War in Iraq and the US Economic Growth- History of the war in Iraq Essay Example for Free

War in Iraq and the US Economic Growth- History of the war in Iraq Essay Iraq was also known as occupation of Iraq began in 2003 march 20th led by United States. The president of US then George W. Bush, the Prime minister of United Kingdom by then Tony Blair, Prime minister of Spain by then Jose Maria Aznar, and domestic foreign supporters accused Iraq of possession of weapons of mass destruction, which was against the 1991 agreement to unconditionally give them up. This triggered one of the most historically long wars since the Vietnam War. It’s estimated that the war has caused as many deaths and resources as the Vietnam War. (BBC news 26 Nov 2007). The war is still on but key figures in the war have already been eliminated. Among them are sadaam Hussein and his sons. Impact of the War on US Economy As Wall Street reports the most recent advances of the battle, in Iraq, Economist are on the other hand worried that the war might be affecting employment, consumer confidence, and a service industry show down. According the government realized labor figures on April 4 statistics showed that economy had lost 108,000 jobs in March, more than the expected number which was 36,000. More so, the unemployment rate was steady at 5. 8% following discouragement of more people (hopes for quick war April 2003). The increase in unemployment not only affects the individuals but also the economy at large since the government invests a lot on charity in order to take care of citizens who cannot afford basic needs In addition, the crime rates are increasing at a faster rate. As manufacturers on the other hand lay off workers, there is a fall in the institute for supply management’s index for non manufacturing businesses in the service industry. This industry indicates 85% of US economic activities. Thus a fall basically means that a big percentage of economic activities are reducing. Consumer confidence has also been greatly reduced. According to study from university of Michigan consumer confidence was lowest in 9 years. With consumers hope gone people tend to do minimal buying especially of high worth assets. This brings about less money in supply and hence a slow movement of economic progress due to minimal economic activities. Economic growth has slowed in the US. This is due to the softness of the economy. Long term goals of the government to attack Iraq remain unclear. This is slowing the US economy because a large portion of money has already been injected in the war, placing other government plans to broaden the economy at a stand still. Little or no help is likely to be coming from other nations to rebuild Iraq. The Bush Administration alienated so many of its European allies with its unilateral action; it also put European bidders so far from USA government contracts for reconstruction projects. This means the only people who might benefit from such contracts are the Americans. Britons can not hence fund the Americans to do what will only benefit Americans. Financial markets are taking a dark view due to the engagement of the government in war that has brought a budget deficit. This is leaving the state money in circulation less than normal. As a result the prospective investors in stock Market cannot access enough liquidity to invest. With a country’s stock index going town, economic growth is mostly low due to the fact that many economies growth is determined partly by economic activities and financial performance. The war in Iraq might be of negative impact too. Now that uncertainties from war in Iraq have not ended and souring oil prices are trying though not yet the uncertainties might not be eliminated in a short time and the war might not be economic benefit to US. With the US government suffering a budget deficit, it might be difficult for the economy to move forward. Analyst approximated $100 billion, to rebuild and secure Iraq. Such and expenditure added to the already existing deficit will not only slow the entire economic growth of American but also drag it behind. Since the start of the Iraq war, the price of oil shot up from $37 a barrel to over 90$ a barrel. Consistent disruptions from the war have affected oil prices; however one cannot argue that the Iraq war is wholly responsible for the rise in the oil prices. Oil prices have brought negative financial status in the US by transferring approximately $124 billion from US to other oil producing companies in different counties between 2003 and 2008. (Jeannine Averssa Economics writer Tue. Nov. 13) High oil price can slow economic growth of a particular country especially by slowing the spending and rate of investment by consumers and business. This is through limiting the circulation of money. When people reduce the spending power, financial institutions like banks don’t get to lend more hence the bank loans, sale of government securities and activities economic development automatically slows down. Interest changed on money borrowed to by the US Government according report had over $850 billions. Recently the debts interests hit $9 trillion. With an economy’s money being moved out at such rates economic growth of any particular economy has to be slowed (Associated press 2007) U. S decided that it will keep its short term interests rates unchanged. The US federal reserve (Fed) said in a statement that the hesitancy of the US economic expansion appears to owe importantly to oil price premiums and other aspects of geographical uncertainties. † The fed has stressed that policy makers couldn’t assess the risks of future US economy given all the uncertainties over the Iraq situation. (Xinhua News Agency march 22, 2003). This is a dangerous report for any particular economy since the central government is responsible for giving confidential report concerning the governments’ position economically. This means the fed is genuinely foreseeing a dark if not unpredictable future. The Iraq war has also created division among US residents and between bush administrations and opposition leaders. This is being reflected on the economic growth of the country. Currently the US is divided between those who feel that the Bush administration is right, and those that totally oppose it, especially those parents whose sons died in Iraq war and those whose sons are still in Iraq. As a result of the division team spirit has been lost for the country. This is affecting the nation economically since productivity rate is low. However, Bush administration, is trying out economic recovery strategies; like conducting a highly responsible fiscal policy, like taxing the richest individuals heavily. However, economists urge that tax cuts are for more political than they are simulative. Effects in Our Economy today â€Å"People pointed out how war against Iraq may not be compensated for soon enough by other oil producing countries. This is because most members of organization of petroleum exporting countries do not have much additional production capacity. The decline in world prices for oil may not go down as people expect. † (JEANNINE 2000) The Iraq war has hence led to our economy being affected by the oil prices moving up. The hiking of oil prices, in the global economy has resulted to high commodity prices all over the world Economists will urge that many commodities that incur transportation cost in order to be sold, will raise price with a rise in oil prices. This shifts the entire living standards high without increasing the income of individuals. The war in Iraq has hence worsened humanity’s standards of living globally. War in Iraq has also reduced the funding of 3rd world countries by developed countries. Countries that received aid from US for instance have had their economies run bankrupt since the US is facing a deficit budget also. This calls for other stable economies like Japan to cost share by lending to poor countries. the intervention of these other countries brings about extra cost on their side and thus what could have been done say by Japan cannot be done simply because it used the cash to help. This is lowering the chances for innovation by technologically improved countries like Japan and generally lowering the standards of living instead of improving them. Total global energy supplies are declining yet the worlds economy cannot grow beyond its energy budget. The Iraq war has affected this negatively since the world’s civilization will decline with its energy budget. This will happen has the American President instructs his citizens to hold on. If this happens oil will be available still as it will remain in the ground. But then it will be useless as the cost of extracting it will move than the cost selling the oil itself. Conclusion Many theories and suggestions have been advanced regarding the impact of Iraq war and magnitude. Considering the many articles written different opinions aired via media and internet, yes their might be an advantage of the Iraq war to our general economy or the US economy to be more specific, but so far the war seems to have been more of a disaster than problem solving decision. Works cited JEANNINE AVERSA Cost of Iraq war could surpass $1 trillion .Report Puts Hidden war Costs at $1. 6T, AP Economics Writer Tue Nov 13, 6:21 PM ET Global Interdependence: The war in Iraq and the u. s Economy Markets buoyed by hopes for quick war,, but long term outlook is dim. Date Posted on Global Envision: April 16, 2003 Martin Wok. Chief economics correspondent. MSNBC. Updated 4:25 p. m. PT, Fri. , March. 17, 2006 I. f stone . An institute for the rest of us. Institute for policy studies. 1963 Dean Baker. The economic impact of Iraq war and higher military spending. Center for economic and policy research Washington . 2000