- HONG KONG (Reuters) - Waging
war is no longer good for a country's economy and a U.S.-led strike against
Iraq would only compound uncertainty about the health of the world's largest
economy, Nobel-winning economist Joe Stiglitz said on Wednesday.
-
- "War is widely believed to be good for the economy.
This war (on Iraq) is likely to be bad and possibly very bad," Stiglitz
told the Forbes Global CEO Conference in Hong Kong.
-
- An armed conflict with Iraq would not lead to a huge
injection of money into the economy by the U.S. government as was the case
in World War II, which was a total mobilization and pulled the country
out of the Great Depression, the Columbia University professor said.
-
- "We are now trying to fight wars on a cheap. We
spend $40 billion, $50 billion, not a large amounts of money, so the direct
effect is going to be very limited," he said.
-
- "On the other hand, there are some very negative
effects -- the anxiety that the business community is feeling today, the
possible increases in the price of oil and more generally, an increase
in risk premiums."
-
- Stiglitz, a former World Bank chief economist, said investor
confidence was already weak and few people were likely to invest as long
as fear of a war with Iraq persists.
-
- President Bush has accused Iraq of amassing weapons of
mass destruction and said it has to be stopped. He is seeking Security
Council support for possible action against Saddam Hussein, but so far
Britain is the only permanent council member to firmly back him.
-
- Iraq has denied the U.S. charges.
-
- Stiglitz said the current economic slowdown in the United
States was "more complicated" than past downturns because it
was combination of a decline in investment and the end of an inventory
cycle.
-
- "We have excess capacity in many areas. It would
take a while for that excess capacity, that overhang, to work its way out,"
he said.
-
- "In the meanwhile, it is going to be very difficult
to re-stimulate the economy ... Lower interest rates are not going to encourage
firms that have excess capacity to build more excess capacity and that's
one of the reasons why the Fed has been so ineffective."
-
- The U.S. central bank left rates unchanged at 40-year
lows after a meeting of top policymakers on Tuesday and warned that the
economy was at the risk of further weakness, particularly amid "heightened
geopolitical" tensions.
-
- The U.S. and world economy "appear much weaker than
was thought just a few months ago," Stiglitz said.
-
- Deep-seated concern over the economy and war have driven
U.S. equity markets to four straight weeks of declines and pushed up crude
oil prices to 19-month highs.
-
- A war in Iraq would create new financial pressures that
would "sink" several U.S. airlines, the chief executive of American
Airlines parent AMR Corp. said on Tuesday.
-
- Donald Carty said the prospect of war was "financially
chilling" for the airline industry even if the conflict is short,
as the 1991 Gulf War was. At that time fuel prices doubled, and international
and domestic airline traffic fell, he said.
-
- Stiglitz, who shared a Nobel Prize last year for his
work analyzing the imperfections of markets, said rising war risk premiums
could push up interest rates, which will make it more difficult for emerging
countries to repay their debts and create further instability in the world
economy.
-
-
-
- Copyright © 2002 Reuters Limited. All rights reserved.
Republication or redistribution of Reuters content is expressly prohibited
without the prior written consent of Reuters. Reuters shall not be liable
for any errors or delays in the content, or for any actions taken in reliance
thereon.
|
