The spoils of war
War as an engine of economic growth? It all depends on who is doing the cost-benefit analysis, writes Faiza Rady
An anti-war protestor wears a Tony Blair mask while awaiting the prime minister's arrival at the Royal Court of Justice
(photo: Reuters)
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The year 2003 was the year of the Anglo-American war on Iraq. Launched by the superpower as a would-be crusade against Saddam Hussein's weapons of mass destruction (WMD), the war on Iraq never delivered -- despite a formidable assortment of Anglo-American troops and hi-tech arsenal.
Having failed to establish Iraq's WMD credentials, what else did the Bush administration go to war for? Among other things, the US government surely went to war to control Arab oil reserves -- an important, if not crucial, long-term objective in this era of energy resource depletion. But what about more mundane and immediate objectives: like turning the economy around before the presidential campaign starts for real, come January?
If this was the case, did the war on Iraq do anything to boost the US economy? For one, it certainly came at a staggering price tag. Following the official end of hostilities, American taxpayers had to pay a staggering $166.5 billion in reconstruction costs: $79 billion in April for Iraq (and Afghanistan), and another $87.5 billion for Iraq in October. On the average, American workers are dishing out $4 billion a month in post-war payments.
Where do the big bucks go? And how do they profit the US economy? Duly invested in Iraq, a big chunk of the $87.5 billion installment was swiftly siphoned off by the Pentagon, to the tune of $65.6 billion in military expenses. Besides personnel costs -- amounting to $17.8 billion, paid out in salaries and troop maintenance expenses -- the remainder of the Pentagon's allotment went to the coffers of big time defence contractors. Superstars like Bechtel and Halliburton, along with its subsidiary Kellog Brown & Root, effectively grabbed the lion's share of the booty.
Incidentally, Bechtel and Halliburton are both well rounded and diversified multinationals equipped to do everything under the sun. What with Pentagon "operation and maintenance costs" allotted $41.1 billion, "fuel and repair expenses" billed at $624 million, and "construction" going for $412 million, there is plenty to do for the hard-working lot.
As the former employer of US Vice-President Dick Cheney, Halliburton stands out for having particularly solid credentials. "The company is a triple header of war-time spoils," says the watchdog CorpWatch.
An oil-services outfit that also provides construction and military support services, Halliburton is well positioned to do the job.
Although Halliburton is hard-working and certainly deserves every penny it gets curtsey of the American taxpayers, the US government also deserves credit for being a friend in deed. Sensitive to the multinational's needs, the Bush administration maneuvered to spare Halliburton any undue competitive market stress.
The US government thus used a December 2001 Halliburton contract to place new orders for troop support services in Iraq, rather than open contracts to tender following the war's end in April. The beauty of Halliburton's contract is that it includes a licence to sub-contract in addition to granting the corporation a virtual monopoly over US troop servicing in Iraq. Dubbed "the mother of all contracts", Halliburton's unique kind of no- nonsense open-ended contract is also known as the Logistics Civil Augmentation Programme (LOGCAP).
While Republicans generally gloat about the merits of LOGCAP, some Democrats beg to differ. California Democrat Henry Waxman, in particular, blasted LOGCAP as a blatant case of cronyism and wartime profiteering. In devastated Iraq, profiteering has apparently become corporate standard practice -- no questions asked. Among other things, Halliburton stands accused of outrageously gouging imported fuel prices. Halliburton charges $1.59 a gallon, although the Iraqi national oil company says it can buy fuel at 98 cents a gallon.
Blasting LOGCAP as "an affront", Waxman said that "one of the unique features of the contract is that it allowed Halliburton to profit from virtually every phase of the war with Iraq." The US government, however, kept its cool and denied that the company received any form of preferential treatment.
Not one to play second fiddle to Halliburton for long, the other major US defence and construction contractor in Iraq, Bechtel, has likewise been accused of big time looting. Bechtel, which landed the coveted contract for restoring the country's shattered infrastructure -- worth an estimated one billion dollars -- has reportedly delivered very little. Eight months into the US occupation of Iraq, Bechtel has so far restored only about 10 per cent of the Daura electric power plant, reported Newsweek. Where then did the big bucks go? Nobody knows since there is no system of accountability in post-war Iraq. Hence, good money is up for grabs.
Meanwhile, Iraq's infrastructure remains in shambles despite the fact that the "reconstruction" price tag and unemployment has soared to 75 per cent. Halliburton and Bechtel, however, are making out good by all accounts.
Does this corporate success story in Iraq reflect on the US economy? And in time for the January presidential campaign sprint?
On the surface and according to growth figures, things are looking mighty good. In effect, US GDP figures spiraled out of control during the last quarter as growth reportedly hit 8.2 per cent -- the fastest growth rate for nearly two decades. The Republicans naturally cried victory. "Inflation is low. Home ownership is at a record high. Productivity is high. Factory orders, particularly for high-tech equipment, have risen over the last several months. Our strategy has set the stage for sustained growth," said the Republican National Committee.
The problem with neo-con GDP optimism is that growth figures may be seriously misleading. For one, growth does not necessarily reflect manufacturing and/or service growth because it includes government spending -- and therefore masks unemployment levels and production cutbacks. "Just as Reagan before him back in the 1980s, Bush is trying to replace the failure of capitalists to invest and spend by getting the government to do it," contends economist Michael Roberts on Znet.
The Bush administration, as we all know, has been spending like there is no tomorrow: annual US military expenditures now exceed the combined military expenditures of the world's 191 countries. In addition, the administration's subsidies for the rich in the form of generous tax cuts, to the tune of $637 billion over the next 10 years, added a big chunk to the budget deficit. The largest in US history, the budget deficit is estimated at $307 billion before Iraq.
But government spending and tax cuts for the rich have so far failed to create new jobs, or even replace lost ones. According to the president's Council of Economic Advisers the administration's tax cuts, which took effect in July, would contribute to create a total of 5.5 million jobs by the end of 2004 -- or an average of 306,000 new jobs each month. Unfortunately, the predictions of the president's advisers were just a fraction off the wall: since July, the projected job count fell short of a total of 1,259,000 jobs. "The failure of the plan is nationwide. This is the first time that there has been no positive growth in jobs for two years after a recession ended," reported the Washington- based Economic Policy Institute.
The bad news then are net job losses, production cutbacks and runaway budget deficits in 2003. All this despite the war on Iraq. Regardless, Halliburton and Bechtel made out good.
