The Effects of War on the U.S. Economy

3070 WordsMar 18, 201113 Pages
The Effect of War on the U.S. Economy Over the past two centuries, America has seen her share of wars. Wars that have affected every aspect of her citizens’ lives, perhaps most profoundly of all have been the effects that our economy encounters in times of turmoil. From employment to credit and financial markets to the price of much needed commodities, no aspect of our economy can be said to remain unchanged during any given conflict. With the war in the Middle East entering its seventh year and past debt from World Wars I & II still remaining on the national deficits’ books, what does this mean for our economy? Economists have drawn different conclusions on topics such as: 1. The economic cost of War on the economy 2. The economic…show more content…
In a revealing article by George Perry (2001) the author discusses the economic impact that a disruption in the oil supplies would have on world oil prices. He states “Currently 28 percent of the world's crude oil comes from the Organization of Arab Petroleum Exporting Countries (OAPEC) consisting of Arab Muslim nations, some of which are not part of the OPEC cartel. The governing regimes in all these countries are at some risk [due to the war on terrorism].” He goes on to state that in a worst case scenario the economic consequences of oil supply disruption would be “oil prices rise to $161 per barrel driving gasoline price to $4.84 per gallon. The increase in the nation's bill for products of crude oil rises by about 10 percent of GDP, which adds perhaps 15 percent to the inflation rate in the first year. And the recession is the steepest and deepest of the postwar period, with GDP declining nearly 5 percent the first year.” The immediate economic impact of the Iraq war has been to cause uncertainty in the direction that the U.S. economy will take. In a recent USA Today article, Polya Lesova sites the record high cost of crude oil at $91.86 per barrel as a precursor to an impending crisis. “An unexpected drop in U.S. stockpiles has added to ongoing concern that supply from the Middle East may be disrupted." Economists such as Stiglitz believe that there are two reasons the Iraq war has significantly impacted global oil prices; 1) it has added significantly to
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