by Gary North
Will we go to war in Iraq? By going to the United Nations in search of support for the war, President Bush moved the locus of decision-making to an international bureaucracy. Saddam Hussein immediately took advantage of this opportunity to delay the invasion. He has said that weapons inspectors may come into his country. The UN is likely to use this as a way to forestall a war that its members do not want. Bush gave Hussein one last chance, and he took it.
Uncertainty is rising. It's not clear yet whether we are going to war. War is bad for stock market performance unless the war is clearly going to be short-lived. War transfers purchasing power from private consumer markets to weapons markets.
This time, a coalition will not pay for our expenses, unlike 1991. There is no coalition. How much will this war cost? If we expect to impose a regime change, we will have to remain in Iraq to keep alive the politician who rises to the top with our help. He will know what will happen to him once we depart. Karzai is the model. The assassination strategy is a low-tech, low-cost response. There will be vengeance for cooperating with the invader that has put sanctions on the nation for a decade.
Lawrence Lindsey is President Bush's senior economic advisor. He is a free market man. But in serving as a spokesman for the Administration, he has said some highly un-capitalistic things recently. The London Telegraph (Sept. 17) reports the following.
Saddam Hussein's removal from power would be a great boost for the global economy even though war in Iraq could cost America up to £140 billion [$215+ billion], the White House has said.
Larry Lindsey, President George W Bush's economic adviser, said increased oil production in a free Iraq could drive down oil prices.
"When there is a regime change in Iraq, you could add three million to five million barrels [per day] of production to world supply," he said. "The successful prosecution of the war would be good for the economy."
But Mr. Lindsey said the bill for war could be up to four times a previous estimate by the Pentagon of 35 billion pounds. He did not provide a breakdown but the Pentagon figure included the cost of transporting and supplying troops and producing smart bombs.
Think about this economic assessment. We may be about to hike spending in the range of a quarter of a trillion dollars, not counting deaths. This low-ball estimate assumes that the Middle East doesn't explode in waves of Islamic revolutionary violence that the United States military will be called on to suppress.
Why will this be a benefit economically? Because of increased oil flow, Lindsey says. But the United States can get this increased oil flow free of charge. All the President has to do is unilaterally remove the economic sanctions that three consecutive Administrations have placed on Iraq for over a decade. We simply allow Iraq to sell to the highest bidder all of the oil it can produce. The price of oil would fall sharply, probably to under $20.
The Telegraph reports:
Now it has reserves of at least 112 billion barrels, second only to Saudi Arabia's 261 billion. But Iraq's oil production has dropped to 1.7 million barrels a day, compared to 3.5 million barrels before the Gulf war in 1991.
Mr. Lindsey is ignoring the obvious. The Administration wants the ouster of Saddam Hussein, and it is willing to spend hundreds of billions of dollars to achieve this goal. The invasion may very well drive up the price of oil because of the fear of regional de-stabilization. As to how long the battle phase will take, nobody knows. As for the loss of civilian lives due to the war itself and the economic effects of war, nobody is saying.
In an interview with the Wall Street Journal, Mr. Lindsey said the cost would not be enough to push America into recession or spark a rise in inflation.
On the contrary, removing Saddam would take away a "huge drag on global economic growth for a foreseeable time". He said: "It's hard for me to see how we have sustained economic growth in a world where terrorists are running around."
Terrorists will still be running around during and after our invasion of Iraq. Lindsey is implying that Iraq is the source of terrorism, worldwide. This, the Administration has yet to prove. Why Iran is not a larger source of terrorism is not said. Iran is not under an oil-for-food restriction. It has a lot more money to hand out than Iraq does.
If he is correct — that sustained economic growth is incompatible with terrorism — then this war is a prescription for reduced economic growth. Our invasion of Iraq will confirm Osama bin Laden's accusation that the United States is anti-Islam, pro-Israel, and that American troops will not leave the region. It will make Al-Qaeda's recruiting program that much more effective.
The name of the game is oil, and how to get it de-nationalized in Iraq. The Washington Post (Sept. 15) ran an article in which the title told all: "In Iraqi War Scenario, Oil Is Key Issue U.S. Drillers Eye Huge Petroleum Pool."
A U.S.-led ouster of Iraqi President Saddam Hussein could open a bonanza for American oil companies long banished from Iraq, scuttling oil deals between Baghdad and Russia, France and other countries, and reshuffling world petroleum markets, according to industry officials and leaders of the Iraqi opposition.
Although senior Bush administration officials say they have not begun to focus on the issues involving oil and Iraq, American and foreign oil companies have already begun maneuvering for a stake in the country's huge proven reserves of 112 billion barrels of crude oil, the largest in the world outside Saudi Arabia.
The expert cited is James Woolsey, formerly the head of the Central Intelligence Agency (as was President Bush I).
"It's pretty straightforward," said former CIA director R. James Woolsey, who has been one of the leading advocates of forcing Hussein from power. "France and Russia have oil companies and interests in Iraq. They should be told that if they are of assistance in moving Iraq toward decent government, we'll do the best we can to ensure that the new government and American companies work closely with them."
But he added: "If they throw in their lot with Saddam, it will be difficult to the point of impossible to persuade the new Iraqi government to work with them."
Better put, Iraq's post-war puppet regime will be told by its U.S. handlers that the French and the Russians must be cut out of the deal. But, so far, Russia isn't playing ball with any enthusiasm. The French never do.
Since the Persian Gulf War in 1991, companies from more than a dozen nations, including France, Russia, China, India, Italy, Vietnam and Algeria, have either reached or sought to reach agreements in principle to develop Iraqi oil fields, refurbish existing facilities or explore undeveloped tracts. Most of the deals are on hold until the lifting of U.N. sanctions.
Of course, none of this is official policy. Everything is unofficial until after the new regime is installed.
The Future of Iraq Group, a task force set up at the State Department, does not have oil on its list of issues, a department spokesman said last week. An official with the National Security Council declined to say whether oil had been discussed during consultations on Iraq that Bush has had over the past several weeks with Russian President Vladimir Putin and Western leaders.
My point, as usual, is that all is not as it appears to the general public. This war isn't mainly about the war on terrorism. It's mainly about oil.
Officials of several major firms said they were taking care to avoiding playing any role in the debate in Washington over how to proceed on Iraq. "There's no real upside for American oil companies to take a very aggressive stance at this stage. There'll be plenty of time in the future," said James Lucier, an oil analyst with Prudential Securities.
But with the end of sanctions that likely would come with Hussein's ouster, companies such as ExxonMobil and ChevronTexaco would almost assuredly play a role, industry officials said. "There's not an oil company out there that wouldn't be interested in Iraq," one analyst said.
THE MAXIM MAXIM
The Maxim gun was the first self-powered machine gun: no hand-cranking required. Invented in 1885 by Hiram Maxim, it was used most famously in the Sudan in 1898 at the battle of Omdurman, where the British lost 48 men, and the "whirling Dervishes" lost 11,000. It took six Maxim guns to accomplish this. This battle led Hilaire Belloc to write "The Modern Traveller" (1898), a poem not on the Web, but whose lines have become famous:
happens, we have got
The Maxim Gun, and they have not.
But now they do. The law of the Maxim Gun is that price competition reduces the cost of buying it, and increases the quantity demanded. The fuzzy-wuzzies of the world have Kalishnikovs these days, and the whites have got nuclear weapons — not a readily usable weapon.
The Maxim maxim is that high-tech weaponry gets cheaper, and the market for it gets larger as it gets cheaper. The effect of market-driven technology is to lower the cost of destructive weaponry. This is why Bush is obsessed with Iraq. Supposedly, Iraq has weapons of mass destruction. This may be the case, but the fact is, biological weapons are cheap to produce. We can be sure of one thing: they will get cheaper.
To imagine that information about these home-brew weapons can be bottled up and made a monopoly of one or a few nations is one of the more naive views of the modern political realm. Here is an example from 1999. It relates to that most terrifying of all weapons of mass destruction, the racially specific biological weapon. It is this weapon, not yet a reality, which offers to racial majorities hope for the future: a way to equalize the playing field with technologically and economically dominant minorities, i.e., us. This comes from Jane's, the British publishing company that specializes in weapons and war. It quotes a naive dreamer named John Eldridge, who has delusions of information controls.
14 September 1999
INADEQUATE CONTROLS FOR RACE-SPECIFIC BIOLOGICAL WEAPONS, WARNS JANE'S
Recent outcry in the UK over genetically modified foods would not have occurred if there were adequate controls and regulations in the field of genetic science. These controls must improve quickly if we are to prevent a proliferation of race-specific biological weapon ("ethnic" weapon) availability, warns John Eldridge in the new edition of Jane's Nuclear, Biological and Chemical Defence.
Eldridge notes that a number of projects are now publicly providing too much information that is useful in the construction of ethnic weapons: "Full exposure of data on both the common DNA in the human species and also its degree of variety should be subject to control". There is an urgent need to establish a common ethical consensus regarding the uses of genetic research, so that stronger legislation can be put in place.
Additionally, world-wide advances in laboratory technology mean that it will not be long before any country could theoretically develop an ethnic weapon arsenal.
Here is ethnic cleansing on the cheap. Here is a way for small terrorist groups to get even with their enemies. This topic is not much discussed because defenses against this technology seem futile. Once this genie is out of the laboratory bottle, there will be no stopping it. The problem of overpopulation will no longer be high on anyone's list. The threat of blowback — "Our people will die if theirs die" — will be removed.
This kind of high-tech research is likely to be pioneered in the West, which has the money and the science to achieve success. But then, inevitably, the information will spread.
In the London Sunday Times (November 15, 1998), a highly controversial article appeared. It has been reprinted by numerous politically incorrect Websites. It provides insight into what's afoot. The early paragraphs are eerily familiar: weapons inspections, Iraq, and the UN.
Israel Developing an Ethno-Bomb
by Uzi Mahnaimi and Marie Colvin
ISRAEL is working on a biological weapon that would harm Arabs but not Jews, according to Israeli military and western intelligence sources. The weapon, targeting victims by ethnic origin, is seen as Israel's response to Iraq's threat of chemical and biological attacks.
Yesterday Saddam Hussein, the Iraqi leader, backed away from the brink of war and agreed to resume co-operation with the inspection teams seeking his suspected chemical and biological weapons plants.
Kofi Annan, the United Nation secretary-general, said he believed Iraq had met UN requirements. As Britain and America stood by to bomb Saddam, however, Tony Blair's office said compliance must be unconditional.
The White House, which is threatening Iraq with the biggest onslaught since the Gulf war, said President Bill Clinton's advisers were assessing whether Iraq's offer was adequate. The Pentagon is ready to bomb within days.
Last week Downing Street warned Labour MPs that Saddam could be only weeks away from completing the construction of offensive biological weapons mounted on Scud missiles. Israel was hit by Scuds during the Gulf war and fears it would be the prime target.
In developing their "ethno-bomb", Israeli scientists are trying to exploit medical advances by identifying distinctive genes carried by some Arabs, then create a genetically modified bacterium or virus.
The intention is to use the ability of viruses and certain bacteria to alter the DNA inside their host's living cells. The scientists are trying to engineer deadly micro-organisms that attack only those bearing the distinctive genes.
The programme is based at the biological institute in Nes Tziyona, the main research facility for Israel's clandestine arsenal of chemical and biological weapons.
A scientist there said the task was hugely complicated because both Arabs and Jews are of semitic origin. But he added: "They have, however, succeeded in pinpointing a particular characteristic in the genetic profile of certain Arab communities, particularly the Iraqi people." The disease could be spread by spraying the organisms into the air or putting them in water supplies.
The research mirrors biological studies conducted by South African scientists during the apartheid era and revealed in testimony before the truth and reconciliation commission.
The idea of a Jewish state conducting such research has already provoked outrage in some quarters because of parallels with the genetic experiments of Dr Josef Mengele, the Nazi scientist at Auschwitz.
Dedi Zucker, a member of knesset, the Israeli parliament, denounced the research yesterday. "Morally, based on our history, and our tradition and our experience, such a weapon is monstrous and should be denied," he said.
Some experts said that although the concept of an ethnically targeted weapon was feasible, the practical aspects of creating one were enormous.
Dr Daan Goosen, head of a South African chemical and biological warfare plant, said his team was ordered in the 1980s to develop a "pigmentation weapon" to target only black people. He said the team discussed spreading a disease in beer, maize or even vaccinations but never managed to develop one.
However, a confidential Pentagon report warned last year that biological agents could be genetically engineered to produce new lethal weapons. William Cohen, the American defence secretary, revealed that he had received reports of countries working to create "certain types of pathogens that would be ethnic-specific". A senior western intelligence source confirmed last week that Israel was one of the countries Cohen had in mind.
The "ethno-bomb" claims have been given further credence in Foreign Report, a Jane's publication that closely monitors security and defence matters. It reports unnamed South African sources as saying Israeli scientists have used some of the South African research in trying to develop an "ethnic bullet" against Arabs.
It also says Israelis discovered aspects of the Arab genetic make-up by researching on "Jews of Arab origin, especially Iraqis".
The British Medical Association has become so concerned about the lethal potential of genetically based biological weapons that it has opened an investigation, which is due to report in January.
Dr Vivienne Nathanson, who organised the research, said: "With an ethnically targeted weapon, you could even hit groups within a population. The history of warfare, in which many conflicts have an ethnic factor, shows us how dangerous this could be."
Porton Down, Britain's biological defence establishment, said last week that such weapons were theoretically possible. "We have reached a point now where there is an obvious need for an international convention to control biological weapons," said a spokesman.
The story was not picked up by the Establishment Western media. The liberal Web magazine, Salon, responded within days (December 2), reporting that U.S. experts were skeptical about the story. But the story was carefully titled. The deniers denied that Israel "has developed a biological weapon that can target Arabs." ". . . American experts are skeptical that such a weapon is possible today." But the Sunday Times report did not say that Israel had developed such a weapon, only that the Israelis were working on developing one. The Salon article was filled with quotations from experts who said — with no further evidence — that they were skeptical. But some of them did admit that the project is theoretically possible. The Israelis officially said nothing.
The issue is not which nation is working on these weapons. The issue is that such weapons are conceivable. With the completion of the human genome project, such weapons will be that much easier to produce.
The Maxim maxim is permanent. All attempts to bottle up technology will fail. This is why it is so risky for any nation, but especially a nation hated by Islamic zealots, to get involved in regime changing in the Middle East.
The stock market has not moved up in response to the apparent delay of America's invasion of Iraq. This indicates that forecasters are not persuaded that Saddam Hussein has bought Iraq very much additional time.
To launch a preemptive strike in the absence of publicly displayed evidence of Iraq's near-term threat to the United States represents a return to Panama-style adventurism: Hussein = Noriega (another former client dictator of the U.S. government). If there were an immediate threat, Mr. Bush had no good reason to go to the UN to build a coalition. That he decided to appeal to the UN is evidence that there is no imminent threat. To let that debating society in on the decision-making process is to postpone action indefinitely.
If we attack Iraq despite opening the door to UN debate and weapons inspectors, this will create opportunities for foreign leaders to back off from the whole affair, which they want to do anyway. The United States and Great Britain will then become the targets for terrorist reprisals. This will cheer up the French. They know of the attitude of the British: "The wogs begin at Calais."
Rumsfeld's rule is correct: "It is easier to get into something than to get out of it." The United States military will find this true in Iraq.
War is bad for the economy because it substitutes military purchases for consumer demand. It reduces wealth. There is always a trade-off between guns and butter. When an Administration seeks both, and uses fiat money to fund both, the result is price inflation.
Once again, let me say it: war is never deflationary.
If you were a Middle East oil billionaire, what would you be thinking about doing with your money? Buy more dollars? Or would you commit some percentage to gold? I cannot imagine that war in Iraq will be good for stocks and bad for gold. I also cannot imagine that a regime change will allow a hit-and-run strategy. If we go in, we will stay in. American taxpayers will foot the bills this time.
I do not expect to see a balanced U.S. government budget in my lifetime.
Contrary to the slogan, deficits do matter.
September 30, 2002
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