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Winners And Losers In The American Warfare State

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    Winners And Losers In The American Warfare State

    Informed Citizens

    By Sherwood Ross

    “On my last day in Iraq,” veteran McClatchy News correspondent Leila Fadel wrote August 9th, “as on my first day in Iraq, I couldn’t see what the United States and its allies had accomplished. …I couldn’t understand what thousands of American soldiers had died for and why hundreds of thousands of Iraqis had been killed

    Quite a few oil company CEO’s and “defense” industry executives, however, do have a pretty good idea of why that war is being fought. As Michael Cherkasky, president of Kroll Inc., said a year after the Iraq invasion boosted his security firm’s profits 231 percent: “It’s the Gold Rush.” What follows is a brief look at some of the outfits that cashed in, and at the multitudes that got took.

    “Defense Earnings Continue to Soar,” Renae Merle wrote in The Washington Post on July 30, 2007. “Several of Washington’s largest defense contractors said last week that they continue to benefit from a boom in spending on the wars in Iraq and Afghanistan…” Merle added, “Profit reports from Northrop Grumman, General Dynamics and Lockheed Martin showed particularly strong results in operations in the region.” More recently, Boeing’s second-quarter earnings this year rose 17 percent, Associated Press reported, in part because of what AP called “robust defense sales.”

    But war, it turns out, is not only unhealthy for human beings, it is not uniformly good for the economy. Many sectors suffer, including non-defense employment, as a war can destroy more jobs than it creates. While the makers of warplanes may be flying high, these are “Tough Times For Commercial Aerospace,” Business Week reported July 13th. “The sector is contending with the deepening global recession, declining air traffic, capacity cuts by airlines, and reduced availability of financing for aircraft purchases.”

    The general public suffers, too. “As President Bush tried to fight the war without increasing taxes, the Iraq war has displaced private investment and/or government expenditures, including investments in infrastructure, R&D and education: they are less than they would otherwise have been,” write Joseph Stiglitz and Linda Bilmes in “The Three Trillion Dollar War”(Norton). Stiglitz holds a Nobel Prize in economics and Bilmes is former assistant secretary of the U.S. Department of Commerce. They say government money spent in Iraq does not stimulate the economy in the way that the same amounts spent at home would.

    The war has also starved countless firms for expansion bucks. “Higher borrowing costs for business since the beginning of the Iraq war are bleeding manufacturing investment,” Greg Palast wrote in “Armed Madhouse”(Plume). And when entrepreneurs---who hire so many---lack growth capital, job creation takes a real hit.

    We might recall too, the millions abroad who filled the streets to protest President Bush’s impending attack on Iraq and who have quit buying U.S. products, further reducing sales and employment. “American firms, especially those that have become icons, like McDonald’s and Coca-Cola, may also suffer, not so much from explicit boycotts as from a broader sense of dislike of all things American,” Stiglitz and Bilmes write. “America’s standing in the world has never been lower,” they say, noting that in 2007, U.S. “favorable” ratings plunged to 29 percent in Indonesia and nine percent in Turkey. “Large numbers of wealthy people in the Middle East---where the oil money and inequality put individual wealth in the billions---have shifted banking from America to elsewhere,” they say.

    Because the Iraq war crippled that country’s oil industry, output fell, supplies tightened, and, according to Palast, “World prices leaped to reflect the shortfall…” What’s more, he points out, after the Iraq invasion the Saudis withheld more than a million barrels of oil a day from the market. “The one-year 121% post-invasion jump in the price of crude, from under $30 a barrel to over $60, sucked that $120 billion windfall to the Saudis from SUV drivers and factory owners in the West.” Count the Saudis among the big winners.

    The oil spike subtracted 1.2% from the gross domestic product, “costing the USA just over one million jobs,” Palast reckoned. Stiglitz and Bilmes said the oil price spike means “American families have had to spend about 5 percent more of their income on gasoline and heating than before.” Last year, the Iraq and Afghan wars cost each American household $138 per month in taxes, they estimated. Count the Joneses among the big losers.

    Palast writes, “It has been a very good war for Big Oil---courtesy of OPEC price hikes. The five oil giants saw profits rise from $34 billion in 2002 to $81 billion in 2004…But this tsunami of black ink was nothing compared to the wave of $120 billion in profits to come in 2006: $15.6 billion for Conoco, $17.1 billion for Chevron and the Mother of All Earnings, Exxon’s $39.5 billion in 2006 on sales of $378 billion.

    Palast notes the oil firms have their own reserves whose value is tied to OPEC’s price targets, and “The rise in the price of oil after the first three years of the war boosted the value of the reserves of ExxonMobil oil alone by just over $666 billion…Chevron Oil, where Condoleezza Rice had served as a director, gained a quarter trillion dollars in value…I calculate that the top five oil operators saw their reserves rise in value by over $2.363 trillion.” Who’s surprised when Forbes reports of the ten most profitable corporations in the world five are now oil and gas companies---Exxon-Mobil, Royal Dutch Shell, BP, Chevron, and Petro-China.

    “Since the Iraq War began,” Matthew Rothschild, editor of The Progressive wrote, “aerospace and defense industry stocks have more than doubled. General Dynamics did even better than that. Its stock has tripled.” An Associated Press account published July 23rd observed: “With the military fighting two wars and Pentagon budgets on a steady upward rise, defense companies regularly posted huge gains in profits and rosier earnings forecasts during recent quarters. Even as the rest of the economy tumbled last fall, military contractors, with the federal government as their primary customer, were a relative safe haven.”

    Among the big winners are top Pentagon contractors, as ranked by WashingtonTechnology.com as of 2008. Halliburton spun off KBR in 2007 and their operations are covered later. Data was selected for typical years 2007-09.

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