By Christina Cathcart/Accent editor
The promise of a war on Iraq has left a bitter aftertaste on the palette of many capitalists and economists alike for months. Now that the conflict has begun, they’re holding onto their assets while wondering the same thing: what’s going to happen overseas and how will this affect the economy in the United States? Associate economics professor John Harter said although many can make educated guesses, no one can really predict what’s going to happen to the U.S. economy.
“It’s not a hard science where you’d flip this lever and something will happen: It’s sort of an art and a lot of guesswork,” Harter said. “Just like with history, you don’t know the full story until years later.”
Consequently, history has to serve as a reference for understanding the present. Harter notes that like previous overseas conflicts such as the first Gulf War and the Vietnam War, war has different effects on the economy.
“If a war starts in a recession, then industries have to replace the bullets, tanks and whatnot. The industries have to gear up and get people to work there, in the defense industry particularly. This can help get you out of a recession,” Harter said.
“If you’re not in a recession, all war is going to be doing is taking people from other parts of the economy. All this is going to do is cause inflation.”
Harter said that it is difficult to predict what the economic outcome will be in today’s conflict.
“With this war, since we didn’t know where it (the ecomony) was when we started, it’s going to be hard to tell what the effects will be.”
Uncertainty has kept many from investing in the last few months, Harter said.
“There have been a lot of people who have been waiting on this war because they didn’t know what was going to happen. Particularly in the stock market, people aren’t sure what’s going to happen. If the war ends quickly, it likely will go up,” Harter said.
The stock market is only a piece of what makes the economy healthy or haggard: the Gross National Product and corporate profits are also considered.
Even the combination of these components fail, however, to measure the quality of life of the general population, according to associate sociology professor Paul Paolucci. He argues the middle class has actually been in a recession since the 1970s.
“It doesn’t make sense to say when the upper one percent is doing well that the economy is doing well,” Paolucci said. “Now what’s happened is that profits have run out, Internet companies have gone bankrupt and now, all of a sudden, the recession is ‘discovered.’
“A recession has already been going on for a long time for a lot of middle class and working class people.”
According to Paolucci, the middle-class’ economy will not improve in the long term just because of the conflict overseas.
“In the long run, there are no durable goods produced for war. There are no long-term jobs being created unless you put yourself on a permanent wartime economy,” Paolucci said. “I would think the Bush administration would have no problem with that, looking at who the people in that administration are: oilmen and defense contractors.
“I do not believe that the recessionary period we’re in is intentionally trying to be solved by the war, but I think they’re hoping it will give the economy a kick-start.”