Conflict is costing trillions – 'they can explain the benefits'

Author Joseph Stiglitz goes into battle over charges that his estimate of war spending is fraudulent. By Michael Glackin

Joseph Stiglitz's latest book, The Three Trillion Dollar War: The True Cost of the Iraq Conflict, is provoking its very own war.

The Nobel Laureate and former World Bank chief economist estimates that the cost of the US involvement in the Iraqi war is $3 trillion – including everything from military spending and long-term healthcare for veterans to interest on money borrowed to pay for the war and the impact of the conflict on the price of oil.

He also estimates that the cost of Britain's participation in Iraq and Afghanistan through to 2010 will be at least £20bn in direct military and social costs.

But his critics, on the right of the US political spectrum, are having a field day demolishing his figures. A review in the Financial Times by Tunku Varadarajan of The Wall Street Journal accuses Stiglitz of having "entered into territory where it is fraudulent to offer up the omniscient exactitude of three trillion". He is also criticised for failing to detail the benefits of the war.

But speaking during a visit to London last week, days before he was due in Washington to give testimony on war costs to the Congressional Joint Economic Committee, Stiglitz dismisses the criticism. "You know, the Bush administration has never challenged the numbers themselves. Of course, they said we hadn't counted the benefits. Well fine. We said we would look at the costs and let other people explain the benefits."

Stiglitz spits out statistics and economic paradigms supporting his case. Far from exaggerating the figures, he insists the real cost of the conflict to the US is likely to be nearer $5 trillion.

"We were conservative in our accounting because we were aware people would say 'he's a Democrat and against the war'. But if you go through our costing item by item, there's no debate. Look at the number of injuries and there's no debate about that either. There are a few minor quibbles but most of the numbers in the book have been verified by the Congressional Budget Office as well as the Joint Economic Committee."

Getting a precise figure is no easy task. A request to the British Treasury last week ends with the terse response: "The Treasury does not have a figure on how much the war has cost." Stiglitz expresses a combination of amusement and surprise at such ignorance. "Well parts [of the cost] are relatively easy to account for and are really part of good government, such as costs of operations and injured people. Other parts, the ones based on economic assumptions, are harder to quantify but should still be tracked by someone in the Treasury."

He says Britain's system of funding the war is opaque, which partly explains why he was unable to separate UK spending in Afghanistan and Iraq. In his book he states that before the war, Gordon Brown, while Chancellor, set aside £1bn for war spending and also allocated cash to a Special Reserve – a cash pot allowing the Ministry of Defence to supplement its regular budget. Stiglitz makes the point that because funds from the Special Reserve are drawn down without approval by Parliament, it is harder to quantify how much is actually being spent. At any rate, he estimates that the UK has so far committed almost £9bn in military spending alone to Iraq and Afghanistan, 76 per cent of it in Iraq.

Having spent years working in Bill Clinton's White House, turning the large deficit Clinton inherited from George Bush senior into a budget surplus, Stiglitz makes no secret of his contempt for the current president, whose policy of delivering tax cuts to the wealthy while fighting two wars has left America with its largest-ever deficit.

"Part of the problem is that the war has almost been too easy for American people. We've financed it through deficit spending, so there have been no tax rises, but it's a cost that will continue for generations. You know this war has been funded by 24 separate Bills – that's how the administration has been hiding the total costs. It even tried to hide the number of casualties to hide the true costs."

To ensure greater clarity, Stiglitz believes Britain and America should levy a specific tax to fund conflicts in future. "People should know how much a war is costing them, and I think once a conflict has lasted more than three months, it should be funded by a war tax," he explains. "A tax would make the connection of cost and war much more clearly. War is expensive and you should not be allowed to fight one by borrowing."

Despite his links to the Clinton administration, Stiglitz is backing Barack Obama, Hillary Clinton's rival, this time round. Who knows, if Obama goes all the way, Stiglitz may well find himself in a position to implement his war tax, regardless of the arguments about his mathematics.