Stardate 20030725.1406

(On Screen): During WWII, the world's economy was temporarily put on hold for a few years. Production of many kinds of consumer goods (such as refrigerators) largely ceased, and international trade concentrated on movement of strategically important materials.

On the other hand, during the Cold War it was vital to keep normal commerce going. The Cold War was fought on a lot of levels, in a lot of ways, with each side trying to weaken the other. One of those ways was economic. Each side expended a fair amount of effort to trying to louse up the economy of the other side.

It's arguable that this is actually how we won the Cold War. After decades of mismanagement, the Soviet economy was in poor shape. President Reagan then began a highly controversial military buildup, which at the time was referred to (admiringly by supporters, not so admiringly by opponents) as the biggest peace-time military buildup in history.

That put the USSR in a bind. It was already spending such a high percentage of its GDP on defense as to seriously cripple it. If they tried to match the American buildup, it would cause their economy to collapse but if they did not they faced numerous political and diplomatic and military problems. Ultimately, they tried to match it at least in part, and their economy did collapse, followed thereafter by the one thing I never, never expected to see: the USSR dissolved itself peacefully.

But the Reagan administration pushed the American economic envelope rather closely in doing that. Reagan ran huge chronic deficits, and it took years of careful management to get that straightened out. (Doing it was politically painful, but in practice both parties deserve credit for that.)\

The current war is much more like the Cold War than it is like WWII. One of the many strategic goals has been to make sure that side effects of the war don't cause excessive and dangerous world economic reverberations. It is impossible to avoid at least some, but if they were too serious they could result in a massive world-wide economic downturn, which could have awful consequences both in terms of directly-induced misery and indirectly in terms of causing a new rise of fascism, just as fascism had arisen in the 1930's due to the Great Depression.

Like it or not, the world runs on oil, and a lot of that oil comes from the Gulf region. That isn't going to change any time soon. In the late 1970's the Arabs tried to use the "oil weapon" to extort significant concessions regarding Israel; they failed, but they also caused the world's economy to ring like a bell for years, and among other things helped bring about several years of double-digit inflation in the US.

So one of the strategic goals in the current war has been to try as much as possible to avoid causing world economic havoc. That has, in particular, meant that we have been treating the Saudis with kid gloves, and giving them a pass on a lot of things. If the Saudi government had become actively hostile, or if there were serious political unrest in Saudi Arabia or even open revolution there, and if as a result Saudi oil stopped shipping, there could have been serious economic consequences for the whole world.

Their own situation is different than it was in the 1970's. OPEC controlled a larger percentage of the world's oil than it does now, and the OPEC nations were economically in a better position then, having monumental stocks of cash in banks around the world. They obviously lost their income during the embargo but they had the bank accounts to sustain it for quite a while.

The Saudi government is not in anything like that kind of situation now. They need that flow of money, not just to sustain the royal family in the opulent manner to which it has become accustomed, but also in order to keep their own people from exploding. Nonetheless, there were plausible scenarios within which Saudi oil shipments might have drastically declined, and a lot of those could have been set off by dealing harshly with the government.

I think part of the plan, and yet another reason why Iraq was a good choice as target of invasion and occupation, was to gain control of Iraq's oil fields. Not, as many will instantly claim, so as to let Bush's oil buddies in Houston get rich, but rather because we could use Iraqi oil output to compensate for declines in Saudi oil shipments. During the "oil for food" program, Iraq did ship a lot of oil, but the potential is there for shipments to be even greater, not to mention for those shipments to not be under the bureaucratic thumb of the UN.

Iraq's oil infrastructure was largely protected during the war, despite plans by Saddam to destroy as much of it as possible. But after thirty years of Baathist neglect and incompetence, not to mention 13 years of trade sanctions, a lot of it is in pretty sad shape. Nonetheless, shipments have again started, and in the coming weeks and months they'll inc