The U.S.-Iraq War And the Fate of Humanity

Before the American war against Iraq began, the global economy was already stuck in an environment of unprecedented peril. After the regime dissolved in the Soviet Union, a former superpower among the industrially advanced nations of the world, Russia's economy also fell into hardship, where it has struggled until today without being able to get back on track. In Japan, the world's second-largest economy, economic activity has been in a slump for more than 10 years and the economy has stagnated, unable to detach itself from the encumbrances of currency deflation year after year while the unemployment rate climbs step by step and the overall national constitution suffers grave damage, with no intimation at all of when Japan will be able to pull itself out of the morass. Among the nations of Europe, Germany, which has always disdained all but its own strength, has seen its economy slide out of control over the past decade, with an ultra-low growth rate and an ultra-high rate of unemployment that leaves little to choose from between it and Japan.

And this situation is not limited to Germany. As the European Union's integration becomes deeper by the day, its economic force has not strengthened at the same time; its unemployment rate has remained at a high level, and its growth rate has hovered near the bottom for more than a little while. Even the United States, which stands out alone from the other powers, lost its energy for economic growth after the information-industry boom came to an end in a burst, and the shadows of terrorism have not dispersed following the Sept. 11 terrorist attacks; as a result, the U.S. has not regained the strength to power the world economy along the road to recovery. After the news of the attack on Iraq came out, a strong feeling of uncertainty about the future caused American consumer confidence to plummet to a 10-year low, and a low rate of industrial-capacity utilization is constricting the room for new investment. Because of this all the nations of the world, with the U.S. at their head, are placing their hopes on an early conclusion to the war against Iraq and on the proposition that that country's oil fields will not be damaged too heavily.

Even if victory in the war is swiftly achieved and most of the oil fields are successfully protected, however, will this enable the global economy to shake off the mists and emerge into the bright sunshine? Possibly so, in the short term; looking at the medium and long term, though, gives a more pessimistic picture than ever. Viewed over the shortest possible period following the war, U.S. military spending of nearly US$100 billion will lead to a vast expansion of effective demand for America's manufacturers and related service industries, and through the linking effect this will give the domestic American economy a boost. The feeling of uncertainty, which will totally disappear following the war, will cause consumer confidence to rise and corporate investment willingness to strengthen. These are positive factors that are favorable to economic growth. And especially, after the war Iraq will have a huge amount of reconstruction work needing to be done quickly; if these projects go into the pockets of American enterprises, then they will become another driving force for the U.S. economy. This reconstruction work will surely be paid for by income from the accelerated extraction of Iraqi crude oil, so that on the one hand it will not necessarily increase the burden on America's own resources while on the other hand it is possible that the massive increase in supply will impose downward pressure on high oil prices and reduce costs for importers, in effect providing a profit subsidy for producers. This will be of no small help to the U.S. and other countries with a high degree of dependence on imported petroleum.

Still, when viewed from the medium- and long-term aspect, the situation is obviously not so encouraging. The state of the global economy has deteriorated substantially over the past 10 years, with the American economy suffering frequent turbulence since 2000 and laboring under a weak force for recovery. The fundamental reason for this is that the global economy is undergoing a readjustment of huge proportions, which has caused the problems of a severe excess of supply and an excessively rapid increase in labor productivity. This is the basic reason for the rise in unemployment and the expansion of currency deflation. Although the U.S. war against Iraq can expand effective demand for a short while, for the global economy, with its continuing trend toward the double excess of products and labor, this is "as useless as trying to put out a burning cartload of firewood with a cup of water." If the attack on Iraq arouses the anger of other countries, especially the Muslim countries, so that they mount boycotts against American products and American investment, not only will America lose more than it gains but the international economy will find itself in the same boat and be drawn downward along with America. Extreme anger might also give rise to more terrorist attacks and cover a number of countries, including the United States, under a lasting cloud of terror. The damage that this would do to consumption and investment is difficult to estimate.

The really frightening thing, however, is that the huge readjustment underway in the global economy is causing increasingly polarized development between the rich and the poor. Countries and individuals that possess human capital and material capital are gaining ever greater superiority, while individuals and countries whose primary resource is manpower are finding themselves more and more in a disadvantageous position because of their excess of supply of cheap labor compared to demand. The gap between the two is expanding at an accelerating pace. This situation is becoming more apparent by the day, in Taiwan as well as in the U.S. and in all other industrially advanced countries. This trend toward polarized development of rich and poor is a most fearsome thing for human society, and it could intensify conflict, opposition, hatred, and even war, thus causing a tragic outcome. In Taiwan, social instability and antisocial behavior are becoming ever more common, and this is a reflection of this kind of trend. In international society, every time an international economic organization holds a meeting it brings on more and more, and ever more violent, group demonstrations—this, too, is a result that is stirred up by this trend.

In this environment of extreme instability, the mood of religious and social opposition brought on by the American attack on Iraq combines with the polarized rich-poor development described above to nourish the seeds of conflict and opposition with fresh blood, helping them to spread and grow at an accelerated speed. If after it conquers Iraq the United States, with its unmatched military strength and economic power, goes on to mount armed attacks on North Korea and Iran, who can say when the rapidly fermenting hatred will grow past the critical point and explode into irrecoverable chaos?

Situated in a highly dangerous region of the world, Taiwan is on the front lines of the clash between the two large groups of rich and poor; and, in this kind of perilous environment, it must move with extreme care to carve out for itself the best way out. But the seeds of hatred can be extinguished only by a humanistic spirit and benevolent love of the highest order; and although Taiwan is small, it is successor to thousands of years of a highly developed cultural bloodline. We must commit ourselves courageously to taking our share of the responsibilities of the world on our shoulders, and perhaps then we will be able to eradicate at its root the peril that Taiwan faces today.



This editorial was originally published in the Mar. 31 issue of the Chinese-language Economic Daily News. It was translated by CENS senior editor Earl Wieman.