Monday, December 19, 2016

War in Economy: The Necessary Evil

Author: Toyon


Image Source: Googleimage
The other day I came back home early from work. My wife was 8 months pregnant. I told her to sleep early too. Our family was so happy for the upcoming baby. Everyone was having plan for the new member of the family. A new born baby was about to come and see the world. The world was supposed to give her immense gift with hope. I had a dream to take my baby within my arm; to show the sun, to show the moon. I had a dream to see how she would look like; I had a dream to hear how she would call papa for the first time. All most every day at the time of sleeping I put my ear up to my wife’s belly and tried to hear her moving and her heartbeat. Suddenly, missile came and explosion took everything. I lost my hope, my dream, my home, my wife, my unborn baby, my family. My everything has been exploded.  My baby died before she came to this earth. The war is taking everything.”
(-- Anonymous War Victim)



It is not very hard to realize how painful it is to lose family and everything. Millions of people are having stories like this. From socioeconomic perspective the cost of war is unbearable. There are thousands of research papers showing the cost of war in terms of social view point as well as economics perspective based on war for oil in Afghanistan war, Iraq war, Libya, Syria and so on. As the numbers of dead is increasing; refugees as well as internally displaced people are also uprising, and as families are being torn apart and neighborhoods are turning into war zones, ultimately, it is leading to huge social cost, economies slumped and regional economic ties to break down and fall of countries.


The beginning and the secret of Seven Sisters:

Image Source: Aljazeera
The war for oil has been begun decade ago with the emergence of Seven Sisters secret pact to control the world's oil.  From 1927 to even recent, the Seven Sisters have sought to control the balance of power in oil economy at any means. The secret alliance of Seven Sisters has supported monarchies in Iran and Saudi Arabia, opposed the creation of OPEC, creation of secret commission of oil task force of U.S, profiting from the Iran-Iraq war, leading to the ultimate destruction of Saddam Hussein and Iraq. From the report of Aljazeera(April 4, 2013) it was claimed that at the end of the 1960s, the Seven Sisters, the major oil companies, controlled 85 percent of the world's oil reserves. The new sisters have been emerged and new hunting grounds are therefore required, and the Sisters have turned their gaze towards Africa. With peak oil, wars in the Middle East, and the rise in crude prices, Africa is the oil companies' new battleground. In the Caucasus, the US and Russia are striving to control the region. The great oil game is in full swing. Whoever controls the Caucasus and its roads, controls the transport of oil from the Caspian Sea. Tbilisi, Erevan and Baku - the three capitals of the Caucasus. The oil from Baku in Azerbaijan is a strategic priority for all the major companies.


Image Source: Googleimage
Economic Effect of War:

The economic effect of war depends on the combination of before math and after math of the war period. In World Bank working paper (WPS7135, 2014) this issue has been addressed. The report showed both the direct and indirect economic effects of this war on the area --Turkey, Syria, Lebanon, Jordan, Iraq, and Egypt.  They summarized that the direct effect comes from the decline in the size and skills of Syria’s labor force due to loss of life and refugee outflows, infrastructure destruction, the trade embargo on Syria, cost of doing business increases, and a decline in productivity whereas the indirect effect captures the opportunity cost of foregone trade integration initiatives aimed at improving trade logistics and liberalizing trade in services in the region.  Table  1 shows the welfare effect of war and trade disintegration calculated based on the  global computable general-equilibrium framework.

Table 1: Welfare effects of war and Trade disintegration
Source of date: World Bank working paper (WPS7135, 2014)

Source of finance for War:

The common ways of financing war can be arranged through increasing taxation, reducing non-military spending to pay for military outlays, Government borrowing from the public through War bonds or issuance of Treasury securities (debt), Money creation etc. According to the report published by The Institute of Economics and Peace(2015) argued that The U.S. has paid for its wars either through debt (World War II, Cold War, Afghanistan/Iraq), taxation (Korean War) or inflation (Vietnam). In each case, taxpayers have been burdened, and private sector consumption and investment have been constrained as a result. They also added that the other negative effects include larger budget deficits, higher taxes, and growth above trend leading to inflation pressure and have effects into the future and regardless of the way a war is financed, the overall macroeconomic effect on the economy tends to be negative. The figure 1 shows inflationary pressure faced by U.S. government because of war.


Figure 1: Wars Boost Inflationary Pressure in U.S.
Source of data: IEP Report 2015

Spending in War and Balance of The Gun & Butter Curve :

Image Source: Googleimage
Some researchers claim that war can be beneficial if rate of return from the war project is higher than the cost of war project. In real scenario it demands to integrate the politics, international policy and so on. It is argued that War leads to higher government spending; higher employment and can therefore provide a boost to domestic demand, economic growth and help reduce unemployment (Economics blog, 2010). The scenario can be presented through the “gun & butter” model. Generally, the "guns or butter" model is used by researchers to describe how national spending should be done as part of gross domestic production (GDP). In this model a nation has two options which are: either to buy guns i.e. to invest in military or to buy butter i.e. to invest in production of goods, or a combination of both. However, no matter how the balance has been achieved the humanitarian cost should not be ignored. 



Alternative to war:

Is there any alternative to war? Will explosion or military strikes help ordinary people? Will more violence deter the use of chemical weapons, or worsen the problem? Have all other possibilities been exhausted, or are there peaceful solutions that haven't been tried? These questions remain unanswered because of several reasons.

Image Source: Googleimage
The “un” nature of United Nation, non enforcement of its international criminal court, complex policy diplomacy, restricted negotiation, and finally the colonial power to control the world are making the earth a non living place. Policy analyst Phyllis Bennis said in an interview of “Yes Magazine” that no country, not even the most powerful, has the right to act as unilateral cop. He also added that "Russia must stop and must push Iran to stop arming and funding the Syrian regime. And The U.S. must stop and must push Saudi Arabia, Qatar, Turkey, Jordan and others to stop arming and funding the opposition, including the extremist elements." Bridging peace depends on the countries. Whether they want to have a war or not! Though it results in the death of kids or harm to the environment but still if the enemy chooses to attack they attack! “World peace” is the biggest shaming world for living human of this earth!

To conclude:


Image Source: Googleimage
“I dream of a world of peace,
Where people can live a life of ease.
World where there is no difference between rich and poor,
Life being pleasant for living ever more.

I dream of a world of happiness,
Where there is no sight of selfishness.
Where each and everyone can get their needs,
And have belief in their deeds.

I dream of a world of kindness,
Where people can know that value of love is priceless.
Where people could realise that of earth we are all children,
And to have a kind heart is better for all men.

I dream of a world of loving mates,
Where people can realise all are great.
Where people can know that in this earth,
With a kind heart people must give birth.

                   I dream of a world of peace,
                    Where people can live a life of ease!”


-- (I Dream of a World of Peace, Riken Shrestha, Nepal)

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