Newspaper logo  
 
 
   Breaking Iraqi Windows Won’t Help the Economy


OTHER VOICES, OTHER VIEWS:

Breaking Iraqi Windows Won’t Help the Economy

by Sheldon Richman

As 19th-century economist Frédéric Bastiat pointed out, wealth cannot come from destruction. It may appear to do so because we are focused on a specific economic interest. But when we look at everyone concerned, we see that the benefits accruing to one company have come at the expense of others. There is no net gain.

The record-shattering bombardment of Iraq has begun, but that doesn’t mean it’s too soon to think about which American companies will get contracts to rebuild the soon-to-be devastated Arab country. According to the Washington Post, the Bush administration is “preparing what would constitute the most ambitious US rebuilding project since the aftermath of World War II.” Any time now contracts worth “hundreds of millions of dollars” will be awarded.

The usual well-connected companies were invited to bid: Bechtel Group, Halliburton Co., Fluor Corp., and more. More often than not, these companies share one of two characteristics and sometimes both: directors or officers who used to hold high-ranking positions in the defense or state departments, and former directors and officers who currently hold such positions. Just a coincidence, of course.

No one should draw any adverse conclusions from these developments. After all, the US government has to bomb Iraq and someone will have to rebuild it. Why not good loyal American companies? You cynics should be ashamed of yourselves. No one of goodwill could suggest that the Bush administration would go to war merely to help these friendly corporations prosper. Just think of it as a fringe benefit to the moral crusade about to be launched to bring peace and democracy to the Arab world. Doing well by doing good...who can complain?

While no one would suggest that the purpose of the war is the reconstruction, a few people seem to believe that the reconstruction will be good for the American economy nonetheless. At first glance it might appear that building new buildings, roads, power plants, and the rest will revitalize what now looks like a moribund U.S marketplace. Those American firms, stimulated by the lucrative contracts, will have to hire workers and buy equipment and materials. That will in turn have various ripple effects, as suppliers see their business increase and workers have new income to spend on an array of consumer goods. We might must conclude that war is the best economic stimulus of all.

But it’s not true. As a 19th-century economist, Frédéric Bastiat, pointed out, wealth cannot come from destruction. It may appear to do so because we are focused on a specific economic interest. But when we look at everyone concerned, we see that the benefits accruing to one company have come at the expense of others. There is no net gain.

Bastiat called this the “broken window fallacy” because he illustrated the idea with the fable of a shop window broken by a mischievous youth. Someone in the gathering crowd tries to look at the bright side of the incident by pointing out that when the shop owner pays for his new window, money will circulate through the town and bring new prosperity.

The fallacy, of course, is that if the shopkeeper didn’t have to buy a new window, he’d have used his money to buy something else. Instead of a window, he might have bought a suit of clothes. His spending to replace the window doesn’t enrich community. It just brings it back to the condition it was before the window was broken. There is a loss, not a gain. Bastiat’s point was that you have to consider the “unseen” effects—namely, the spending that will not occur because the window has to be replaced.

Now think of Iraq. All the money that is going to be spent rebuilding that country would have been available for other things that people want. That’s true no matter where the money comes from. If the government raises taxes, the cost to the taxpayers is obvious. If it borrows the money, that amount will also be unavailable for investment in consumer projects. If it creates money through inflation, the devalued money in our pockets will buy much less.

The Bush administration hints that the reconstruction costs could come from Iraqi oil revenues and from allies. Don’t hold your breath. The American people are not likely to get off the hook. Besides, without war and under free trade, those oil revenues would be buying products made by Americans (and others). There’s no such thing as a free lunch.


Sheldon Richman is senior fellow at The Future of Freedom Foundation in Fairfax, Va., and editor of Ideas on Liberty magazine and author of ’Ancient History’: U.S. Conduct in the Middle East since World War II and the Folly of Intervention.


Copyright © 2003 The Baltimore Chronicle and The Sentinel. All rights reserved. We invite your comments, criticisms and suggestions.

Republication or redistribution of Baltimore Chronicle and Sentinel content is expressly prohibited without their prior written consent.

This story was published on April 5, 2003.
  
APRIL 2003
LOCAL NEWS
4.4NEWS BRIEFS
4.7CALENDAR
4.28Local Activists March to DC
4.19 The City's Neighborhoods Have Become the Poor Stepchildren
4.5 The State of Giving in Maryland 2002
4.5 No Sports Story This Time, and Here’s Why
4.4 City to Celebrate 175th Anniversary of Railroading
LETTERS
4.4 Letters
OPEN LETTERS:
4.4Open Letter to U.S. District Court Judge J. Frederick Motz
3.21Open Letter to The Sun
3.19An Open Letter to Americans from a Concerned German
ART & ENTERTAINMENT
4.5New Book Sniffs Out Best Places to Walk Your Dog in Baltimore Region
4.4Fear, Danger, and Bravery: A Young Fighter-Pilot's Memoir of the Vietnam Experience
NEWS MEDIA CRITIQUE
4.14Who's Paying for those Embedded Journalists?
4.4Major Broadcasting Company Sponsors ‘Patriotic Rallies’
4.4Fla. Court Rules It’s Legal for Press to Lie
SPEAKING OUT
4.10EDITORIAL: Nuremburg Principles for Others--But Not for Us?
4.29Investigative Journalist Robert Dreyfuss To Assess Risks to Activists during this Anti-Terror Age
4.11Softly, Softly: War in Black, White, and Grey
4.10On Getting Inspired (and Snubbed) by Ralph Nader
4.9Q & A with Greg Palast
4.5Words from an Iraqi Just Before the Attack
4.5The Weapons of Greatness
4.5The War President Is Waging a Multi-Faceted Battle on the Domestic Front
4.5Lessons in Foreign Policy from the Islands of Hawaii
4.5Breaking Iraqi Windows Won’t Help the Economy
4.4A Season of Protests
4.4Rumsfeld Should Resign For the Good of Our Democracy
4.4Rep. Conyers Says the US Needs a Regime Change
4.4Phony conservatives wage war on the real ones
3.19Progressive and Neo-Conservative Journalists Face Off on Iraq
NATION & WORLD
4.8 Bush's Medicare proposal forces seniors to switch to private health insurance for a meaningful drug benefit
4.5 Offshore Activities Gave ‘Lifeblood’ to Enron
4.4 Charge It: The Growing Trend of Paying Taxes with Credit Cards
4.4 Black Flags
4.4 Survey Declares Two-Thirds of US Pension Plans ‘Underfunded’
4.4 After Iraq, What? Can the US Occupy and Police the Whole World?
4.4 Boycott the French?
3.13 The Administration Plays "Russian Roulette" With Our Economy
FROM OTHER SITES
  SCREED brings you news the mainstream media ‘ignores’
  Websites We Like!
  Analysis & Perspective

Public Service Ads: