economic costs: of military fatalities; of contractor facilities; of the seriously injured; of accelerated depreciation of military hardware.

However, the macroeconomic costs may even be several times larger. Stiglitz and Bilmer point to at least three major sources of macroeconomic consequences: the increase in the price of oil; the increase in defence expenditures; and the increased insecurity that has followed from the way that the war has been pursued. They suggest that these costs are very large, and possibly even a multiple of the direct and other economic costs. On this basis, they estimate that the total economic costs of the war, including direct costs and macroeconomic costs, lie between $1 and $2 trillion.

This is clearly very far from the Bush administration’s own projections of the costs of war, which were admittedly very conservative. But even the ostriches in the White House will find it hard to keep ignoring the mounting budgetary and other costs. And internal political opposition to the war will continue to grow not only because of the body bags being flown into the US at an accelerating rate, but because the costs to the US economy are simply so staggering.

This is why the US is behaving as such an inefficient imperialist in Iraq, making the most basic blunder of destroying the conditions of life in the occupied country and then walking away from the minimal responsibility of undoing the damage. Clearly, this level of callous incompetence will rebound upon the occupier, as is happening. The tragedy is that it also means that Iraq continues to be a living hell for most of its citizens.