This reported statement from Paul Bremer, acknowledging that reconstruction in Iraq will cost tens of billions of dollars, and that oil revenue will come nowhere near paying for this is a welcome acknowledgement of reality. But there is still no sign that the US Administration as a whole has accepted the need to spend lots more money. And even Bremer is still sticking to the party line that other countries (read Old Europe) can be expected to give buckets of money to Uncle Sam while being treated as pariahs or interlopers.

Meanwhile Howard is steering clear of the whole thing, offering no more than the handful of troops still left in Iraq and no serious money. I’m in two minds about this. Certainly, we have plenty of problems closer to home, and the benefit-cost ratio is probably higher in the Solomons than in Iraq. On the other hand, we invaded Iraq, smashed its economy to bits, and are now leaving the unfortunate Iraqis to pick up the pieces.

This report from Salon is the most depressing of a string of depressing stories I’ve seen coming out of Afghanistan.

As the article makes clear, there are all sorts of reasons for the current problems, going back at least to the Russian invasion. But a big one is that the US has not spent the kind of money required to make a success of nationbuilding, and has not provided the kind of security that would encourage other donors to spend either. How much is needed would be hard to tell, but an obvious benchmark would be to return living standards to what they were before the current cycle of wars started. This would cost tens of billions of dollars, whereas the total amount being spent is around $1 billion.

All of this applies even more with respect to Iraq, which was wealthy before the war with the US started in 1991 (even more so before Saddam’s war with Iran). I estimated a few months back that a policy with a reasonable chance of establishing a stable democratic government would require expenditure of between $25 billion and $50 billion, and that the cost of undoing the damage of the last 15 years would be between $100 billion and $200 billion (all of this excludes the costs of military occupation). So far, the aid committed by the US Administration is $2 billion.

The pro-war Weekly Standard agrees, and has even suggested a petrol tax to defray some of the costs (thanks to Jack Strocchi for passing this along). Of course, there is no prospect of this happening. But at least the Standard, unlike most of those who supported the war, is pushing the Administration to take the kind of actions that would be needed to justify it.

It’s possible that the current policy of nation-building on the cheap might work. The atrocious attack on the UN building and, more generally, the shift towards civilian targets on the part of at those fighting the occupation forces may shift public sentiment against them. And perhaps the attacks on civilians are a sign of weakness. But the example of Afghanistan does not provide any grounds for optimism.

This piece from the Guardian summarises pretty exactly my views on Iraq. By joining an unjustified war on false premises, Blair has undermined the whole principle of humanitarian intervention. What’s left is the idea of the US as a ‘selective policeman’, punishing the crimes of its enemies and ignoring those of its friends or those that simply fall outside the sphere of interest. This idea precluded making war on Saddam Hussein when he was filling mass graves in the 1980s, but allowed for him, and the Iraqi people to be retrospectively punished when he changed sides.

Even the limited constraints on dictatorship posed by the threat of US intervention will disappear if, as seems likely, the nation-building exercises in Afghanistan and Iraq fail for lack of resources. Along with the fact that the US government is on a path to bankruptcy, this will probably produce a swing back to isolationism sometimein the next few years.

Everybody is pretty much blogged out with Iraq, but I was still a bit surprised that this report on the Iraqi “mobile germ lab” trailers seems to have passed without notice. Given that the official position of the coalition governments, including the Australian government is still that these trailers constitute proof that Iraq had biological weapons, the report that

Engineering experts from the Defense Intelligence Agency have come to believe that the most likely use for two mysterious trailers found in Iraq was to produce hydrogen for weather balloons rather than to make biological weapons

is of interest in itself.

But the report is more interesting because the trailers represent the clearest illustration of the way in which we got into a war where the official pretext was Weapons of Mass Destruction. Unlike, say, the Niger uranium or the dodgy dossier, this process was largely public, or made so by leaks, from day 1.

It’s clear that the Administration honestly thought they had found the smoking gun when the trailers first turned up, then doggedly held to that view as the contrary evidence mounted (the absence of any biological evidence, even on the second truck which had not been cleaned; the insistence of the Iraqi scientists that the truck was used to produce hydrogen; the absence of crucial components etc). In defending its position, the Administration did its best to suppress any alternative view from its own agencies and to prevent outside experts from access to the evidence.

This was the same pattern as we saw in the leadup to the war. A year ago, nearly everyone (including me) assumed that Saddam was hiding weapons, so Bush Blair and Howard felt free to overstate the strength of their evidence, pointing to specific sites and making specific claims which can now be seen to be ill-founded. After Saddam called their bluff and the inspectors went in, the process became more and more dishonest and the pressure directed against sceptics intensified.

In retrospect, it’s clear that the UN Security Council majority was absolutely justified. On the basis of the case presented to them, which solely concerned Weapons of Mass Destruction, there was no justification for halting inspections and going to war.

Of course, there was a better reason for going to war, namely to replace Saddam’s government with a democratic or at least non-totalitarian one. But reliance on the WMD pretext undercut this rationale, since it had to be claimed that war would not go ahead if Saddam complied with the weapons resolutions. Hence, it was not possible to do the things that would be required for a successful war of liberation, such as establishing a provisional government and getting it recognised. Instead, the coalition decided to wing it, on the assumption that victory and the discovery of weapons would legitimate the war.

This assumption now seems to be unravelling. If there has been progress towards a sustainable democratic government in Iraq, it’s not visible in the reports we are getting here.

Via Keneth Miles (and a string of others, leading back to Bill Maher), this report says that anti-terrorism laws are already being used in ordinary criminal cases, with the theory that “drugs are chemical weapons” being used to indict someone accused of making methamphetamines on a charge of “manufacturing a nuclear or chemical weapon”.

The accused, facing 10 years to life, should count himself lucky. He could have been seized as an enemy combatant, held incommunicado and executed by a military tribunal. Of course, if this had happened, the Administration would not have had to tell anybody about it.

Josef Joffe’s Bonython lecture, reprinted in full in the SMH represents the United States as Gulliver in Lilliput, a military, economic and cultural hyperpower of unprecedented dominance, but argues

Power exacts responsibility, and responsibility requires the transcendence of narrow self-interest. As long as the United States continues to provide such public goods [global order, a stable world trade system etc], envy and resentment will not escalate into fear and loathing that spawn hostile coalitions.

I don’t think the hyperpower premise stands up to scrutiny. In military terms, it’s certainly true that the US can defeat any likely non-nuclear adversary with ease, but the lesson of Afghanistan and Iraq is that defeating the opposing army is the easy bit. The US military is now stretched to, and arguably beyond, the limit, occupying a country that is, as we have been reminded so often, the size of California. It can’t or won’t muster the additional resources to stabilise Liberia (effectively a former US colony).

In economic terms, war and domestic profligacy have put the US in the classic imperial position – running an empire on borrowed money. It’s hard to put a precise time limit on current US fiscal policies, but it’s most unlikely they can be sustained for another decade.

Finally, there’s the issue of cultural ‘soft power’. I plan a big post on this Real Soon Now, but for the moment I’ll just observe that the most striking cultural trend of the past few years has been ‘reality’ TV. This phenomenon would be the epitome of the dominance of American low culture, if it weren’t for the fact that it was invented by the Japanese and modified for a broader market by the Europeans before reaching the English-speaking world.

Keneth Miles, Brad de Long and a lot of slashdotters have been all over this report that the Pentagon was on the verge of setting up a futures market in terror attacks.

Apparently, the genius behind this idea is Admiral Poindexter of Iran-contra fame.

Leaving aside the obvious points about moral hazard and insider trading that have already been made, I’m impressed that the most magical version of the efficient markets hypothesis, in which markets can divine the future better than any individual, still holds sway in Washington in the wake of the bubble. Perhaps these guys have been in some sort of bunker since 1999. I wouldn’t be surprised to learn that they planned to run the thing over the Internet, have an IPO and use the billions of dollars they made to fund the Defense budget.

The issue of oil is still coming up as one of the issues regarding the war in Iraq, and US relations with the Middle East more generally. To get a bit of perspective on this it’s useful to look at some numbers. Currently world oil production is about 80 million barrels each day, of which the US consumes about 20 million. This is about a third of total energy consumption. (a useful conversion factor, if I have it right is that a million barrels of oil yields about 5 terajoules of energy, which is about the output of 10 1000MW power plants).

Saudi Arabia typically produces about 8 million barrels per day, but has the flexibility to range between about 6 and 10. Prewar Iraq was producing around 3 million barrels per day. An optimistic outlook is that a functional government there could produce up to 6 million barrels per day.

There are various ways of looking at this, which I’ll discuss, but a convenient starting point is to focus on a change of 3 million barrels a day in the supply-demand balance. This is the amount of extra Iraqi oil in the optimistic scenario, and was the amount that Saddam could have cut off at short notice if he’d been left in place and in unfettered control of Iraqi oil. It’s also a pretty good measure of Saudi capacity to swing the oil market around.

3 million barrels a day is equal to 15 per cent of US oil consumption and about 5 per cent of US energy consumption. Over the short run, say a year, it would be easy to meet such a shortfall by drawing on stocks (including the ‘strategic reserve’) and by modest rationing measures like ‘odds and evens’. To look at the longer-term economic impact, it’s best to think what tax change would be required to yield this kind of reduction in use. I’ll assume the medium-term elasticity of demand for oil products is about 0.5, which implies that a 30 per cent tax would be needed. Some more rough calculations, available on request, suggest that the economic welfare cost of such a tax would be around $10 billion per year. (This assumes that the price is right to start with. It seems more likely that gasoline is undertaxed in the US, relative to the social costs of car use, and that a tax would be welfare-improving.)

Clearly the cost of domestic action to reduce US oil demand by 3 million barrels a day is a lot less than the cost of the Iraq war (amortised over any plausible time span) or the continuing cost of an expanded military.

The upshot of all this is that any* analysis of the war that places heavy weight on the role of oil implies that the US has adopted a policy adverse to its own interests. This could be because the Administration doesn’t understand the issues, because it thinks a war would be more popular than a petrol tax or because it is acting at the behest of oil industry interest groups. Alternatively, it might be better to conclude that oil (Iraqi or Saudi) was not one of the primary motives for war.

* I leave aside the idea that Iraq is supposed to serve as a springboard for an invasion of Saudi Arabia. If the US wanted to invade Saudi Arabia, it could do so easily, with no need for a springboard, and 9/11 provided the best pretext that’s ever likely to arise.

Everybody on both sides of the Iraq debate now seems to be agreed that the war wasn’t about weapons, and most people seem to be agreed that it wasn’t about terrorism. What’s left of the overt case put up before the war is the humanitarian argument that Saddam’s regime was so murderous that it needed to be ended, even if thousands of civilians and thousands more Iraqi soldiers died in the process. This was a minor element in the case put up by Bush and Howard, but a fairly major argument for Blair.

The latest tragic turn of events in Liberia gives us a good test of the extent to which Bush takes this argument seriously. The humanitarian payoff to intervention in Liberia would be far higher than in Iraq, and the cost far lower. Moreover, having been in effect the colonial power, the US could be expected to intervene even under the Cold War era rules where national sovereignty was supposed to preclude intervention except in cases, like the present one, of state failure.

When Bush went to Africa, he seemed set to announce a commitment, but now he looks to be going cold on the idea. A decision to do nothing would be a disaster for the US as well as for the Liberian people, especially if things turn really bad as they did when the French sat on their hands in Rwanda.

By comparison, Howard is looking relatively good. The decision to duck out of reconstruction in Iraq, about which I was pretty scathing at the time, can be justified in the light of the commitment to the Solomons.

Jason Soon links to this Telegraph report in which Blair and other centre-left leaders give an in-principle endorsement to internationalist military intervention, saying

Where a population is suffering serious harm, as a result of internal war, insurgency, repression or state failure, and the state in question is unwilling or unable to halt or avert it, the principle of non-intervention yields to the international responsibility to protect

Jason gives his own qualified support and says

I’d be interested to see how the usual suspects will react to it

. Like Jason, I have no love for national sovereignty arguments, and would welcome the emergence of the kind of international order that would permit intervention in cases of state failure or to overthrow repressive regimes. The danger is, of course, that without a clear framework of international law, the principle of intervention could be used to justify wars of revenge, conquest and so on.

Unfortunately, by his acquiescence in the Iraq war, Blair has discredited himself as an advocate of this kind of policy, and greatly eroded potential support for such a policy.

To get Blair on board, the US Administration went through UN processes in the expectation that they would produce an ultimatum that Saddam Hussein would defy. When, instead, Saddam acquiesced, Blair and Bush embarked on a campaign of lies and spin that included vigorous abuse of the UN Security Council. Even now, when it is clear that, on all the factual issues, the UNSC majority was right and Bush and Blair were wrong, there has been nothing resembling an admission of error.

In retrospect, there were two options available to Blair and consistent with his stated principles. One would have been to focus the attention on human rights issues from the start, and seek an international consensus for the overthrow of Saddam on the basis that he was an evil dictator. The problem here is that this would have required Saddam to be charged in the International Criminal Court, and the Americans would not allow this. The alternative would have been, having gone with the weapons inspections process, to stick with it to the end and accept the half a loaf of ensuring that Saddam’s weapons had been destroyed.

Until Blair recognises that the US determination to run the world without interfence is a greater obstacle to internationalist intervention than is residual support for national sovereignty, he’ll continue to flounder on issues of this kind.