War on Iraq will damage British business

Philosophy Forums Society, Government, and Economics
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Brace yourself for more arguments against the war.

Given that this is the Politics and Economics forum, I thought I’d make a contribution to the Iraq debate outlining the extent to which military conflict would affect the economic welfare of many around the world.

Below is a letter I wrote to the Director-General of the CBI (Confederation for British Industry) which attempted to gain the support of the business lobby for the anti-war movement. I’ve outlined how the war on Iraq would adversely affect British business.

The CBI are the most influential insider pressure group in Britain having successfully captured even the Labour movement in Britain. They are comparable to the NAM (National Association of Manufacturers) in the US, though I think the range of business interests they represent is far more diverse.

Dear Digby Jones,

I am writing on behalf of the Stop The War coalition, though my request is unrelated to the goals of the anti-war movement.

We are asking for the CBI to issue a statement to its members stating explicitly that its members are recommended to allow employees the day off work on Saturday 15th February to attend the anti-war march, if they choose to.

All of the good work the CBI has done in pooling an influential and substantial collective voice for business in Britain may be undone if the government choose to pursue a course of action which will likely yield profound damage to the business environment in which CBI members operate in.

Apart from the obvious stock market falls in connection to the impending international uncertainty, the continued prospect of war, and the prospect of a series of international confrontations with North Korea and Zimbabwe, may see the current situation exacerbated or even worsened.

As with the last gulf war, the prospect of an oil price shock seems imminent. Though the Saudi government are trading as we speak, their output is certain to fall during a war on Iraq. The rise in oil prices, especially with the industry’s current elasticity, will see the costs of many British businesses soar at a time when profit margins in the fuel-dependent industries (manufacturing, haulage/distribution/road transport industries) are very tight. The effect of an oil price shock, be it this summer or even sooner during the time of conflict, will have a detrimental effect on employees travel to work, on the wages they demand, and most importantly, on the net costs to businesses.

Another threat to business in Britain is the impact a war may have on the social infrastructure that businesses rely upon. Health care, the education of employees’ children, and most likely and most crucial of all, transport, are all prone to seeing a withdrawal of labour as unions affiliated to the Stop The War coalition take their own stand. Although I personally have been trying to discourage this, the Aslef and RMT union executives have predictably stated their intention to ballot industrial action during a period of war. It is highly likely that employees usual route to work during this period will be blocked. This is particularly a threat to those commuters working and living in London and the South East.

The Iraq issue, with the strength of emotion and attention brought by all players in the political arena, is likely to dominate the political agenda for many months to come, even up until June, as attention and effort is brought to post-conflict Iraq and the final stage of regime change. This will have the effect of minimising space for public and possibly private debate regarding the conclusion of the Treasury’s euro assessment. This may be particularly damaging to business in Britain as their respective views will not get the air-time they demand and deserve.

Although the war in Afghanistan following September 11th showed otherwise (there was little if no direct threat from those the war was being waged against), it is also likely that with the country at war, which is seen by many in and out of Britain as unjustified and unprovoked, consumer confidence will fall. This likelihood could see many of those businesses reliant on buoyant consumers, especially those in the retail sector, suffer in the face of reduced private spending. Though most commentators are ambivalent about Saddam Hussein retaliating, the prospect of a full-scale two-way and protracted war could accentuate the adverse effect on businesses as consumer confidence falls further.

There are many likely outcomes and cause-effect reactions relating to military conflict in Iraq and the effect it will have on business in Britain, which is why I would like to have the opportunity to meet with you or one of your senior associates to discuss these possible future events.

I am not trying to appeal to your sense of conscience regarding the desirability of going to war on those it effects directly. Rather, I am urging you to consider the simple stated action so as to guarantee that any opposition to war is given the full and effective exposure it needs to discourage this government’s involvement and encourage the best use of our close political links to the US administration. I do not believe, that with the current breadth and depth of opposition to the war on Iraq, that such an action encouraging employers to allow their workers time off, will in any way adversely affect the CBI’s relations with government.

I realise that allowing for a withdrawal of labour for one day (albeit a weekend, and one in which a major sporting event takes place – ManUtd-Arsenal F.A. Cup 5th Round) will represent a short-term sacrifice to business in Britain at a time when many firms need to be maximising their output and income in order to survive or meet their projected targets. However, such a short-term sacrifice, if allowing for an effective protest on the 15th, will see a much needed long-term gain in terms of international trade, oil price stability, political stability and consumer buoyancy.

Though I am aware that it is not in the CBI’s interests to take a political stance on such an issue, and that the prospect of such a stance is probably not feasible, I would encourage you to make aware to your members the likely cascade of events leading from this war which could seriously damage their prospects. I do not know in great detail the lines of communication the CBI uses in issuing statements commands or advice to its members, however, I would strongly recommend that some sort of guidance regarding the desired employer response to this march be available and forcefully so, to the businesses you represent.

If you would like to meet with me over the coming week or before the march itself, so I can explain the likely scenarios and the above arguments in more detail, I will be happy to do so according to your own schedule.

I look forward to your swift reply, and hope to meet you or the senior executive of the CBI soon.

Yours sincerely,

Leo Pollak

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I wish you all the best with this undertaking as it certainly is needed in times like this. But that said, while the war might initially be bad for British business, long term it will stabilize the market as the threat of war will have passed. The uncertainty of terror will be removed from the minds of people, though the reality of attacks will remain the same.

The only player in this war is America, Britain has very little real power but is a strong and forceful diplomat with many years of experience. Only a threat of military action against America by other UN countries has the power to stop them from doing as they please. This is highly unlightly as America has already confirmed deals with the other interested parties, so that they will not appose the America position. America has also invested heavily, by the deployment of equipment in a war so would like to see it through. It would take the American people to stop the war, the British don’t have power to do this, as it would required a massive propaganda campaign.

While war is not inevitable, it is highly lightly. Other then Saddam standing down, which they know he will never do, could war be averted. This war from the American perspective is now about the National Security of America from the threat of terrorism. The government needs to be seen to deal with this problem, because when it comes time for Bush’s re-election campaign, he’s has to use the line, “9/11 killed our people, and our economy. But I was a strong leader. I saw the threat to our future security by terrorism, I went out and made America safe, so it could truly be the land of the free. Now that the threat of terrorism is gone, I will rebuild the economy, with that same leadership and vision I used to save our country!” He has to take this line, as there economy is currently unhealthy, unemployment is rising, and people have lost a lot of money in the stock market. He needs a fall guy, enter Saddam the big bad boogieman. Who said ‘realpolitik’ isn’t fun, I know it certainly wasn’t Henry Kissinger.

Pax Vitae.

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A fairly good analysis, Pax.

My concern is that going to war will divide the international community of democratically accountable political leaders sooo much, that the threat of war will not pass as a result of going to war and ridding the world of these nerve-imposing regimes once and for all. A series of internaional wars, or ‘confrontations’ will falter when reaching the ‘Saudi question’.

This old style of international relations (as opposed to the modern ‘Clinton’ style - a dichotomy I outline in my post on the North Korea thread) will not see stability for markets. The tension and build-up of military material will only destabilise the business envionemnts of the future.

What’s more, businesses analyse and project for the short-term. The stock-market is ultimately a crystal ball for the short-to-medium term future of big businesses. Businesses will not support a war because it may lead to a more stable business environment in 10-20 years time. Particularly in the knowledge of what I have written in that letter.

Thanks PaxVitae for such a quick response. I really do need some very rational and realistic feedback on this one.

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The interest rate in the UK has just been dropped by a 1/4 of a percent. Making more money available in the form of loans for all. If borrowing continued and the economy was to fall flat, there would be an awful lot of personal financial debit. This in turn would certainly leave the economy in a very precarious position. Because a lot of this debit is in the form of mortgage and credit card repayments, the ordinary consumer spending would affectively dry up. All but the most essentials of life would cease to be traded in the required numbers to fuel an economy. But anybody who has medium to large cash reserves will be in a position to buy up undervalued property and other commodities. Rich people with cash can make large sums of money in these types of markets. I believe international politics is driven by local need; so to this end I can’t see Britain entering into a war if they know it will rune their economy. Unless you know war is inevitable, in that case its then best to be on good terms with the one most lightly to win.

I see your point about stability, but if that did happen we’d be entering a World War status, as there are a lot of interested parties in this one. I don’t believe North Korea wants a war, just money, and they’ll take whoever’s they can get, even if it means selling weapons to Saddam or others. I believe this is their line for trying to extort more money from the US. If the US where to occupy both Iraq and North Korea that entire area would be a hot bed for terrorism as the local Islamic community would be in uproar and it would fuel fanatics. As people would be saying, “Look, all those who we thought fundamentalist were actually right! America is an evil warmonger!” It would be the equivalent of the Roman occupation in Jerusalem 2000 years ago, which created armies of Religious Zealots and might spark a Jihad. But I can’t see this happening, unless America goes homicidal.

Pax Vitae

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I’m not speaking of one small with Iraq, then one big war with all other agitators. ‘Confronting’ NK must take a rtead-careful approach. What I was describing was a series of potential military conflicts or ‘confonrtations’ that would see markets destabilised continually, as the US military machine steps up its war on everyone, and confronts each terrible regime, one after another. In much the same way the Iraq crisis is jamming the markets with worry, a NK crisis will do just the same. It ultimately depends on what political outcome comes of each othese conflicts, for the country who is being waged war against and for the surrounding region. If the general strikes continue, will Venezuala (1/6th of US oil imports) be confronted?

NK poses an especially difficult porblem for the UN and US. A military build-up will provoke a pre-emptive strike probably on South Korea. It may seem ridiculous, but when Japan were building up troops in S Korea in 1998, the NK leadership bombed Japan with one of their missiles. They have the means to keep war at bay, and they are willing to use it. People speak of these eccentric unpredictable leaders. Saddam Hussein is no longer unpredictable any more. He has been sufficiently cornered so now every trick he has left are all tricks we can see in the manual. Kim in NK IS unpredictable. Altough there is no oil there, any prospect of confronting NK will see the markets shake with fear.

Cuts in interest rates have affects both ways. They can encourage borrowing to kick consumer spending, and they can lower the returns of savers as well as cause house prices to rise. The reason yesterdays tiny cut recieved so much attention was because it was the first cut in over a year, and left interest rates lower than they have ever been since 1955.

International politics is to a great extent friven by local need, though often, for the sake of peace, local need or local demand (political or economic) is defied as leaders aim to reach a comprimise. Tony Blair is risking much by defying the bulk of local opinion, though I think his performance last night with Paxman nd the Geordies will do his position a lot of good. The problem with going to war is that regardless of who is actually leading the strikes, the war will affect the economic welfare of millions, possibly billions around the world, as well as tearing apart long-standing and important political consensuses as loyalties are split. This has happened in Korea-Japan, in Europe, in the Middle-East, in S America in Russia and even in China. This political tension is what affects markets.

This is why the multilateral route is always so important in these situations, because any decision made must be made by those who will be affected by that decision. The basic democratic principle. This time through the world tier of government - the United Nations.