Lessons for a shaky US economy

Alan Greenspan, former chairman of the Federal Reserve, was the first to state that the main goal of the US war against Iraq was oil.

The revelation came four years after the invasion of Iraq, and raises doubts that the military action in Afghanistan may also have a similar reason, since the country is an important route for transporting oil and gas from the oil-rich Caspian Sea region.

Contrary to expectations, war has paralysed the economies of all three countries, namely the US, Iraq and Afghanistan.

The US economy appears worse than it has been in many years, with a sharp decline in the value of the dollar, a record deficiency in budget and trade balance, besides the property mortgage crisis, which threatens to outgrow all attempts to contain it.

This is an expected result of the high war costs borne by the US administration, which is estimated at $12 billion a month.

Although the administration asked for additional amounts to finance the forces in both countries, the potential further decline of the economy and currency prompted the congress to cut down allocated amounts to a bare minimum.

In Iraq, the catastrophic economic situation has caused the displacement of more than four million Iraqis, while oil exports are stumbling and agricultural and industrial production is declining.

Even worse is the decline in education and increase of illiteracy among Iraqis. There are more than 60,000 Iraqi students in Jordan, out of which only 20,000 children study in private schools, while the rest cannot afford to go to school, and spend their days at home or on the streets.

This simply means that there are 40,000 Iraqi children threatened by illiteracy in Jordan, and hundreds of thousands more in Syria and Iraq.

With regards to Afghanistan, it's global share of marijuana production increased from 10 per cent before the war to a current 70 per cent. Millions of Afghani farmers work in planting and importing marijuana and other drugs.

An economy based on drug trade is the only option for farmers and fighters alike, since economy is still paralysed and the infrastructure damaged six years after the war, and to make matters worse, even aid workers are not safe in Afghanistan.

These negative effects spread out to include economies around the world due to the increase in oil prices, caused by the fears surrounding the area between Iraq and Afghanistan, as well as the tension between the US and Iran.

The economic impact of Iraq and Afghanistan is negligible, but the US economy is the world's moving wheel, thus any recession there would negatively affect the whole world economy.

In one of his columns for New York Times, American writer and former supporter of the current administration Thomas Friedman urged the US to move on.

He wrote: "9/11 has made us stupid... Yes, in the wake of 9/11, we need new precautions, new barriers. But we also need our old habits and sense of openness. For me, the candidate of 9/12 is the one who will not only understand who our enemies are, but who we are."

Any recession in the US economy will have critical consequences over the whole world, and affect oil prices in particular, especially that reducing interest rates in the US lately has not revived the economy.

The US has not used Iraqi oil the way it planned to, and Iraq is not exactly thriving. It is now subject to division and strife more than ever.

This is where Friedman's call to have a realistic and practical view to amend the situation reflects the opinion of the majority of Americans, who have started feeling the heavy weight of economic depression that is threatening the whole global economy with an unbearable crisis.

The writer is a UAE economic expert.