Iraq war and the recession

Is the Iraq War the reason the U.S. economy is heading into recession?

That’s the reason put forward by Nobel-prize winning economist Joseph Stiglitz.

Stiglitz, once the chief economist at the World Bank and now a professor at Columbia University, detailed his view in a full hour interview on Pacifica Radio’s Democracy Now Feb. 29. He and Linda Bilmes of Harvard’s Kennedy School of Government were on the show to promote their newly released book, “The Three Trillion Dollar War.”

Stiglitz and Bilmes estimate that the total cost of the war is $3.3 trillion, compared with the $50 billion to $60 billion the Bush administration said would be the total cost at the time the war was launched. Today, the White House estimates the total cost at $500 billion.

Stiglitz says that the Iraq War is now the second-most expensive in U.S. history after World War II and the second-longest after Vietnam. No one disputes this.

His view is that the Iraq War is a hidden cause of the current credit crisis. He says that the Federal Reserve responded to the massive financial drain of the war by flooding the economy with cheap credit. That led to a housing bubble, which is now collapsing and pulling the economy down into a recession.

This view has an appeal for those who are against the war and who know in their bones that the war is not good for Iraq and not good for the people of the U.S. And while it is true that the costs of the war are outrageous—a small fraction of that $3.3 trillion could have built quality housing for everyone in New Orleans, for example—Stiglitz and Bilmes have exposed only a part of the beast behind the economic downturn while ignoring the whole beast.

Perhaps Professor Stiglitz’s other new book is helpful in understanding his agenda. That book is titled “Making Globalization Work.” Globalization is the current codeword used by academics and the media for imperialism, the kind of imperialism that V.I. Lenin described as the ultimate stage of capitalism.

Stiglitz’s report on the $3.3 trillion war isn’t meant to expose the core of the problem. It focuses on the failure of the war to advance “globalization.” In fact, he deliberately throws up smoke by claiming the one to gain from the war is not Big Oil. Instead he asserts that the war has “moved wealth away from the U.S. and towards places like, say, Abu Dhabi” because the war has driven oil prices from $25 a barrel when it started to over $100 a barrel today.

That’s a straight coverup. He could more honestly say that Big Oil has been the primary winner of the Iraq War. ExxonMobil reported on Feb. 1 the largest profits ever recorded by a U.S. company, $40.6 billion in 2007. ExxonMobil is 100 percent U.S. owned and controlled.

As for the current turn toward a recession, the war is certainly a major factor in the downturn. But what about the subprime credit crisis? Karl Marx in “Capital” showed that capitalist crises usually show up first in the credit business or the stock market. This makes it appear that credit or banking or stock market speculation is the reason for the crisis.

To many, the subprime credit crisis and the housing bubble appear to be the cause of the downturn. But it is actually a reflection of a crisis in capitalist production.

The stock market and the credit market are the most sensitive barometers of capitalism and they reflect exactly all the fluctuations and changes that take place in capitalist production. The credit crisis is, in reality, a consequence of a production crisis.

Capitalist production is not for direct use. Capitalist commodities are produced in order to make a profit. Profits are all that matter to the capitalists. The crisis comes when the capitalist fails to make a “normal” profit.

What Stiglitz and Bilmes leave out is that it is a crisis of capitalist production that’s turning the economy toward a recession or possibly worse. And the only way to stop it is to get rid of capitalism.