Starting Wars Is A Bad Idea

A blog about business and economics.
March 20 2013 12:22 PM

Norman Angell and the Case Against Launching Wars

Here's my lessons learned from the U.S. invasion of Iraq: Starting wars is a bad idea.

The classic analysis of this case is an economic one, coming from Norman Angell's 1911 book The Great Illusion. Given roughly market economies and free-ish international trade, he argued there was nothing Germany could possibly gain from conquering Europe. Workers would still have to be paid, and resources would still have to be purchased. Some particular industries—armaments industries, in particular—might gain from war, but on the whole there was no way for the German people to enrich themselves through conquest. This led him to predict—wrongly—that general European war would be averted. But his claim that launching a war would be economically ruinous was completely vindicated. And of course launching World War II was also ruinous. And the construction of postwar welfare states only makes Angell's analysis more compelling. Adding East Germany's territory and population to West Germany served important national purposes, but even though it was accomplished peacefully it proved quite costly to the West German population.


At first glance, the presence of large and economically valuable deposits of oil in the Persian Gulf might seem to change the analysis. But as John Quiggin wrote several years ago this doesn't seem to be the case:

But examples where either of these strategic ideas has been applied with success are thin on the ground to say the least. While I don’t subscribe to simple ideas of “war for oil” in relation to Iraq, it’s pretty clear that one of the many motives for going to war was the desire to put Iraq’s oil under the control of a government friendly to the US (and preferably not so friendly to rivals like France and Russia). The war has been as spectactular a failure in this respect as in many others. With the best part of a trillion dollars already spent and trillions more to come, the US is worse off in the oil market than it has ever been.
On the other side, the oil embargo of 1973 signalled the change from a market dominated by a buyer cartel to one dominated by a seller cartel. But in geopolitical terms it was a disaster. The Israeli occupation arising from the 1967 war, then only six years old, is still almost intact 35 years later (the Egyptians got the Sinai back, but not because they had any oil).
More generally, I suspect that countries wanting oil can’t do better than to buy it at the going price, and that those wanting to maximise the benefits from owning oil would be best off selling it for the same price and using the money to promote their strategic goals (or, more sensibly, investing it in projects like education).

That's right on. Not only have the $1 trillion or so dollars the United States spent in Iraq accomplished nothing useful and gotten an incredibly number of Iraqis killed, if we were seriously worried about the vulnerability of the US population to oil price shocks we clearly could have made a lot of progress on that front by spending the $1 trillion on battery research, improved buses, targeted subsidies to make hybrids more affordable, etc.


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