Tuesday, March 11, 2008

Economic Insecurity: Stiglitz on the Three Trillion Dollar War; Its Devastating Impact & Its True Winners

Migrant Mother/Pea-Picker in the Dust Bowl, Photo by Dorothea Lange, 1936

Economic Insecurity: Stiglitz on the Three Trillion Dollar War; Its Devastating Impact & Its True Winners

Excerpts from a Democracy Now! interview with Joseph Stiglitz --

JOSEPH STIGLITZ: Well, first of all, the economy is almost surely heading into a recession. I was at the American Economic Association meetings. In the past, the probability of going into recession was fifty-fifty. The general consensus is now 75 percent probability of going into recession. But whether we go into recession or not, the real fact is that it is a major slowdown. It’s going to be one of the—I think clearly the deepest downturn in the last quarter-century. The loss of output, the difference between the actual output and our potential output, will be at least one-and-a-half trillion dollars, and that’s not money we’re talking about in this Three Trillion Dollar War. This is a serious problem. And I think at the core of this is the war. You know, in the election campaign, people said there are two big issues: the economy and the war. I think there’s one big issue, and that’s the war, because the war has been directly and indirectly having a very negative effect on the economy.
JUAN GONZALEZ: Well, could you talk about that somewhat, because you obviously go into that in your book, the impact of the enormous borrowing that occurred to finance the war at the same time that the President put through tax cuts—unheard of that we go into war and we cut taxes, rather than raise them—and also just the impact then that spread throughout the entire economy in terms of the housing crisis that we’re into now?
JOSEPH STIGLITZ: Well, this was one of the big points that came up in the joint committee hearing that we were in yesterday.
AMY GOODMAN: You testified yesterday before Congress.
JOSEPH STIGLITZ: That’s right. And this was one of the big points, that in every other war there has been what you might call shared sacrifice. Some people obviously sacrifice more, putting their lives at risk, but everybody was asked to sacrifice. This is the first time that, at the time we went into war, we actually cut taxes, rather than raised taxes. And even as we were cutting taxes, we already had a very large deficit. So that means this war has been totally financed by deficit. And that’s really been the trick that the Bush administration—it wanted people to think that there were no economic trade-offs. We could have a war for free.
JUAN GONZALEZ: And those deficits, the financing came increasingly from abroad, right?
JOSEPH STIGLITZ: Very much so, at least 40 percent from abroad. So that means that Americans will be paying those abroad interest and—the other aspect of that that’s really important to realize is that while we were saving zero, or household saving went down to zero, the government had negative saving and we were borrowing, the pools of wealth that were being created were in the Middle East, China. So when we have an economic problem, like the fact that Citibank and Merrill Lynch had to be bailed out, they had to turn to these others, to the sovereign wealth funds that were held by other countries, and that makes us more dependent on abroad.
AMY GOODMAN: Who is profiting from this war?
JOSEPH STIGLITZ: Well, actually, there are two big gainers in this war and only two: the oil companies and the defense contractors. And you see that where the pools of wealth are being created. One of the big pools of wealth are in the Middle East, the countries that are the oil exporters. We are transferring hundreds of billions of dollars from American consumers, businesses, to the oil exporters. You can look at it as simple as that.
AMY GOODMAN: Which countries?
JOSEPH STIGLITZ: Well, Saudia Arabia, Iran, Venezuela. You know, if you asked who were the countries that we would not want to help, many of them would be on the list that we have been helping.
AMY GOODMAN: So, what do you think of our headline today: President Bush helps the Axis of Evil? Iran and Venezuela, they benefit from the war in Iraq
JOSEPH STIGLITZ: They are the big beneficiary. That’s very clear. You know—
AMY GOODMAN: His Axis of Evil, I should say.
JOSEPH STIGLITZ: Exactly. And one of the things that—you know, as economists, we talk about opportunity cost, what you could have done with $3 trillion to win the hearts and minds, to advance security. One of the aspects of this—everybody talks about security. While we were focusing on weapons of mass destruction that did not exist in Iraq, another country joined the nuclear club: North Korea. And so, it shows you, you know, there’s limited resources, time and effort, and we were focusing on the wrong problem. While we were focusing on Iraq, the problems in Afghanistan got worse, and the problem of security in Afghanistan is much worse than it was five years ago. So there’s not only an economic opportunity cost; there’s a security opportunity cost.
Democracy Now! Interview w/ Joseph Stiglitz, 2-29-08

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