Joseph Stiglitz on How the Iraq War Ruined the Economy
A graduate of Amherst College, Joseph E. Stiglitz received his PHD from MIT in 1967, became a full professor at Yale in 1970, and in 1979 was awarded the John Bates Clark Award, given biennially by the American Economic Association to the economist under 40 who has made the most significant contribution to the field. He has taught at Princeton, Stanford, MIT and was the Drummond Professor and a fellow of All Souls College, Oxford. He is now University Professor at Columbia University in New York and Chair of Columbia University's Committee on Global Thought. He is also the co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia. Stiglitz helped create a new branch of economics, "The Economics of Information," exploring the consequences of information asymmetries and pioneering such pivotal concepts as adverse selection and moral hazard, which have now become standard tools not only of theorists, but of policy analysts. In 2001, he was awarded the Nobel Prize in economics for his analyses of markets with asymmetric information, and he was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. His most recent book, The Three Trillion Dollar War: The True Cost of the Iraq Conflict measures the war's opportunity cost to Americans.
Card: How is the Iraq War connected to the economy?
Stiglitz: It’s actually a very clear connection between the war which has been a disaster and our economy which has been a disaster. The most clear link is the fact that the war of 2003 led to an increase in the price of oil. The price of oil was $25 a barrel in 2003. [Future markets]. Once you look at the demands and the supplies going forward, saw that there was going to be an increase in the demand for oil from China, India, even in the United States, but they thought that there was going to be an increase in supply that was concomitant with that increase in the demand, particularly for the Middle East, which is the low cost provider, and so they forecast that the price of oil would remain around $25 a barrel for the next 10 years. Well, the war upset that equation. It was very difficult to produce oil out of the Middle East and… and there were other things that went on but clearly it was a very important factor in the soaring of the price of oil from $25 to 50 then a 100, a 140 and now it’s back to 100. Now, why is that important? Well, the United States was spending hundreds and billions of dollars in Saudi Arabia, Kuwait, other places that’s producing oil. In the past, when prices of oil went up like that, as in the 1970s, it caused an economic down turns. You’re spending that much money abroad, you don’t have that much money at home. Some people looked at what was going on in the American economy and said, “Well, we’ve [repealed] the old laws of economics.” Whenever anybody says that to me, I always say, you know, “You’re not seeing something going on,” and here, it was very clear what was going on, well…
Joseph Stiglitz on how the Iraq War ruined the economy.